| BUENOS AIRES
BUENOS AIRES Argentina will reduce its corn output next season as farmers - hobbled by high inflation and antagonistic government policies - brace for a record-high U.S. harvest likely to trample prices and push them toward planting cheaper-to-grow soybeans instead.
Lower Argentine output would affect global trade given the country's role as a reliable corn shipper just as the United States, the world's No. 1 producer, is reducing its share of the export business.
Less corn from No. 3 supplier Argentina would be felt most acutely in Asia, which relies on shipments from the South American country from April through July, when global stocks tend to run low just ahead of the U.S. harvest.
It could also affect emerging-market political risk by making basic staples less available year-round in the Middle East and North Africa, where food insecurity has contributed to upheavals in recent years.
"If corn prices go down, which they will as the United States gets ready for its 2013 harvest, Argentina and other corn exporters like Brazil, South Africa and Ukraine could be driven out of the business at least for the next season," said Martin Fraguio, head of Argentine corn industry chamber Maizar.
Farmers in Argentina's Pampas grains belt will sow corn in September, just as their U.S. counterparts are gathering what is forecast to be a record harvest of more than 360 million tonnes (397 million tons). The new supply could push Argentine corn prices down to $100-$120 per metric ton from the current $165 per metric ton.
"At that price," agricultural consultant Pablo Adreani said, "80 percent of Argentina's corn area would be operating at a loss, and a lot of corn farmers would have to switch to soy".
Soy farming has taken off in Argentina over the last two decades. The country is the world's No. 3 exporter of beans and its top supplier of byproducts such as soyoil, which is used in the booming international biofuels sector. But corn is key to the crop rotations that are needed to keep Pampas soils healthy.
DREADED EXPORT CURBS
The worst U.S. drought in decades punched a 100-million-tonne hole in world corn supply last year, raising fears of a global food crisis. The price spike made corn profitable for Argentina this year despite government export curbs and high farm costs caused by galloping inflation.
The cost of seeds and fertilizers is much higher for corn than it is for soybeans in Argentina. With private economists predicting inflation will end this year at about 30 percent, one of the highest rates in the world, that's a big factor in favor of ditching corn for soy.
Then there are the curbs that the government puts on corn shipments to ensure ample food supplies domestically. Export quotas fluctuate as the government matches crop estimates against expected domestic demand, making it hard for farmers to plan how much to grow.
"These blundering government policies, plus high inflation and the fact that corn requires relatively high amounts of fertilizers and other chemicals, point to a big decrease in 2013/14 corn planting," said David Hughes, who manages thousands of hectares in the agricultural province Buenos Aires.
It costs about $490 to grow a hectare (2.5 acres) of corn in Argentina, compared with $320 per hectare of soybeans, which are subject to a 35 percent export tax but exempt from export quotas. That exemption makes soy the more reliable crop for growers.
Argentine soybean output ranks third behind Brazil and the United States, and the country already seeds four to five times more soy than corn. Argentina's soybean yields have frequently matched or bettered those of the United States and elsewhere.
The country's corn yields historically have been roughly 30 percent lower than U.S. corn yields. (Graphic of Argentina, Brazil and U.S. crop yields: link.reuters.com/zut96t)
U.S. corn output is forecast by the government at 369 million tonnes this year, blowing past the previous U.S. record of 332.5 million tonnes in 2009. Last year's drought-hit harvest came in at a scant 273.8 million tonnes.
Argentina is expected by the U.S. Department of Agriculture to harvest 51.5 million tonnes of soy in the current 2012/13 crop year and 26.5 million tonnes of corn.
It is early to forecast the size of the 2013/14 crop, but large grain consumers across Asia - such as Indonesia and South Korea - will be nervous about the likely reduction in Argentine corn output because it would imply a further concentration of global corn production in the Northern Hemisphere.
Agriculture is the backbone of the Argentine economy but the country's sparsely populated rural areas carry little political clout compared with the vote-heavy suburbs of the capital. These industrial areas are the bastion of President Cristina Fernandez, who says her interventionist policies help the poor.
She won re-election in 2011 on promises of expanding the government's role in Latin America's No. 3 economy, but her popularity has fallen since then. The country's economy grew by just 1.9 percent last year, way down from 8.9 percent in 2011 as currency and trade controls dented investor confidence.
Pointing to the country's high inflation, farmers say Fernandez's export curbs have done little to keep domestic food prices down while making orderly crop planning impossible. But no major changes are expected in government policy.
"If the U.S. gets a good corn crop and prices drop below $150 per metric ton in our market, we will reach toward an all-time-low corn-planting area, especially as our costs - trucking, labor and machinery - increase," Hughes said. "It will be a blow to our agriculture industry, and to the country as a whole."
(Editing by Gavin Maguire and Dale Hudson)