Soy climbs as USDA slashes Argentine crop estimate by 20%

Corn and soybean crops in drought-stricken Argentina, a crucial exporter, are in even worse shape than previously thought, according to the US Department of Agriculture.

Argentina, the world’s top shipper of soymeal and soyoil, will harvest 33 million tons of the beans this year, the USDA said in its monthly supply and demand report Wednesday. That’s a decline of 20% from its February estimate and the smallest crop since 2009.

The US agency now sees smaller crops than official forecasts in Argentina, with new numbers due as soon as late Wednesday from the Rosario Board of Trade. Soybean and soybean oil futures climbed following the report while corn prices were lower.

Crops from South America are key to world feed reserves, and bigger harvests are needed to help bring down raging food inflation. USDA’s mid-March report is typically a smaller news event when compared to its US prospective planting report due March 31 that will estimate which crops farmers will sow this spring.

“The USDA doesn’t usually make any dramatic changes,” said Naomi Blohm, senior market adviser at Total Farm Marketing, who characterized the Argentine forecast revision as “aggressive.”

USDA estimated Argentina’s corn harvest at 40 million tons, down from 47 million a month ago an below the average analyst estimate in a Bloomberg survey for 43.5 million.

In the regions of Sante Fe and Santiago del Estero “crop conditions are the lowest in the last twenty years of data,” USDA said in a report.

USDA also cut its outlook for exports from Argentina and the US, while it raised its forecast for Ukraine corn exports.