Oct. 19 (Bloomberg) -- Rains that fell over Argentina’s drought-stressed soybean farms since early September restored moisture levels in time for planting, improving prospects for a record harvest that growers say may reach 53 million tons.

Soil conditions are so good that farmers will sow 19 million hectares (47 million acres) with the oilseed, Rodolfo Rossi, the president of Argentina’s soybean producers association, said in an Oct. 13 telephone interview from Buenos Aires. In late August, Buenos Aires Cereals Exchange President Ernesto Crinigan forecast a crop of 50 million tons.

Argentina, the world’s third-biggest soybean producer, reaped its largest-ever harvest of 47.5 million tons in 2006- 2007 from an area of 16 million hectares.

A bumper crop from Argentina, which ships 95 percent of its soybeans in the form of unprocessed grains, meal for animal food, edible oil and biofuel, “will have a large impact on markets,” said Mario Balletto, a grain analyst for Citigroup Global Markets in Chicago. “Argentina is where the biggest change will be globally compared with last year.”

Argentina’s grains and oilseeds harvests were devastated last season by the driest weather in a century. Soybean output fell to 32 million tons, almost 30 percent less than in 2007- 2008, according to the Agriculture Ministry.

Soybean futures for November delivery rose 13.5 cents, or 1.4 percent, to $9.91 a bushel at 9:48 a.m. on the Chicago Board of Trade. The oilseed has gained about 9.3 percent in the past year and has declined 39 percent from a record $16.3675 on July 3, 2008.

El Nino

Rains brought by El Nino, a weather pattern that forms in the Pacific and influences climates worldwide, began in September and have continued in October.

“September was a fantastic month, with lots of rain,” said Cristian Russo, an agronomist at the Rosario Cereals Exchange. “The rains have been very good for the soil.”

Soybean planting will be in full swing during the next two weeks, Russo said in a telephone interview from Rosario, a river-port city 300 kilometers (190 miles) northwest of Buenos Aires in the heart of the country’s soybean belt.

Argentina’s soybean output quadrupled in the 10 years before the drought, as farmers switched away from corn, wheat, cattle and sunflower to feed growing global demand, especially from China. The area sown to corn this season will be the lowest since 1989, according to an Oct. 14 estimate by the Buenos Aires exchange.

Brazil Output

Soybean output in Brazil, the world’s largest producer after the U.S., is also set to rise to a record next year after lower corn prices prompted some growers to switch crops. Output will climb to between 62.3 million and 63.3 million metric tons, Brazil’s Agriculture Ministry’s forecasting agency said Oct. 7. That compares with 57.1 million tons this year.

The growth of soybean production helped Argentina’s economy expand by an annual average of 8.5 percent over the past six years, according to government figures. In 2008, farming accounted for 5.8 percent of the country’s $328 billion gross domestic product, the data show.

Since March 2008, farmers have campaigned for a reduction in taxes and government restrictions on agricultural exports. Their protests have included withholding produce from markets and erecting roadblocks that created food shortages in Buenos Aires.

Taxes

Last year, agricultural taxes, of which levies on soybeans and their products represented 80 percent, accounted for about 9.5 percent of government revenue, according to the Argentine Rural Confederation, a Buenos Aires-based farmers association.

The damage to last year’s harvest has led to a shortage of good quality seed held by farmers, who keep part of their production for sowing the next season, said Eduardo Anchubidart, an agronomist at the Buenos Aires exchange.

“According to current lab tests, there are a lot of seeds out there with a 75 to 85 percent germination rates,” said Anchubidart in a telephone interview.

That means farmers will have to buy more supplies from seed companies, whose products are certified to have 100 percent germination, or increase the density of sowing of their own seeds to maintain yields, said Anchubidart.

Argentina’s biggest oilseeds exporters and processors include Cargill Inc., Bunge Ltd. and Archer-Daniels-Midland Co.

Markets Last Week

Last week, the yield on Argentina’s benchmark 5.83 percent peso bonds due in 2033 rose 20 basis points, or 0.2 percentage point, to 12.13 percent, according to Citibank. The bond’s price declined 1.4 centavos to 98.05 centavos on the peso. The peso climbed 0.3 percent to 3.8192 per U.S. dollar from 3.8288 on Oct. 9.

The Merval stock index rose 1.8 percent to 2,207.28 points from 2,169.04 last week. Power line operator Transener SA (TRAN AR) led gainers, climbing 12.8 percent to 12.84 pesos, while Grupo Financiero Galicia (GGAL AR) lost the most, declining 0.5 percent to 1.97 pesos.

The following is a list of events in Argentina this week:

*T Event Date World Forestry Congress Oct. 18 to Oct. 25 September trade balance Oct. 20 September industrial production Oct. 23

To contact the reporter on this story:
Rodrigo Orihuela in Buenos Aires at 
rorihuela@bloomberg.net.

Last Updated: October 19, 2009 10:59 EDT