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Will Argentina Steal U.S. Corn Marketshare?

Farmers spend like there’s no tomorrow.

As the world and the U.S. prepare for a supercrop, keeping alive worries about commodities prices, Argentina’s agricultural economy is coming alive.

Because of tax changes, Argentine farmers are taking advantage of export opportunities and enjoying more money in their pockets.

This will be the first crop planted after the government eliminated export taxes on corn (previously with a rate of 20%) and reduced those taxes on soybeans from 35% to 30%.

Though the government has made a remarkable policy U-turn on the issue of soybean export taxes, denying a new possibility of a reduction of another five percentage points, there is a strong optimism for the new corn season, with indications of increased farmer spending.

Spending Is Up

So far in the year, sales of fertilizers and agrochemicals have jumped by 50%, comparing to 2015. Another indicator is the rise of pickup truck sales by nearly 30%, pushed by farmer demand. In addition, the total agricultural surface growth in 2016/2017 Argentina is the highest in the world with a 5% jump, comparing to 4.6% in Russia and 4.5% in Kazakhstan.

A private report from a Boston-based consultancy with global presence foresees that Argentina could potentially steal corn market share from both the U.S. and Brazil, though most analysts say that is not true because Argentina’s output growth would be offset by higher China purchases of corn from all three countries.

In this scenario, the most recent estimates from the Buenos Aires Cereal Exchange put the total corn output at 36 million metric tons through a surface of 12.1 million acres, which is 20% more than in 2015. In the meantime, the soybean production would reach 52.5 million metric tons, which is less than a year ago, the Rosario Board of Trade estimated Friday, due to recent rains in producing regions.

Because Argentina’s corn harvest season follows the peak selling season of U.S. corn, the South American country’s ability to steal export share is challenged.

Don Roose of U.S. Commodities, West Des Moines, Iowa, says it’s important to note that Argentina’s new crop will not come available to the market until April.

“I think Argentina will have a very limited overall market share because U.S. producers will be very aggressive sellers of corn, regardless of weather, and due to the need of money. This will also keep prices low,” says Roose.

For Esteban Copati, an analyst of agricultural estimates at the Buenos Aires Cereal Exchange, there is reason to be optimistic about the new-corn crop and the following crops because of a recovery of a grain surface of 2011/2012 levels, prior to the significant export tax hike. “There are good crop conditions, following a year of El Niño. The climate conditions have been favorable,” affirms Copati, as planting hits 38% completion.

In the meantime, Ramiro Costa, chief economist at the same exchange, adds that this season and the following seasons will be different than others in terms of trade because Argentinian farmers will stop retaining grains. “Each time, we will see less soybeans and corn leftovers and smaller initial stocks with these new favorable policies of the government. Now it is good to sell for Argentinian farmers,” analyzes Costa.

Corn Exports

Gustavo López, director of consultancy Agritrend, believes that the U.S. Department of Agriculture is likely to be right on a projection that Argentina would export 22 to 23 million metric tons in 2016/2017. “Argentina would be very close to Brazil in terms of percentage of the global market. It would be just a jump of 17% of the total market share to 17.5% coming from 20 million metric tons, which is not that high,” he explains to Agriculture.com.

 

Argentina Wheat Harvest Update

Rains in important parts of Argentina could potentially mean future losses of soybeans or corn. As the wheat harvest advances in the country, locations like General Villegas in the northwest of Buenos Aires, some parts of the Santa Fe province, and Córdoba province. In the case of General Villegas, there was over 15 inches of rain in October, which is more than five times above the average for the period. So far, the wheat losses are estimated at around 2 million metric tons. Last week there was a delay of soybean planting with a progress of 13% in the country, while the average for the time of year is 23%, but that was reversed in the last few days and has reached 50% of the crop.

A farmer with significant planting intentions in that location in the Buenos Aires province has lost about half of his wheat planted in a surface of 1,000 acres and is reviewing his plan to plant all soybeans in 2017. “I’m not sure with this delay and losses that I will risk increasing my surface with these low prices.In this final stretch of the decision, perhaps I will change my mind and plant some corn,” said farmer Hernando de La Torre from General Villegas.

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