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Drought hits Argentine corn and soy crops

June 22, 2012 at 1:10 PM   |   Comments

BUENOS AIRES, June 22 (UPI) -- Drought is claiming a heavy toll on Argentina's corn and soy crops, creating new problems for the economy amid an increasingly fraught confrontation between farmer groups and the government.

Drought isn't a new threat to Argentine agriculture and has affected crops with varying severity over the past three years but officials said this year's yields could be the worst in 15 years.

Dry, hot weather conditions are blamed on La Nina, the weather phenomenon that is the opposite of El Nino.

The last major La Nina phase began in mid-2007 and lasted through 2009 but its adverse effects returned in parts of Latin America in 2010 and in other parts in 2011.

Venezuela is another regional country affected by La Nina's vagaries.

Drought-related yield reports from across the country earlier led the Agriculture Ministry in Buenos Aires to slash soy output forecast to 42.9 million tons. Economists from Argentina's Rosario grain exchange said they were revising the soy harvest estimates further downward -- from 40.9 million tons to 40.5 million tons for soy planted in the last season.

Rosario's latest figures represented a sharp revision of yield forecasts issued as recently as May and a drastic departure from earlier estimates that predicted soy yields of 52 million-53 million tons. Analysts said that continued drought conditions made it likely the yield forecasts could be revised again.

The exchange's report on the expected yields also said that crop areas that couldn't be harvested also increased. The La Nina which developed in mid 2007 and lasted until almost 2009.

Farmers showed damage to soy plants, including stunted growth resulting from poor or almost absent irrigation of the drought-affected fields.

Farmers' representatives are fighting for more incentives, lower taxes and increased relief aid from President Cristina Fernandez, who hasn't budged on raising incentives for the distressed agriculture sector.

Fernandez and farmers' representatives have argued over the government's agricultural policy. Farmers have threatened more strikes and shutdowns to force action by the government.

The Rosario report cited "negative adjustments" in soy yields in Buenos Aires, Cordoba, Entre Rios and Chaco.

Analysts said the effect of the drought on crops that were planted early could be far reaching and more damaging than thought likely. Uneven rain also had produced positive surprise in some locations not far from potential disasters for farmers, who were missed by the rain and so hit by poor yields.

Corn yields, meanwhile, have showed damage from drought that also varies from area to area, agriculture data indicated.

However, while poor soy yields have pushed soy prices upward, Argentina's poor corn yields have yet to make similar impact because of current oversupply of corn on global markets.

Brazil's Mato Grosso state is aiming to enter the grain market with a major harvest likely to exceed 13 million tons. Analysts said the rising stockpiles of corn could depress prices of the grain worldwide.

Slow growth in U.S. fuel demand is also seen behind depressed corn demand. About one-third of the corn produced in the United States is used to produce ethanol that's blended into gasoline.

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