Argentina's upcoming corn crop appears to be in jeopardy due to persistent drought, which could hamper planting, and delays in fertilizer imports, potentially reducing essential nutrients for plants.
In major corn-growing provinces of Argentina, such as Córdoba, Buenos Aires, and Santa Fe, precipitation has been significantly below average since June. Last year, a drought led to a 31% decrease in corn production compared to the previous year. Under such dry conditions, many Argentine farmers might be reluctant to plant corn.
Reductions in urea and urea ammonium nitrate (UAN) imports, which account for roughly half of Argentina's annual total consumption of these commonly used fertilizers, also pose a risk to the upcoming corn crop. According to a survey by Gro's Global Fertilizer Impact Monitor, Argentina's urea imports dropped by 28% year-on-year between January and July 2023. This marks the second consecutive year of declining fertilizer imports, even with relatively stable corn planting areas. While UAN imports are nearly on par with the previous year, down just 21% compared to the same period in 2021, Argentina typically consumes 1.5 million tons of urea fertilizer and over 500,000 tons of UAN annually between 2015 and 2020.
Currently, Argentina's currency is at its lowest exchange rate against the US dollar in over two decades, further driving up the cost of fertilizer imports. When converted to Argentine pesos, implied local prices (excluding freight, storage, and handling costs) from major urea suppliers like Algeria and Egypt have reached their highest levels in five years.
The drought conditions in Argentina's corn-growing regions exacerbate the nitrogen fertilizer supply tension. This is because planting in dry soils typically requires additional nitrogen fertilizer, as nutrients are not as readily absorbed as in normally moist soil. Consequently, Argentina's existing fertilizer supply may be insufficient to help the upcoming corn crop overcome its challenging start.
This year's bountiful corn harvests in Brazil and the United States may partially offset the gap in global corn supply caused by Argentina. Nevertheless, poor yields could further harm Argentina's economy. In the coming weeks, replenishing soil moisture with rainfall is crucial to enable planned corn planting in Argentina. However, current forecasts indicate minimal precipitation. Argentina is the world's third-largest corn exporter, and first-season corn planting typically occurs from September to October. If this situation persists, farmers may decide to shift more planting towards second-season corn, sown early in the year, or switch to soybeans planted in November to December.
This article is provided for readers' commercial reference and is not intended as investment advice. Kelewell is not responsible for the accuracy of the data.
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