Top Argentine grains company poised for hefty corn losses

Argentina's MSU, one of South America's biggest grain producers, says this season's sharp drought will slash 30 percent off its corn harvest although soy crops should escape largely unscathed. MSU also farms in neighbouring Brazil, Uruguay and Paraguay, and general manager Guillermo Marseillan said that geographical diversity should help limit the company's overall losses.
"We've got corn losses of about 30 percent compared with the yields we initially forecast. Due to the rains we've seen in the last few weeks, we're not seeing a significant decline in soy productivity," Marseillan told Reuters in a telephone interview.
Soy has a longer flowering period than corn, allowing it more time to soak up whatever moisture is available. Global grains markets have been keeping a close watch on the weather in South America since December, when dryness linked to the La Nina phenomenon started to bite into crops and raise concerns over export supplies.
Brazil, Argentina and Paraguay account for about 60 percent of the world's soybean exports, and soaring demand led by China and India has prompted farmers to dedicate more and more land to the crop from the Amazon to the Pampas. Soy farming has also taken off in Uruguay, partly due to the influence of Argentine-based agricultural firms such as MSU, Los Grobo and El Tejar, which have a similar business model based on geographical diversification and an economy of scale.
Brazil and Argentina are also important exporters of corn, which was hard hit by the parched soils and high temperatures that scorched the Argentine farm belt until mid-January. Several storms have since replenished water reserves. Early-planted corn suffered the most, vindicating MSU's strategy to plant later than usual, Marseillan said.
"Watching certain forecasts, we went for a more defensive approach, which meant increasing our crop portfolio's share of late corn seeded from the end of November," he said. "It turned out to be a good way to dodge the drought." Echoing similar forecasts by foreign and local industry analysts, he said an Argentine corn harvest of between 20 million and 21 million tonnes should be expected.
At the start of planting, farmers and Agriculture Ministry officials predicted a record 2011/12 crop of up to 30 million tonnes, after the 23 million tonnes harvested in 2010/11. MSU produces grains on 250,000 hectares of South American farmland, some rented and some fully owned. Argentina remains its base and it farms 160,000 hectares in the country, where more than 20 million hectares are used for corn and soy farming.
"The geographical scope we've got has helped us a lot (with the drought)," Marseillan said. Soy, which accounts for about 60 percent of MSU's business in Argentina, has come off far better than corn because the oilseed is sown later. That meant plants were not passing through critical growth stages at the height of the dry spell. "In the (later-planted) soy crops, we're seeing lower yields because in many cases sowing stretched from December into January, but it's difficult to quantify," Marseillan said, estimating output of between 45 million and 46 million tonnes.
The Buenos Aires Grains Exchange expects a soy harvest of 46.2 million tonnes, 3 million tonnes less than last year. Besides being the No 3 global supplier of beans, Argentina is the biggest exporter of soybean oil and meal. As demand for food remains strong, the fertile lands of the South American region have lured foreign investors and MSU and its competitors have expanded rapidly in neighbouring nations. "We're evaluating the opportunities," Marseillan said. "Argentina has enormous potential to keep adding value to production. In Brazil, there's a lot of possibilities but we haven't made a decision to grow there.