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Argentina 2019-20 wheat output may dip on weather woes, likely hit exports: analysts

Highlights

A sharp dip in Argentina's wheat crop production due to consistently dry weather conditions in central and southern parts of the country could eventually squeeze its export volumes in the 2019-20 marketing season (December-November), industry sources told S&P Global Platts.

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Argentina is the world's sixth-largest wheat exporter and ninth-largest producer, according to data from the US Department of Agriculture.

Wheat crop for the 2019-20 marketing season is now expected to slip to 18-19 million mt from 21 million mt projected previously, as rains in western areas have disappointed, an Argentina-based analyst told Platts.

Moisture requirements in key wheat regions are at the highest levels, he added.

The Buenos Aires Grain Exchange Thursday cut down Argentina's 2019-20 wheat production to 19.8 million mt, citing lack of rains and cold weather.

"Soil moisture in the country's core productive area is currently below 2018 records. Furthermore, the drought covers a larger area this season," said Marina Barletta, analyst at the Rosario Board of Trade.

The Rosario Board of Trade also slashed Argentina's wheat output by 7.5% from a previous estimate to 20 million mt following extensive dry weather that has continued into October.

High yield losses have already been reported in key wheat producing regions of Argentina.

Lack of rains have contributed to yield losses of the wheat crop from a range of 10% to 40% in some areas of Santa Fe, Buenos Aires and Cordoba provinces, the Rosario Board of Trade said in a report earlier.

Argentina's government in June had raised the area under wheat planting to 6.5 million hectares for the 2019-20 season from a previous estimate of 6.46 million ha on good rainfall conditions.

The Buenos Aires Grain Exchange currently reports wheat planting area to be at 6.6 million ha, the highest level seen since the 2002-03 marketing season.

Argentina's wheat harvest starts around in mid-November and December, but there are some areas in northeast region where harvest begins during October, another Argentina-based analyst said.

INCONSISTENT WEATHER CONDITIONS

In northeastern areas of Argentina, such as in the Salta and Chaco provinces, wheat harvest has already started with excellent yields and quality reported for the crop, said Juan Manuel Niveyro, analyst at GRAIN Trader Argentina.

However, the important areas in central and southern Argentina continue to struggle due to dry and cold weather, market and weather experts told Platts. "[S]ome of the major croplands in Argentina have seen less than ideal conditions in the last 2-3 months," said Kirk Hinz, a meteorologist at US-based BAMWX LLC.

In provinces such as Cordoba, Santa Fe, Buenos Aires, San Luis and La Pampa, the weather is still cold, which would mean wheat will take more time to dry, Niveyro said, adding that in the next seven days farmers will begin harvesting in those areas.

According to the Argentina's government website, the Buenos Aires, Cordoba and Sante Fe provinces produce more than 80% of the country's total wheat output.

"There's a good shot of rain over the next week anticipated that I think will help a good portion of the bigger croplands, but after this shot of rain, the pattern does look to trend back to below normal precipitation here into week 2 [of October]. The areas that look to stay on the drier side ahead for the remainder of [October] into early [November] are Cordoba to Buenos Aires and points southwest," Hinz added.

"Up to now, crops defended with deep reserves but demand in October is higher as days are longer, temperatures are higher and wheat starts heading," an analyst said.

With no rains during October, the market will be talking of a 18-19 million mt wheat crop in 3-4 weeks, the analyst added.

EXPORTS COULD BE HIT

For the current marketing year, Argentina has exported 10.2 million mt of wheat so far until September 15, latest data from Argentina's government website showed.

Argentina's wheat exports are expected to reach 11 million mt in 2019-20, down from a previous estimate of 14 million mt, an analyst said.

In its latest report released Thursday, the USDA kept unchanged its export forecast for Argentina from its previous estimate at 14 million mt in 2019-20. However, this will still be up 10.4% from the 2018-19 marketing season.

Argentina's exports generally pick up pace in December, and peak during the next two months.

-- Rohan Somwanshi, rohan.somwanshi@spglobal.com

-- Edited by Debiprasad Nayak, debiprasad.nayak@spglobal.com