MercoPress. South Atlantic News Agency

Argentina expects record soybean and sunflower crop

As Argentina's 2005/06 crop year gets under way, analysts say prospects are bright for a record soybean harvest and surging sunflower seed production, but corn and wheat output will slump.

Among the world's top exporters of corn, soy and wheat, Argentina notched record harvests in the 2004/05 season, the result of favourable weather and improved seed technology. But this season, dry soils have hindered wheat seedings and farmers are opting to plant soybeans instead of corn, because biotech soy is cheaper and easier to plant.

"Soy's profitability is clearly superior to that of corn, in some cases two times greater," said Carlos Pouiller, a grains market analyst at the Argentine Agriculture Secretariat.

After slipping last season, soybean area is forecast to expand again in Argentina, rising to an estimated 15 million hectares from 14.4 million hectares in the 2004/05 season.

Soy area and output have both surged since genetically modified seeds were approved in 1996. Production rose 320% in the past 10 years, reaching a record 38.3 million tons in 2004/05.

The government tentatively forecasts 2005/06 soybean output at a record 40 million tons, while the US Department of Agriculture foresees 39 million tons. Farmers will start seeding 2005/06 soy in October or November Corn will be the main victim of soy's steamroller expansion this season, analysts said.

The Agriculture Secretariat forecasts the 2005/06 corn area will fall to between 3.0 million hectares and 3.1 million hectares, from 3.32 million last season ? shrinking by as much as 10%. Corn has higher production costs than soy, fuelled by pricey seeds and fertilizers, but fetches lower prices on the market.

The Argentine government tentatively forecasts corn output at 17 million tons, down from a record 19.5 million tons last season. The USDA puts Argentina's 2005/06 corn output at 18.5 million tons.

Farmers began seeding new-crop corn last week.

Some say farmers should use more corn in crop rotations to replenish vital soil nutrients. The government just approved a new biotech corn variety in a bid to boost corn plantings, after reducing sales tax on fertilizers. "Many farmlands are rented and the tenant is not that worried about conserving soils because it's not his land. So he plants what is most profitable, which is soy," Pouiller said.

Farmers have nearly finished seeding 2005/06 wheat on 5.3 million hectares, down from 6.26 million hectares last season due to excessively dry soils in parts of the growing region.

The government tentatively forecasts wheat output at 13 million tons, down from a record 16 million tons in the prior season. The USDA puts Argentina's 2005/06 wheat output at 13.5 million tons.

Sunflower seed area is seen growing by as much as 25%, rebounding after drought hurt plantings last season in northern provinces, such as No. 3 producer Chaco, Pouiller said.

Production is tentatively forecast at 4.0 million to 4.1 million tons, up from 3.65 million tons last season but far below the record 7.1 million tons notched in 1998/99.

Recent rains have renewed soil moisture in much of the Pampa region and forecasts show normal to greater-than-normal rainfall through to January, said Cesar Rebella, director of the state-run Institute of Climate and Water.

Last season, weather conditions were very good in the main growing region but less favourable in southern Buenos Aires and downright dry to the north, in Chaco and Santiago del Estero, Rebella said.

This year, rains are expected to be more evenly distributed and weather conditions could be better overall.