Agri Commodities Preview: Argentina Soyabean Acreage To Increase 3% In MY 2018/19

As per the latest forecasts by United States Department of Agriculture (USDA), the Argentina 2018/19 soybean production area at 19 million hectares, an increase of nearly 3 percent over the previous year and closer to historical levels, as area lost to flooding during late 2017 is reincorporated.1st crop soybean area is expected to remain stable. Prolonged issues with weed resistance, especially astmaweed (Conyza bonariensis) and green amaranth (Amaranthus hybridus), whose control measures can cost up to $ 150 per hectare, continue to reduce farmer soy margins at a time when more favorable corn returns lower the potential for 1st crop area expansion. 2nd crop soybeans will increase by 15 percent due to a rise in wheat sowings in the upcoming winter crop season. Yields are forecast to return to average levels but the rise in 2nd crop soybean production will push overall soybean yields down slightly. Overall, soybean average yield is forecast to surpass 3 tons per hectare, delivering production of 57.5 million tons. Nonetheless, the expected increase in 2nd crop soybeans (with winter wheat crop) indicates a positive trend. In addition, a favorable input/product ratio is expected to assist producers in rebuilding soil conditions and help increase yields. Local reports indicate that the local glyphosate/soybean ratio at 0.95, 14 percent below the average of 1.1. Rented land: An estimated 70 percent of soybean production is cultivated on rented area. Land rent rates of around 1 ton (US$ 290) of soybeans per hectare are expected to remain relatively stagnant with some potential minor increases in more premium planting areas. An increase in multi-year rental agreements is attributable to the flexibility they provide to absorbing changing conditions. Returns: Producers are expecting adequate returns next season thanks to a positive input/product ratio, declining soybean export taxes, and higher soybean values. According to sources, the break-even yield (including rent) is around 2.8 tons per hectare based on positive price expectations. With average yields for 1st crop soybeans expected at just over 3 tons per hectare, this should deliver sufficient returns based on current price expectation.