Harvesting of Argentina’s biggest corn crop ever has been slowed by rains across the Pampas grains belt, pushing export schedules past August and increasing the competition against massive expected output from Brazil and the United States.
What is shaping up to be an August export battle among the world’s top three corn suppliers would put downward pressure on international prices already hammered by a global grains glut.
The United States is the world’s top corn supplier, followed by Argentina and Brazil. Argentina usually offers freshly harvested corn between March and July, a schedule that may extend past August this year due to transport routes being flooded out and farmers planting later in the year.
In anticipation of huge global supply, traders have built short positions, selling corn now and hoping to fulfill those sales later through purchases at cheaper prices.
“Traders have already gone for their maximum short positions. They’ve had to be restrained by their internal company risk officers,” said August Remijsen, former Southern Cone CEO of trading group Toepfer.
U.S. Commodity Futures Trading Commission data on Friday showed funds held twice as many short positions as long positions in the CBOT corn futures market as of May 30 for a net short position of 224,571 contracts, the second most bearish fund position in that market since March 2016.
Swooning grains prices have already dragged down profits for big trading companies including Archer Daniels Midland Co, Bunge Ltd and Cargill Inc., while making it easier for poorer countries to feed themselves.
Argentina usually has the advantage of offering corn to the international market ahead of its two main rivals, but less than 40 percent of its 2016/17 crop has been harvested so far, compared with 60 percent a year earlier.
“For sure we will compete more,” said a trader with a major grains export company. “Before Argentina was almost done by August. Now we are going to have a lot of corn just being harvested in August.”
Argentina is expecting a record overall 2016/17 corn crop of at least 39 million tonnes, with about 60 percent, a bigger proportion than ever, planted late in the season.
Harvesting is progressing 8.6 percent points slower than the average pace over the last five years, according to the Buenos Aires Grains Exchange. Harvesting has also been slower than expected in the southern U.S. corn belt, where early planting had raised expectations of an early crop.
August is a traditionally a big month for Brazilian corn exports while freshly harvested U.S. corn usually gets to port in September.
“When late-planted Argentine corn starts coming in, there will be a new sales push from growers and exporters. Even Brazil is slated to import Argentine corn this year,” Argentine farmer and crop analyst Pablo Adreani said.
“An estimated volume of 8 million tonnes of Argentine corn will compete with Brazil and the U.S. in the July-October period,” he added.
In the current market year, which started in March, Argentina’s main corn customers have been Algeria, Vietnam and Malaysia. So far 17 million tonnes have been harvested from Argentina and about 13 million tonnes have already been spoken for by exporters, Adreani said.
“That’s a very high sales versus harvested volume ratio, showing farmers have decided to sell more corn and less soy,” he said.
The grains exchange forecasts a corn harvest of 39 million tonnes this season, vaulting above Argentina’s previous record high 30 million tonnes set in the previous crop year.
The jump in Argentine corn supply follows sweeping trade policy reforms implemented in December 2015.
President Mauricio Macri took office that month, having been elected on a free-markets platform. He eliminated the 20 percent tax that had been slapped on corn exports and ditched the strict trade and currency controls favored by the previous government.