Drought is taking a higher-than-expected toll on Argentina’s corn and soybean farmers, according to the USDA, which cut production and export forecasts Wednesday for the South American country.

In its latest World Agricultural Supply and Demand Estimates report, USDA slashed its projection for Argentine corn production for the 2022-23 marketing year to just 40 million metric tons, a 15% reduction from its February prediction.

“For Argentina, production is cut as continued heat and dryness during February and into early March reduce yield prospects for late-planted corn,” the WASDE said.

USDA also raised its forecast for U.S. soybean exports in the 2022-23 marketing year and cut its prediction for ending stocks to the lowest level in seven years. USDA says it now expects U.S. soybean exports to climb to about 58.2 million tons, up from its February estimate of 54.8 million.

The crush forecast for the U.S. was also lowered, but USDA says it still sees ending stocks dropping to 5.72 million tons – or about 210 million bushels.

The cut in the forecast for Argentina comes at a time when global supplies are tightening; a smaller Argentine crop means countries like Peru, Malaysia, and Egypt that traditionally rely on corn from Argentina will find it more difficult to get the quantities they need, according to a separate Foreign Agricultural Service analysis that was also released Wednesday.

"Argentina's corn exports (for the 2022-23 marketing year) are forecast at 29 million tons, the lowest since 2017-18,” FAS said in the report. “This year’s production, like 2017-18, has been heavily impacted by drought, which is expected to reduce supplies available for export.”  

But Brazil may be able to make up for Argentine losses. Brazilian farmers are right now planting their “safrinha,” the largest of the country's three corn crops. It is planted on just-harvested soybean acres, and production is expected to reach a record high this year.

“In stark contrast (to Argentina), Brazil is forecast to harvest a record crop of 125 million tons (of corn) and export a record 52 million tons (for the 2022-23 marketing year),” according to the new FAS analysis. 

Drought has also spurred USDA to again cut its forecast for soybean production this year. Argentina is now predicted to produce just 33 million tons this year, 8 million less than the forecast in WASDE last month. That’s going to force the country to import record levels in the 2022-23 marketing year.

“To help offset tight domestic soybean supplies, Argentina imports … are forecast to be a record at 7.3 million tons,” says FAS in yet another analysis released Wednesday. “Argentina importers are expected to capitalize on a record Brazilian crop and recovery in Paraguay production to supplement the weak domestic crop.”

Brazil’s soybean harvest is not yet complete, with yields suffering from dry weather in its southernmost state, but the country is expected to have a very strong overall crop this year.

The March WASDE left the forecast for Brazilian soybean production this year unchanged at 153 million tons, but the prediction for exports was bumped up 700,000 tons to 92.7 million.

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