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Floods, fungi fan food-price jitters over Argentine wheat
December 5, 2012 / 6:25 PM / 5 years ago

Floods, fungi fan food-price jitters over Argentine wheat

* August-October storms flooded Pampas, sogginess remains
    * Some analysts say official crop forecasts too high
    * Rosario exchange cites "big problem" with wheat quality

    By Hugh Bronstein
    BUENOS AIRES, Dec 5 (Reuters) - The wheat harvest in grains
powerhouse Argentina will be smaller than expected and of poorer
quality this season as farmers slog through waterlogged fields,
trying to save their crops from toxic fungi bred by too much
    After harsh August-October storms flooded wide swathes of
Argentina's Pampas farm belt, the normal amounts of rain falling
this month are keeping some fields in a mushy state.
    That's bad news for consumer nations that have seen their
wheat bills soar this year and were counting on Argentine supply
to help cap prices. Benchmark Chicago wheat futures have risen
25 percent in the last 11 months.
    World grain markets are contemplating the risk of prolonged
supply tensions, which would squeeze food prices higher and
drive up inflation in countries already struggling with low
economic growth and high unemployment.    
    On top of dry weather that thinned the crop in Australia,
the world's No. 2 wheat exporter, a weak harvest in No. 5
supplier Argentina would take an extra toll on global stocks,
which are forecast by analysts polled by Reuters to be the
smallest in four years.
    Argentina's government forecasts the 2012/13 wheat crop at
11.1 million tonnes, recently marked down from 11.5 million.
    But with more than 26 percent of the harvest already
collected, yields have been poor, prompting some analysts to
reduce their projections for the full crop.
    "The harvest will be under 9.5 million tonnes, and the
quality of the wheat will not be good," said Manuel Alvarado
Ledesma, a Buenos Aires-based agricultural consultant. "The
situation could worsen because more rain is expected."
    Farmers need a window of sunny days to help topsoils firm to
the point of being harvestable. Forecasters, however, are
calling for 100 to 150 millimeters (3.9 to 5.9 inches) of rain
over 60 percent of the Pampas on Thursday and Friday.
    The Argentine government, which curbs wheat and corn exports
to ensure ample domestic supplies of food, has freed 6 million
tonnes of 2012/13 wheat for overseas shipment. Internal wheat
demand in Argentina is also about 6 million tonnes.
    "There is going to be a problem in terms of exporting the
full 6 million tonnes that the government has freed for
shipment," Alvarado Ledesma said. "International wheat prices
will get additional support from thin Argentine supply."
    Argentina's crop has been hit by Fusarium fungus, which robs
wheat of its protein. Between the floods and the fungi, analysts
say not only wheat quantity but quality as well is suffering.
    Wheat planting area also shrank by 24 percent this season to
3.5 million hectares (8.6 million acres) as farmers shifted to
other crops in an attempt to skirt export curbs.
    "There are not going to be 6 million tonnes of wheat to
export this season," said Gustavo Lopez, director of Agritrend
consultancy. He projects a 2012/13 wheat crop of 9.8 million
tonnes compared with 13.2 million in 2011/12.
    The uncertainty is so high that the Rosario grains exchange,
the country's biggest grains market, has not yet ventured a
harvest estimate for this season.
    "The floods have damaged wheat quality," said Patricia
Bergero, a grains market analyst at the exchange. "It's a big
problem, the extent of which is yet to be seen."
    The U.S. Department of Agriculture expects Argentina to
harvest 11.5 million tonnes of wheat this season, a projection
with which some private analysts still agree.
    Supply from Argentina is of key interest to exporters such
as Bunge Ltd and Noble Group Ltd that operate
huge grains terminals along the Parana River, which offers
access to the shipping lanes of the South Atlantic.
    Ruben Sgalippa said 30 to 40 percent of the lands around his
small family farm in central Buenos Aires province are flooded.
    "You see a lot of Fusarium in the fields," he said.
    Indeed, the yields collected so far in the central farm belt
have been well under projections, said Esteban Copati, an
agronomist with the Buenos Aires Grains Exchange. 
    But he said he is keeping his harvest target unchanged at
11.1 million tonnes for now because wheat in Buenos Aires, a key
farm province, had good weather during its main development
    About 44 percent of Argentina's wheat is grown in central
and southern Buenos Aires. The exchange is still betting that
this region will come through with healthy yields, offsetting
losses in more marginal areas.
    "The fungi outbreaks in the main wheat belt hit when plants
were already in their advanced reproductive stages," Copati
said. "In other regions, the diseases did more damage because
they came along earlier in the development of the crop."

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