Sept. 28 (Bloomberg) -- Argentina, the world’s second- largest corn exporter, may plant the smallest crop in two decades as the government delays plans to lift a ban on exports.

President Cristina Fernandez de Kirchner has yet to make good on a Sept. 10 pledge to allow overseas shipments of corn, prompting farmers to plant more soybeans, Martin Fraguio, executive director of corn exporters and grower association Maizar, said in a Sept. 24 interview. The government doesn’t restrict soybean exports and they’re also cheaper to plant.

Argentina will sow 1.88 million hectares (4.63 million acres) of corn this year, according to the Buenos Aires Cereals Exchange. That’s the least since 1989, when hyperinflation led farmers to run out of cash. The country is set to fall behind Brazil, becoming the world’s third-largest corn-exporter amid rising global demand, the U.S. Department of Agriculture said.

“Until recently we saw Argentina and South America becoming the next growth market,” Shawn McCambridge, a senior grain analyst for Prudential Bache Commodities LLC in Chicago, said in a telephone interview. “With Argentine production dropping, there could be an impact in the following years.”

Corn futures for December delivery rose 5 cents, or 1.5 percent, to $3.39 a bushel at 1:19 p.m. on the Chicago Board of Trade, after earlier rising as much as 2 percent. The contract gained on speculation smaller crops in Argentina and China may boost demand for supplies from the U.S. Soybean futures for November delivery fell 0.6 cent to $9.2025 a bushel.

Record Soybean Harvest

Argentina may produce a record soybean harvest of more than 50 million metric tons next year as farmers switch to the oilseed, Ernesto Crinigan, president of the Buenos Aires Cereal Exchange, said in an Aug. 28 interview.

Brazil, the world’s biggest soybean producer after the U.S., may also harvest a record crop next year of as much as 64 million metric tons, according to Renato Sayeg, a broker at Tetras Corretora in Sao Paulo. Argentina is the No. 3 producer.

Argentina’s export control office, known as Oncca, hasn’t permitted any corn grain exports since June 24, according to its Web site. The export registry has been shut for more than 90 percent of the past year, Fraguio said. Since 2006 the government has limited exports of beef, corn and wheat to provide cheaper foodstuffs in the Argentine market.

An Oncca spokesman, who asked not to be named citing government policy, declined to comment on when the government would lift the ban on corn exports. A spokesman for the President’s office in Buenos Aires also declined comment.

‘Disaster´

“This is a disaster,” Fraguio said in a Sept. 24 telephone interview from Buenos Aires. “Soybeans are going to be the salvation of some farmers.”

The export controls have led grains buying to slump at the Buenos Aires Cereals Exchange, where traders sat chatting and joking on Sept. 24. Corn hasn’t been bought or sold on the exchange’s spot market since June, Fraguio said.

“Trading is at a minimum for wheat and corn,” Ricardo Baccarin, president of grains brokerage Panagricola Safici, said in an interview on the exchange floor. Fernandez’s announcement about opening the corn and wheat markets earlier this month failed to prompt a resumption of activity as traders wait for the ban to be lifted, he said.

The U.S. Department of Agriculture in August cut its forecast for this year’s exports from Argentina by 1 million tons, to 7 million tons, as farmers grow more soybeans.

Corn Planting

The corn planting season runs from August through December. Harvesting starts in February and goes through August. The soybean planting season begins in September and runs through January. Harvesting starts in February and runs through June.

Argentina’s farmers harvested 13.2 million metric tons of corn between February and June, a 40 percent decline from the 22 million metric tons harvested the year before, the Agriculture Secretariat said on Aug. 14.

The decline in production in the past year was because of drought, Fernandez said in the Sept. 10 speech. The past year’s dry weather was the worst in a century, according to the Buenos Aires Cereals Exchange. Earlier this year farmers planted the smallest wheat crop ever.

Warmer, wetter weather brought by El Nino is bringing more favorable conditions to farmers to plant soybeans and corn this year, the exchange said Sept. 23. Farmers are likely to plant a record soybean crop, taking advantage of more soil humidity and better outlook for the oilseed, Crinigan said last month.

Farmers are also favoring soybeans over corn because Argentina’s cattle and dairy industries, the country’s largest consumers of the grains, are losing money because of export controls and drought, Fraguio said.

Markets

Last week, the yield on Argentina’s benchmark 8.28 percent dollar bonds due in 2033 rose 52 basis points to 12.69 percent, according to JPMorgan. The bonds’ price fell 3 cents on the dollar to 66 cents.

The Merval stock index advanced 0.4 percent to 2,015.83. Empresa Distribuidora y Comercializadora Norte SA (EDN AF), the country’s biggest electricity distributor, rose 10.2 percent while Petrobras Energia Participaciones SA (PBE AF) fell 2.3 percent.

To contact the reporters on this story: Matthew Craze in Santiago at mcraze@bloomberg.net; Rodrigo Orihuela in Buenos Aires at rorihuela@bloomberg.net.

Last Updated: September 28, 2009 14:32 EDT