Aug 17, 2022

First Look at 2022/23 Argentina Soybean and Corn Production

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The 2022/23 Argentina soybean and corn estimates are as follows:

Argentine economy - The overriding issue in Argentina is the economy, which is in free-fall with no end in sight. Inflation is expected to be approximately 90% by the end of the year. Interest rates were just increased to 69.5%. The new economic minister (the third in the last month) is now in charge of the economy, manufacturing, and agriculture. The peso devaluation has not kept pace with inflation (at least not at the official rate). None of this bodes well for anyone in Argentina including farmers.

Farmers are coming off a disappointing 2021/22 growing season due to adverse weather. They have been slow sellers of their 2021/22 grain production as they prefer to hold onto their grain as a hedge against inflation. That means they will have less resources for their 2022/23 production, while at the same time, input costs are rising.

There have been reports of scarcities of fuel and fertilizers across the country. La Nina is still present, which makes the weather during at least the first half of the growing season suspect. As you can see, there are a lot of uncertainties as Argentine farmers approach spring planting.

2022/23 Argentina soybeans - It is estimated that farmers in Argentina will increase their soybean acreage 700,000 hectares to 16.7 million (41.2 million acres) mainly because soybeans are cheaper to grow and soybeans are less inclined to be impacted by adverse weather. Additionally, the government is less likely to limit soybean exports in order to help hold down domestic food inflation. Most of the soybeans leave Argentina in the form of meal and oil and they are taxed at a very high rate of 33%, but at least they can be exported.

The 2022/23 Argentina soybean production is estimated at 50.0 million tons compared to 44.0 million tons in 2021/22. This is assuming normal weather and trend line yields.

2022/23 Argentina corn - It is estimated that the farmers in Argentina will lower their corn acreage by 200,000 hectares to 7.0 million (17.3 million acres) due mainly to the higher cost of production. Additionally, the Argentine government has used corn in the past as a weapon against domestic food inflation. The government has limited corn exports in the past in order to drive down domestic corn prices and thus lower feed costs and the price of meat in the supermarket.

On one hand, given the economic turmoil in the country, it is uncertain if that strategy will work once again. On the other hand, the government is now more desperate than ever to try and tame inflation and the last thing they need are high corn prices.

The 2022/23 Argentina corn production is estimated at 55.0 million tons compared to 52.0 million tons in 2021/22

When will the crops be planted? - The corn in Argentina is planted in two phases. Farmers will plant their first phase of corn in September and October and 50% or less of the corn will be planted during this first phase. Not much corn is planted during November and the second phase will be planted in December and January. Generally, 50% or more of the corn will be planted during the second phase. Soybean planting starts at the end of October and ends about mid-January.

Will there be enough fuel and fertilizers? - There have already been spot shortages of fuel and fertilizers and with a devalued peso, the cost of anything imported such as fertilizers and chemicals will be very high. Given the economic uncertainties in the country, I would suspect that farmers will try to plant their crops as economically as possible, which could translate to less fertilizer and chemical applications.

Will there be enough financial resources? - Farmers are not well capitalized because last year's crops were disappointing and they have been slow sellers of their 2021/22 grain production. Their 2022 winter wheat production is probably going to be disappointing due to dry conditions. Inflation is raging, the prime interest rate is about 70%, and everyone expects a significant devaluation of the peso. It is going to be a very challenging growing season in Argentina and how this all ends is anyone's guess.

Bottom line - The situation in Argentina is very uncertain with the economic turmoil in the country and the possibility of a third consecutive year of La Nina. I think farmers will try to do the best they can with limited resources. I too am very uncertain about my estimates for Argentina. I am starting off the season expecting normal weather and trend line yields, but it remains to be seen if either of those will happen this year.