Heavy Rains in Argentina Could be Good News for Soy-Hungry China

(Reuters) – Rainstorms are sweeping Argentina’s soy belt, building soil moisture needed to guarantee good yields when crops blossom in February and providing some cushion for China to buy should its trade war with the United States continue to limit U.S. supplies.

Bolstered by strong showers in key parts of the Pampas farm region, which meteorologists expect to continue over the week ahead, Argentina’s harvest should reach 55.5 million tonnes, according to the U.S. Department of Agriculture.

That would mark a sharp recovery from the 2017/18 season, which was walloped by a drought that reduced the harvest to an anemic 37.8 million tonnes.

The White House has said it will raise tariffs on $200 billion worth of Chinese goods to 25 percent from 10 percent if an agreement is not reached before March 2.

Argentina usually starts harvesting soybeans that month and the country’s soybean exports to China could jump to a record 14 million tonnes if the U.S.-China conflict persists, according to the Rosario grains exchange. China is the destination for about 95 percent of Argentina’s soybean shipments.

The rain has been good in key parts of the Pampas including northern Buenos Aires, and southern Cordoba, Santa Fe and Entre Rios provinces. Some parts of southern Buenos Aires remain dry, but not enough to cause alarm, said German Heinzenknecht, weather specialist with the Applied Climatology consultancy.

Some areas in Santa Fe have been hit by hail storms which have caused farmers to replant. “But that’s not a large-scale problem. The net effect of the rains has been positive,” Heinzenknecht said in a telephone interview.

“The current snapshot plus what we expect over the week ahead shows a situation that is much better than what we had at this time last year,” he said.

This season’s soy area is more than 70 percent planted, according to the Buenos Aires Grains Exchange, which expects a harvest of 53 million tonnes versus 35 million in 2017/18.

With 2 million hectares of this year’s soy crop planted in low-lying areas vulnerable to floods, any possible threat to this year’s soybean crop would not come from too little rain, but too much, Eduardo Sierra, climate consultant to the Buenos Aires Exchange told Reuters.

“At this point everything is pointing toward a crop of 53 million tonnes; 50 million if there is a lot of flooding and a ceiling of 56 million if conditions continue to be good,” Sierra said.