Oct 29, 2014
Argentine Soybean and Corn Acreage is Point of Disagreement
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
As farmers in Argentina are finishing planting their early corn and getting started on planting their 2014/15 soybean crop, there is disagreement about the potential acreage for both corn and soybeans in Argentina. Everyone agrees that the corn acreage will be down compared to last year, but how much down is the question. For soybeans, it is a little more complicated.
Argentine soybean acreage - On one side are those who think the corn acreage has been reduced in favor of more soybeans and that the soybean acreage is larger than last year. On the other side are those who think the soybeans acreage actually will be lower this year compared to last year due to poor economics especially for soybean production in northern Argentina.
For those who think that the soybean acreage will decline, their main area of concern is in northern Argentina where soybean production has been expanding in recent years. In northern Argentina the cost of producing soybeans is higher, the yields are generally lower, and they are the furthest from the ports so transportation costs are higher. Additionally, there is a general lack of credit availability in Argentina. So the argument is that farmers in northern Argentina are not well capitalized since they are still holding some soybeans from last year. They are also having a hard time getting credit due to the low soybean prices. Since they do not get top notch yields in northern Argentina, they are going to reduce their soybean acreage especially in the fringe areas or on rented land.
A huge amount of the soybean production in Argentina is on rented land and it's going to be hard to make any money this year if you have to pay rent. Therefore, the first area they may reduce their soybean production is on rented land.
In the most productive areas of Argentina, referred to as the northern core and southern core regions, the soybeans acreage might actually increase as farmers switch from corn to soybeans. Farmers have no enthusiasm for corn not only because of the high cost of production and low prices, but also because of the way the government allots corn exports. Farmers never know how much corn will be allowed out of the country or when export licenses will be issued, thus future prices for corn are uncertain.
In the core regions, a soybean farmer needs approxikmately1,500 kg/ha to cover his production costs or 21.7 bu/ac, not counting rent. The rent may be equal to another 1,500 kg/ha. So on rented land, it takes about 43.5 bu/ac just to cover their costs. In these core areas, most farmers budget yields of about 3,500 kg/ha or 50.7 bu/ac. So if you are renting land to grow soybeans, there is only a margin of about 7 bushels per acre. In less productive areas of northern Argentina, the margins are even less, if there will be any at all.
My current soybean acreage in Argentina is 20.5 million hectares, but now I am concerned that I might be too high. I left the acreage unchanged this week with the possibility it could decline.
Argentine corn acreage - The Argentine corn acreage may also be overestimated. I started off the growing season using a corn acreage of 3.0 million hectares, or 12% less than last year. There are farmers in Argentina who feel the corn acreage may be down as much as 20% compared to last year.
Unfortunately, we won't have a quick answer to the corn acreage due to the split nature of corn planting in Argentina. Approximately 33% of the corn has been planted and the early corn planting is now about ending. The late corn planting will start at the end of November and continue into December. The problem is that we don't know if farmers will reduce their early corn acreage and then make up for it by planting more corn later or if they will reduce both early and late corn acreage.
Farmers are reported to be using less technology as a way to save money. They certainly are not anxious to plant the most expensive corn hybrids. I think there is greater than a 50-50 chance that the corn acreage in Argentina ends up being less than what is currently being estimated.