Reference Date: 10-May-2018
Prolonged dry weather conditions affect prospects for 2018 maize output
Domestic and export prices of maize and wheat increased sharply in past three months and well above year-earlier levels in March
High feed prices and pasture shortages prompt herders to reduce herd sizes
Prolonged dry weather conditions affect 2018 maize production prospects
Harvesting of the 2018 maize crop is underway in the main producing provinces of Buenos Aires, Córdoba and Santa Fe. The current prospects point to a decline in 2018 output, mainly due to a prolonged hot and dry period since November 2017, which affected early-planted crops entering the vegetative stage and delayed plantings of late-planted crops. Dry weather conditions continued until March, adversely affecting the area sown and yields. Favourable rains in the first half of April brought some relief to late-planted crops, but they were too late to reverse the impact of previous moisture deficits. Official estimates indicate that about 8.9 million hectares were sown with maize, 5 percent more than the previous season’s level. However, due to area losses resulting from the dry weather and significantly lower yields, the first official forecast puts the 2018 maize output at 42 million tonnes, 15 percent down from the record level of 2017. At this level, production is still more than 10 percent above the average of the last five years. The prolonged dry spell and high temperatures also affected the 2018 sorghum crop production of which is forecast at 1.8 million tonnes, nearly 30 percent lower than the already reduced level in 2017 and more than 40 percent down from the average of the last five years. Regarding soybeans, with the harvest underway, production is forecast at a six-year low of 37.6 million tonnes, 32 percent lower than in 2017, due to lower plantings combined with an expected decline in yields.
Production of 2017 wheat crop set at bumper level
Harvesting of the 2017 wheat crop was completed in early January 2018 and production is estimated at a record high of 18.5 million tonnes, slightly above the already bumper output obtained in 2016. The yearly increase is mainly due to higher yields and increased plantings for the second consecutive year, partly facilitated by a change in the Government’s policy that promoted a more liberalized wheat market. Planting of the 2018 wheat crop is about to start and recent rains have improved moisture conditions for the upcoming season.
Maize exports at record highs in 2017/18 marketing
Exports of maize in the 2017/18 marketing year (March/February) are estimated at record level of nearly 26 million tonnes, reflecting larger domestic availabilities and Government’s efforts to boost exports. In the recently-started 2018/19 marketing year, exports are expected to decline moderately mainly due to lower national output. Exports of wheat in the 2017/18 marketing year (December/November) are forecast close to the record high level of 12.5 million tonnes traded in previous marketing year.
Grain prices increasing and at high level in March
Prices of yellow maize rose sharply for the fourth consecutive month in March and reached record highs in nominal terms, about 50 percent above their year-earlier level. The higher prices were underpinned by concerns about the impact of persisting dry weather conditions on the 2018 maize crop and larger export volumes. Prices of wheat grain also rose significantly and reached record highs, in nominal terms, in March, mostly driven by a strong pace of exports. Higher grain prices drove up wheat flour prices, which increased by 6 percent in March, on a monthly basis, after remaining virtually unchanged in the past several months. In addition, the depreciation of the local currency since December 2017 and higher prices in the international markets also contributed to the upward pressure on domestic cereal prices.
Dry weather conditions affect livestock sector
Persistent dry weather conditions, is affecting pasture and fodder production, coupled with high prices of grains (used for feed) prompted herders to reduce the number of animals ahead of the winter, which extends from June to August. In the first three months of 2018, the number of cattle slaughtered was about 6 percent higher than in the same period in 2017 and the highest since 2009. During the same period, the slaughter rate of female cattle was also proportionally higher than in the past few years as farmers aim to reduce calf production as well as to cut current herd sizes. In early April, the Government agreed to reduce, for a period of 90 days, the minimum weight required for female cattle to be slaughtered, in order to facilitate sales and support producers. The increased rate of slaughtering caused an 8 percent month-on-month decline in the price of live cattle in March and, concurrently, led to increased exports, particularly to China. Despite the reduced live cattle prices, the average price of beef meat rose in recent months and, in March, it was about 18 percent higher year-on-year. Prices of chicken and pork meat are also reported to be well above their year-earlier levels, mostly reflecting the higher cost of feed crops, including maize and soybeans.
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