January 19, 2012 / 9:33 PM / 6 years ago

UPDATE 2-Argentina sees soy area, corn yields hurt by drought

* Soy area estimate cut to 18.8 mln hectares from 19 mln

* Government sees corn yields getting slammed by drought

* Buenos Aires Grains Exchange reduces corn area estimate (Rewrites, adds context, details)

By Hugh Bronstein

BUENOS AIRES, Jan 19 (Reuters) - An unforgiving Southern Hemisphere summer sun, intensified by dryness caused by the La Nina phenomenon, is taking a toll on Argentine corn and soy crop expectations, the government said on Thursday.

The drought has caused concern about world food supplies. Argentina is the No. 2 global corn exporter and the No. 3 supplier of soybeans, which serve as the world’s most important source of protein.

The weeks-old heat wave will add to the government’s fiscal challenges this year as Argentina faces fallout from a sluggish world economy and Europe’s financial meltdown. So not only farmers and grains traders but sovereign bondholders as well are watching the vast blue Pampas horizon for signs of rain.

While farmers hope that rains expected over the next week will be strong enough to revive their parched fields, the Agriculture Ministry trimmed its estimate of the area to be planted with 2011/12 soy to 18.8 million hectares from 19 million previously.

“There have been losses in late-planted soy areas, which have received practically no rain since they were sown,” the ministry’s monthly crop report said.

But it is corn that has really suffered under dry conditions that started affecting Argentina’s Pampas growing area last month. The report said that yields could be slashed by 20 percent to 50 percent.

“The corn planted earlier in the season has been hurt the most, as its flowering period coincided with the drought,” the report said. Soy plants have a longer flowering period, which gives them more time to soak up the little moisture that has been available in the Pampas.

The heat wave is related to La Nina, an abnormal cooling of waters in the equatorial Pacific Ocean that threatens to upset commodity markets from corn to coffee as traders factor in the threat of depleted crops.

The Buenos Aires Grains Exchange said a storm front was expected to hit Argentina’s grains belt over the week ahead, dumping more than 100 millimeters (3.9 inches) of rain in some areas. But it will be too late for many corn fields as farmers report irreversible losses and hopes fades for Argentina to replenish global supplies depleted by a lackluster U.S. harvest.

The government’s corn area estimate nonetheless edged higher to 5.0 million hectares from a previous 4.9 million, according to its report. It raised its 2011/12 wheat harvest estimate to 13.4 million tonnes from a previous 12.0 million tonnes.

The Buenos Aires Grains Exchange meanwhile cut Argentina’s 2011/12 commercial-use corn area estimate to 3.70 million hectares (9.14 million acres) from a previous 3.74 million, saying that some plantings were halted by the hot, dry weather.

The exchange kept its 2011/12 soy area forecast steady at 18.85 million hectares. It also kept its 2011/12 wheat harvest estimate unchanged at 14.0 million tonnes.

The U.S. Department of Agriculture expects Argentina to produce 50.5 million tonnes of soy and 26 million tonnes of corn in the 2011/12 season. Other analysts have put this season’s corn crop at under the record 23 million tonnes produced by Argentina in 2010/11. (Additional reporting by Maximiliano Rizzi; Editing by Bob Burgdorfer and Lisa Shumaker)

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