Bloomberg News

Argentine Corn ‘Terrifyingly’ Cheap as Farmers Meet Quotas

September 12, 2011

(Updates with reduced U.S. forecast in sixth, seventh paragraphs, Brazil forecast increase in last paragraph.)

Sept. 12 (Bloomberg) -- Corn in Argentina, the world’s second-largest exporter, is trading at close to a 50 percent discount relative to U.S. benchmark prices as farmers struggle to sell stocks after meeting government export quotas.

Corn for delivery this month on Argentina’s Rosario Cereals Exchange closed at $158 per ton, or about $3.95 per bushel, on Sept. 9, after plunging 15 percent this year. That compares with $7.36 a bushel for December corn on the Chicago Board of Trade, where prices surged 17 percent this year after the hottest summer since 1955 in the U.S., the world’s top corn shipper.

“The price differential is terrifyingly high because Chicago is flying and Argentina hasn’t followed,” Ramiro Costa, chief economist at the Buenos Aires Cereals Exchange, said in a telephone interview from the city.

Prices are falling in Argentina because the “market is closed,” after producers met the government’s quota of 12 million tons of corn for export this year, Costa said.

Argentina’s government demands that corn producers earmark 8 million tons of corn per year for domestic consumption. Export quotas are announced over the course of the year. Argentina’s output was about 21 million tons in the 2010-2011 season.

Midwestern Heat Wave

The corn crop in the U.S., the world’s largest grower and exporter, will be 3.2 percent smaller than forecast a month ago after unusually hot, dry weather in the Midwest, the U.S. Department of Agriculture said today in a report based on a farmers’ survey.

Output will total 12.497 billion bushels (317.4 million metric tons), less than the 12.914 billion forecast in August, the USDA said. Production will increase from last year’s 12.447 billion bushels after farmers planted the second-most acres since 1944.

Argentine corn farmers will harvest a record 28 million tons in the season that started last month and ends in August 2012, Agriculture Undersecretary Oscar Solis said in an Aug. 25 interview. Corn planting may be hindered by dry weather in the main growing regions, the Buenos Aires Cereals Exchange said in a Sept. 8 report.

In Brazil, the world’s third-biggest exporter, farmers are likely to harvest more this year than previously forecast because of better weather in most producing regions, the Agriculture Ministry said on Sept. 9.

Brazil’s corn harvest is estimated to total 57.5 million metric tons, up from an Aug. 9 estimate of 56.3 million tons and higher than the 56 million tons harvested last season, the ministry said.

--Editors: Dale Crofts, Robin Saponar

To contact the reporters on this story: Laura Price in London at lprice3@bloomberg.net; Rodrigo Orihuela in Buenos Aires at rorihuela@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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