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April 20, 2016

2015/16 Argentina Soy Lowered 1.5 mt due to Extensive Flooding

The 2015/16 Argentine soybean estimate was lowered 1.5 million tons this week to 59.0 million and I have a lower bias going forward. Heavy rains and flooding over the past two weeks have taken a toll on the crop in eastern Argentina, but we don't have full accounting of the problem as yet. Some market observers feel that 4-5 million tons of soybeans are at risk, but we won't know for sure until the rain stops and farmers get back into the field. Unfortunately, the forecast for this week is for more rain.

Farmers in Argentina had expectations for very good yields after a nearly ideal growing season, at least until several weeks ago. Farmers in the provinces of Santa Fe and Entre Rios are now facing extensive loses due to flooding. In the province of Santa Fe, 9 of the 19 departments (municipalities) in the state have been impacted by the flooding. Some areas in the state have received 250 to 700 mm of rainfall over the last 12 days (10 inches to 28 inches) resulting in extensive flooding. Local estimates in Santa Fe are that 2,300,000 hectares have been impacted, but some of the impacted area is hay and pasture, so it is difficult to say how many hectares of row crops have been impacted.

The province of Entre Rios was also hard hit. The province planted 1,345,400 hectares of soybeans with 1,174,300 hectares of full-season soybeans and 171,000 hectares of double crop soybeans. The Rosario Grain Exchange estimates that approximately 30% of the full-season soybeans have been impacted or 350,000 hectares. Only 5% of the soybeans in the province have been harvested or just 60,000 hectares.

Many areas remain inaccessible, so the total amount of damage is yet to be determined. In both provinces, farmers have pastures and hay as well as row crops, so it is difficult to determine how many hectares of soybeans and corn have been impacted. Unfortunately, there was some more rain in the region over the weekend and there is more precipitation in the forecast for this week.

Part of the problem is that this region is very flat. There is no slop to the land, so the water drains away very slowly and any further rains would exacerbate the situation even further. Additionally, these are not fringe production areas. Some of these areas are in the northern core production region which contains some of the most fertile soils in Argentina.

According to the Buenos Aires Grain Exchange, the soybean crop in Argentina was 15% harvested late last week, which represented an advance of only 1.5% for the week and the harvest is now 17% behind last year's pace. The Grain Exchange is estimating that thus far, the average soybean yield is 3,680 kg/ha (53.3 bu/ac), which is down from last week's estimate of 53.9 bu/ac.

The flooding has also caused logistical problems as well with fewer trucks able to transport the soybeans to processors or export facilities. The processors are running well below capacity and only about 60% of then normal truck volume is arriving at the ports.