Market report: Locust threat boosts South American wheat market

Wheat farmers in Argentina are racing to spray fields against what may be the biggest plague of locusts in 30 years.

The locusts have thrived during two years of drought, and threaten to damage 2.56m ha of crops. Wheat harvest in Argentina is only 11% complete, well behind last year due to heavy rain, and the Buenos Aires Cereals Exchange estimates that output will fall to 7.5m tonnes this year, down from 8.4m tonnes last year and 16.4m tonnes in 2007/08.

Combined with the smallest planted area on record, poor growing conditions, and strong demand from Brazil after its own wet harvest, the threat of locust damage has already caused local prices to rise sharply. But EU and UK values have not responded, with markets fairly quiet.

Meanwhile, Argentina’s soyabean plantings are forecast at a record high of 18.5m ha, with Brazil also planting a record area. Together, the two countries are forecast to produce an additional 24m tonnes of soyabeans for export, says a recent report from Rabobank. “Our expectations for soybean market fundamentals for next season suggest a supply-led bear market for soybean prices throughout 2010.” With a record American crop now harvested, it forecasts world soyabean stocks to increase by 30% in 2010, leading to a 12% drop in prices.