It has been a tough start to the year for Argentinian soybean farmers. With very little to no rain in the first three weeks of December, soil conditions in the main soy producing regions of Buenos Aires, Córdoba and the southern part of Santa Fe became very dry, reducing the soils capacity to effectively convey excess water. And excess water was indeed what this region got. Heavy rains and flooding forced more than 600 residents in Santa Fe and Buenos Aires to evacuate their homes, with further flooding reported in Córdoba. Many areas recorded over 200 mm of rainfall over a period of 24 hours.
Aside from the obvious losses caused by damage to property, there are rising concerns with regard to the effects on this year’s soybean crop. The drought preceding the flooding prevented plantings, and is estimated to have caused a 2-3% reduction in acreage compared to forecasts. Furthermore, some areas already seeded have been lost due to the heavy rainfall.
This presents Argentina with a problem. The grain exchanges in Buenos Aries and Rosario are predicting area declines of about 300,000 – 400,000 hectares while other industry observers suggest the figure could reach as much as 600,000. While there were hopes of being able to replant some of the affected areas, data from the ministry of agriculture, as well as other weather forecasters, suggest a fairly active shower pattern during the remainder of the planting window which comes to a close around 20 January.
It is not the first time Argentinian soybean has been affected by flooding. Last year, devastating floods limited the yield to 56m tonnes, down from 60m the year before. Expectations for this year have also been cut, with current estimates suggesting a yield of 53-54m tonnes. This is set to limit the nation’s ability to contribute to China’s firm demand for animal feed and soya oil.
A natural consequence has been an increase in Argentinian soybean prices as traders spot opportunities to benefit from further disruption. However, while the true scale and impact of these floods remain to be seen, its potential to impact the export market is clear, possibly giving a boost to soybeans coming out of the US, thus adding positive pressure on tonne mileage.