USDA: Wheat production set to grow in Argentina

By Aerin Einstein-Curtis contact

- Last updated on GMT

© GettyImages/ reisegraf
© GettyImages/ reisegraf
The end of drought conditions and export market shifts for sorghum may be bringing an expectation of increased planting and larger feed crop production from Argentina.

The US Department of Agriculture’s (USDA) Foreign Agriculture Service (FAS) released details of feed crop production and predictions for the 2018/19 market year in a recently released report​.

Overall, wheat production in Argentina during the 2018/19 marketing year is expected to reach a historic high with the production of about 20m tons and exports of 14.2m tons, the department said. Barley and corn production also is expected to increase beyond the drought-affected harvest seen in marketing year (MY) 2017/18, although sorghum production is forecast to remain similar.

“Grain consumption for animal feed (wheat, barley and corn) is expected to be up due to lower feed reserves after drought conditions,”​ the USDA said.

Wheat production

Wheat production for 2018/19 is anticipated to be around 20m tons as farmers expand planting to 6.2m hectares, the USDA said. If realized, the area planted would be the largest in 11 years.

Production during the 2017/18 marketing year was raised to 18.4m tons based on an increase in harvested area, the department added.

“Experts agree that the drier La Nina pattern is fading, after the worst drought in 50 years, to a more normal moisture cycle,” ​the department said. “Favorable planting conditions in the eastern part of the country, due to recent rains could be offset by other regions, such as north and east Cordoba, southwest Buenos Aires and La Pampa, that still lack the moisture levels needed to plant wheat which could lower overall planting area if not rectified before June 2018.”

Strong future prices stemming from global demand and tight regional supplies are supporting wheat planting, the department said. Wheat prices have grown by about 20% compared to an increase of about 2-3% in production costs.

“Where possible, wheat crop followed by second crop soybean gives producers one of the most profitable planting combination as well as cash at the end of the year to help finance summer crop expenses,”​ the department said. “In addition, wheat planting area may also rise as last year flooding prevented some producers from planting wheat, the use of winter cover crop for weed control continues to expand and the ‘short memory’ of farmers who had a good wheat crop last year.”

Domestic consumption is anticipated to increase and there could continue to be an expansion of the use of wheat in animal feed, the department said. “Although still small, wheat for animal feed may also continue a growth trend as the local corn crop in MY 2017/18 could fall 8-10m tons,”​ it added.

The amount of wheat exported is expected to increase as previous export restrictions ease, the department said.

Corn specifics

Corn production for 2018/19 is anticipated to grow to 40m tons, a 9m ton bump from 2017/18 crop, the USDA said. Harvested area is predicted to reach a record 5.2m hectares based on strong domestic future prices, stable production costs and the expectation of improved returns.

“Furthermore, farmers will continue to incorporate corn in their crop rotations to improve soils and combat problematic herbicides-resistant weeds,”​ the department said. “Higher growth potential, though, is tempered by drought impacts on farmer solvency that may see strapped farmers planting soybeans due to their lower financial investment, per hectare, than corn.”

However, the planting of a late, or second, corn crop is anticipated to drop, the department said. “Over the past several seasons, the preference for late corn has grown due to stable yields as it skipped flowering in the normally dry and hot window of late December-early January,​” the department added.

The most recent late corn crop developed poorly in the recent drought conditions, the department said. But, corn planted early was able to take advantage of better moisture levels.

“Corn production in MY 2017/18 is estimated at 32.0 million tons, 1.0 million tons below USDA’s,”​ the department said. “Late-planted corn had low moisture levels during the season and for harvest in May is not in good condition. Most local analysts and traders estimate that corn production for MY 2017/18 will be between 30.5-32m tons.”

Domestic use of corn is forecast to increase by about 13m tons in the coming marketing year based on the improving economy and to rebound from the drought-affected crop, the department said. Dairy production is increasing, and livestock and broiler production also are expected to expand.

Feed reserved for cattle is expected to be low in the coming winter, the department said. “Many pastures were lost or seriously damaged, while many winter pastures, like oats and rye, could not be sown due to the dry conditions earlier in the year,”​ it added.

“The weather seems to be changing, coming out from La Nina’s dry pattern to a more normal/neutral condition with some rain and warm days during April, but winter weather is approaching,” ​the department said. “Many cattlemen, including cow-calf operations, are expected to use more corn and other alternatives to feed cattle this year.”

Trade also is expected to increase in 2018/19 reaching a projected record of 27m tons, the department said.

Barley and sorghum details

Farmers have been “enthusiastic”​ about barley planting and overall production is expected to be 3.5m tons with about 900,000 hectares planted, the USDA said. The crop provides an advantage to producers looking to have a second crop of soybeans as harvest is earlier than that for wheat.

“Local barley prices have recovered in the past months and, despite higher production costs, barley future returns are better than wheat,” ​the department said. “Nowadays, malt and feed barley futures prices are similar.”

Feed use of barley is anticipated to increase as livestock producers look for alternative feed ingredients, the department said. Dry conditions lowered production for corn and pastures.

Barley exports in 2018/19 are projected to be 2.2m tons, similar to levels seen in 2017/18, the department said. About 1m tons of that export is estimated to be feed barley with the primary market being in the Middle East.

Production of sorghum is forecast at 3.4m tons, an increase from the previous season, with an expansion in the area planted, the department said.

“Sorghum consumption in MY 2018/19 is forecast at 3m tons, a historically stable figure,” ​the department said. “Almost 90% of the total sorghum output is consumed domestically, primarily by the cattle sector – sorghum is generally cracked for cattle feed.”

Sorghum exports in 2018/19 are anticipated to be similar to previous years at about 500,000 tons, the USDA said. “Local traders are closely following the commercial ramifications of China’s recent imposition of steep tariffs on US sorghum, which could provide market opportunities for competitors, such as Argentina and Australia,” ​the department added.

“In 2014, Argentina and China signed a sanitary protocol to allow sorghum exports,” ​the department said. “In mid-2015, an international grain company exported 90,000 tons of Argentine sorghum to China. However, local exporters have complained that the conditions of the import protocol with China are burdensome and costly which hindered subsequent shipments.”

“Sources report that the Argentine government is engaged in bilateral negotiations in the pursuit of securing more commercially viable import sanitary requirements,”​ the department added.

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