Argentina aims at record wheat production with the largest planted area in 20 years

Argentina aims at record wheat production with the largest planted area in 20 years

An increase in the estimate of planted area destined for wheat would increase national production, reaching a record of 20.5 Mil MT in the 2021/22 campaign. In the international sector, production and stock estimates for the next cycle were cut.

With just over 4 months to go until formally beginning the 2021/22 wheat campaign, more than 90% of the area destined for this cereal has already been sown. In Wednesday July 14^th’s report, the Strategic Guide for Agriculture (GEA-BCR) increased its estimate of the area to be sown from 6.7 Mil Ha to 6.8 Mil Ha, predicting that the sowing will cover the largest land area since the 2001/02 cycle when 7.1 Mil Ha were planted. At the same time, this would lead to a production of 20.5 Mil MT, surpassing the records of the 2019/20 campaign by almost 1 Mil MT, and establishing a historical record for the production of bread wheat at the national level. It’s worth clarifying that these estimates are subject to maintaining favorable weather conditions until the time of harvest.

Although the focus is largely set on the next wheat season, there are still a few months to go before the grain harvest. Meanwhile, 2020/21 trading activities appear in full force, with internal selling (between industry and export sector) of 14.1 Mil MT, according to data from the Argentinian Ministry of Agriculture, Livestock and Fisheries (MAGyP), which represents 72.2% of the total supply of grain for this season. This level of earmarked grains is behind the volume traded last season at this same time of the year, in both absolute and relative terms. In this sense, in 2020, 18.6 Mil MT of wheat had already been commercialized, thus compromising 86.5% of the total supply, which denotes a relative delay in selling. However, the current traded percentage exceeds the average record of the last 5 campaigns for this time of the year (70.1%), so it can be said that the current commercial dynamic looks pretty similar to historical performance of recent years, excepting the 2019/20 harvest.

Regarding the Sworn Statements of Foreign Sales (DJVE), in recent campaigns, a change has begun to be seen in the timing of exports, with a tendency to commit significant volumes of wheat abroad before the start of the trading cycle. Among the latest campaigns, the 2019/20 cycle stands out, in which exports were declared abroad for 10.2 Mil MT (88% of the exportable balance) before the campaign actually started. This situation was based in the uncertainty generated by the presidential elections of 2019, which led international trading of grains to be bumped forward.

Concerning the current 2020/21 campaign, although 4.6 Mil MT were declared in advance, it is well below last year’s record. The cargo declared since July was practically nil last season, and it is expected that something similar will occur in the current season since a good part of what is expected to be exported in the entire commercial season has already been declared. Meanwhile, export business has already begun to be registered for the 2021/22 cycle, for 3.1 Mil MT so far.

In the meantime, for the last week, grain prices in the Rosario city square have maintained bullish trend, going from 202.2 USD/MT on July 7 to 208.4 USD/MT on Thursday 15, resulting in a 3% from one week to the next.

At an international side, concerns grow at the decline in the production estimates of key exporting countries

On Monday, the monthly US World Supply and Demand report (WASDE) surprised private agents when realizing the size of the estimated cuts in production and, consequently, final stocks of the cereal.

As for production, the most significant cut occurred within the US projections, with the drop of almost 4.2 Mil Mt compared to the June report, brought on mainly due to the droughts suffered by the spring crops in the Plains of the Northern Plains area. It’s expected that this will generate a drop in sales, both foreign and domestic, as well as cutting the volume of stocks with which the US would end the 2021/22 season. Canada and, to a lesser extent, Russia would also suffer production declines, and although global production would grow, the concern main about in these drops lies in the fact that these two countries represent two of the main exporters worldwide.

Concerning exports, the US agency stated that trade will increase internationally in the 2021/22 campaign, again exceeding 200 Mil MT shipments between countries. A noteworthy point was provided by Australia, which saw its exports increase to 23 Mil MT for the 2020/21 campaign, after the last three harvests, where low productive performances gave way to exports ​​of 9 Mil MT in the 2018/19 harvest and 9.1 Mil MT the following year. At the same time, the US and Canada are expected to reduce their market shares from 26.9 and 27.5 Mil MT in the 2020/21 cycle to 23.8 and 23 Mil MT in 2021/22, respectively. Meanwhile -according to USDA data- Argentina would match its maximum export performance with 13.5 Mil MT, previously achieved in the 2019/20 corp.

Finally, the inventories with which the 2021/22 campaign is projected to end are 291.7 Mil MT, slightly exceeding the previous year’s records and falling well below the 296.8 that was reported in June. Once again, the severe weather conditions in the US that had an impact on the wheat production of the new season cut part of the supply that is already adjusted at the moment. The 18.1 Mil MT with which the US is expected to end the next campaign is the lowest since 2013/14, when 16.1 Mil MT were recorded. At the same time, the mentioned final stock is more than 10 Mil MT below the last 5-campaign average.

Lastly, as for China, a drop is also expected in its cereal inventories, taking into account that it is the country that has the largest wheat stocks in the world. In this sense, its estimated to go from 145.6 Mil MT to 142.6 Mil MT, translating to a second-consecutive year reduction in stocks after the 151.7 Mil MT record reached in the 2019/20 harvest.

Source: https://bcr.com.ar/

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