The market awaits the 2020/21 wheat while 40.7% of the planted area is in fair to poor condition
It is estimated that 40.7% of the area planted with wheat is in a state between fair and bad according to MAGyP. Cereal stocks at the end of October are the highest since 2015/16 while shipments abroad slowed.
With the 2019/20 wheat cycle practically over and with little merchandise to be marketed internally, the market is waiting expectantly for the income of the cereal corresponding to the new 2020/21 commercial season. In this sense, there are still no certainties regarding the yields to be obtained from the fine harvest, given the worrying lack of water that affected the normal development of the crop, which in commercial terms has slowed down the business dealings of the new season.
If the state of wheat cultivation is observed for the last week until November 5 published by the Ministry of Agriculture, Livestock and Fisheries (MAGyP), at the country level no less than 40.7% of the hectares sown with wheat are in a state between fair and bad. Without the possibility of observing large variations in this figure for the beginning of the crop, the remaining 59.3% managed to stay in more favorable conditions. Taking the 2019/20 cycle as a reference at the same time, the area planted with bread wheat that was in a state between fair and bad was located at 29%, well below the current record.
Regarding the most important productive provinces, Buenos Aires is the wheat area par excellence, representing 40% of the area planted with wheat in Argentina. In this jurisdiction, unlike what happened the previous year, the crop managed to pass the planting stage without major shocks because the humidity of the soils remained adequate, mainly in the southern provincial area. In this sense, with only 15% of the implanted area in a fair-poor state, it is expected that it will only partially compensate for the drop in yields in other regions of the country.
The most critical situation is registered in the provinces of Santa Fe and Córdoba, which together represent just over 40% of the planted wheat area. In both provinces, more than 50% of the planted area is in an unfavorable state, being one of the main reasons why the production projections for the new season have fallen. For its part, Entre Ríos registers similar figures while the provinces of northern Argentina have also suffered significant water deficits in soils, which had an impact on the state of the crop in general terms.
On the other hand, despite the fact that the wheat production forecasts currently stand at 17 Mt according to the Strategic Guide for Agriculture (GEA-BCR), that is, 2.5 Mt less than the previous cycle, the commercial stock as of October remains above the record of the previous year with 2.17 Mt. This figure is a maximum since the 2015/16 cycle for this time of year, which brings some relief for the commercial splicing of the campaigns despite the unfavorable production outlook that It was planted. Already for the current month, it is expected that the merchandise harvested early in the north of Argentina will begin to enter, despite the fact that the new campaign officially begins on December 01st.
Regarding the progress of the 2019/20 export, up to the month of October inclusive, 11.6 Mt has been sent abroad according to preliminary data, which represents almost 1 Mt more than the shipments of the 2018/19 cycle in the same period. However, after starting the campaign with significant export volumes, these declined until last month only 63,500 tons were destined exclusively for Brazil, according to data provided by an Argentinean shipping agency. This monthly value is a minimum since December 2015, and considering the same month for previous years, such a low tonnage has not been observed since 2014.
On the other hand, regarding the exported value in the 2019/20 cycle, an income of foreign currency from wheat sales of US $ 2,272 million is estimated until October, slightly below the previous commercial cycle due to a negative price effect that could not be offset with the largest volume shipped abroad.
Then, with a view to the beginning of the new 2020/21 campaign, Affidavits of Foreign Sales (DJVE) have already been registered with a shipment date from December for 4.4 Mt. This shows a delay in the sales record compared to the previous year up to the same moment, since at that time such value was located at a historical record of 7.5 Mt. In this sense, both internal and external marketing are more cautious in the face of the productive uncertainty that characterized the sowings this year.
About the international context of the cereal, in recent days there were publications of two reports of great relevance for all grains, the Market Monitor of the Agricultural Market Information System (AMIS), and the Grain Market Report of the International Grains Council ( IGC). The result of comparing the two reports may reveal differences and similarities in the estimates of both agencies.
On the contrary, until the last launch, both reports agree that the projected production for the 2020/21 season will exceed the previous season by less than one million tons. In the case of the IGC, the estimate for the next season is 763.9 million tons, while for AMIS it is 762.7 million. In addition, for the first of these organisms, the next cycle would be the highest in terms of production since it was recorded. On the other hand, the stock/consumption ratio would improve in both estimates, reaching a range of between 37 and 39%. Thus, the final stocks could ensure the supply of just over a third of the year.
Regarding the WASDE report, the group of analysts surveyed by Refinitiv expects cuts in the volume of final stocks for the next season for the global aggregate. That is, the average of the survey showed that a decrease of the order of 1.67 Mt is expected on average compared to the last report, which represents a decrease of 0.5% from the 321.45 million tons reported in October. However, final stocks for the United States are also expected to decline, but to a lesser extent than at the world level. In this case, a little more than 54 thousand tons would fall, which represents a decrease of 0.23% over the 24 million tons stored in USA.
WBL Shipping Agency
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