New Delhi — The Buenos Aires Grain Exchange late Thursday warned of poor wheat quality in the southern region of Argentina amid inconsistent weather conditions across key wheat producing regions in the country, which could lead to a decline in production and export volumes.
In its weekly report, the exchange said wheat crop in the Buenos Aires province remains in critical condition due to difficult weather. Buenos Aires is the largest wheat producing province in Argentina, followed by Cordoba and Santa Fe.
Argentina's central and southern regions have been facing dry weather conditions over the last two to three months, a critical period for the wheat crop. This has resulted in yield losses of around 10%-40% in some areas of Santa Fe, Buenos Aires and Cordoba, according to the Rosario Board of Trade.
For the 2019-20 marketing season (December-November), the Rosario Board of Trade recently slashed Argentina's wheat production estimate to 20 million mt from a previous estimate of 21.5 million mt. The Buenos Aires Grain Exchange, too, cut its estimate, to 19.8 million mt from 21 million mt previously.
In August, the US Department of Agriculture's Foreign Agriculture Service said Argentina could produce a record 20.8 million mt of wheat in 2019-20, mostly due to farmers engaging in higher productivity activities after the strong returns in 2018-19.
Some areas in the central region have received rainfall recently, partially reducing the stressed water levels, according to the Buenos Aires Grain Exchange.
While the recent rains contributed to a stable crop, it would not be enough to recover the crop potential that has been already lost, an Argentina-based analyst told S&P Global Platts.
Market's average estimate for 2019-20 wheat production now stands at 18.5-19 million mt, the analyst added.
NORTHERN PARTS SEE STEADY HARVEST
Even as weather conditions in the central and southern regions have been volatile, the northern part of Argentina paints a different picture.
Harvest in the Chaco and Salta provinces has been continuing at a normal pace, said Juan Manuel Niveyro, analyst at Grain Trader Argentina.
Yields in the northern parts of Argentina remain above historical levels, the Buenos Aires Grain Exchange said.
Recently, analysts lowered their export estimates for the 2019-20 marketing season because of declining yields in the key regions.
The USDA in its October World Agricultural Supply and Demand Estimates report kept Argentinian wheat exports unchanged at 14.5 million mt for 2019-20.
But some market sources see it differently.
In the best scenario, Argentina is expected to ship 11.5-12 million mt of wheat in 2019-20, the Argentina-based analyst said, citing market expectations.
That would bring Argentinian exports closer to the output levels of Australia, which is also facing prolonged dry weather conditions. Argentina and Australia compete for market share in Southeast Asia, the world's largest wheat-importing region.
Argentina is expected to be the world's sixth-largest wheat exporter in 2019-20, according to the USDA.
Dry weather in parts of Australia and Argentina has contributed, in part, to the recent rise in the price of the wheat contract traded on the Chicago Board of Trade. Over the last month, the December wheat contract rose from $4.77/bushel on September 25, to a high of $5.18/bu Thursday.
The volume of wheat exports from Argentina will also depend on the upcoming Argentinian presidential elections to be held on October 27.
A return of the Peronist government could mean heavy tariffs on exports flowing out of Argentina.
Business is currently slowing down in the country, as people are waiting for the political situation to unravel after the elections, and the results would directly impact the country's economy, Niveyro of Grain Trader Argentina said. Farmers are currently protecting their stocks to avoid losses, he added.
-- Rohan Somwanshi, email@example.com
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