MercoPress. South Atlantic News Agency

Drought emergency in central Argentina and Paraguay but no sufficient rains on sight

Corn and soy prices have been climbing at the Chicago Board of Trade

Argentine corn and soy farms will suffer from hot weather and scant rains for the rest of this week, forecasters said on Tuesday, increasing worries that crop losses will eat into global supplies.

Argentina, which supplies about 20% of the world's corn exports and 12% of its soybeans, has been pounded for weeks by an unrelenting Southern Hemisphere summer sun.

A cold front is forecast to bring storms to the country's grain belt on Sunday, but the moisture is expected to be unevenly distributed. The heat caused analysts to cut their crop estimates, which drove soybean and corn prices higher on the Chicago Board of Trade on Tuesday.

“There will be no substantial rains in the nucleus of the grains belt at least until Sunday, when we expect a cold front that will bring showers and storms,” said meteorologist Ezequiel Marcuzzi of the Clima Campo consultancy

But even then there will be a great disparity in the distribution of rainfall, from one field to the next,“ Marcuzzi said. ”One can get 50 millimetres while the field next to it only gets 15 millimetres.”

Farmers say they need more than 100 millimetres of rain in order to revive their fields. Hope has meanwhile faded that Argentina might be able to replenish global corn supplies depleted by a poor US harvest.

Hamburg-based oilseeds analysts Oil World cut its forecasts of soybean crops in Argentina and Brazil by a combined 3.8 million tons, which could help raise demand for US soy on global markets.

Paraguay, the world's fourth-biggest soybean exporter, declared an emergency on Tuesday, allowing the government to give special drought relief to farmers for a period of 90 days.

In Cordoba, Argentina's No. 2 soy- and corn-producing province, a drought emergency was declared along with a handful of districts in other grains-producing areas. Argentina's main farm zone, the Pampas, includes southern Santa Fe, northern Buenos Aires and southern Cordoba provinces.

The US Department of Agriculture expects Argentina to produce 50.5 million tons of soy and 26 million tons of corn in the 2011/12 season.

The Argentine Agriculture Ministry has not yet published harvest projections while the drought prompted the Rosario grains exchange to slash its 2011/12 corn production outlook by nearly 18% to 21.4 million tons. The season started with expectations that corn would come in well above its record 2010/11 harvest of 23 million tons.

Soybeans, which are more resilient than corn thanks to a longer flowering period that gives plants more time to soak up whatever moisture is available, have begun to suffer as well.

The heat wave is related to the La Niña phenomenon, an abnormal cooling of waters in the equatorial Pacific Ocean that threatens to upset commodity markets from corn to coffee.

The drought is expected to add to the government's fiscal challenges this year as Argentina faces fallout from Europe's debt crisis and a sluggish world economy. So not only farmers and grains traders but sovereign bondholders as well have been watching the vast blue Pampas horizon for signs of rain.