By Alastair Stewart
South America Correspondent
URANGA, Argentina (DTN) -- The soybeans plants here have a nice deep-green hue, but the turned leaves betray a pressing need for rain.
"We are getting to the stage where the early planted soybeans really need some rain," said Ignacio Uranga as he drives through his 7,500 acre farm at the center of Argentina's main grain belt
After a wet winter and early spring, the rain stopped in northern Buenos Aires and southern Santa Fe province -- Uranga's farm in southern Santa Fe got just 4 inches in December and January combined.
Of biggest concern are the early planted beans, which are now flowering and starting to fill pods.
The good news is meteorologists indicate farmers will get their wish. Rainfall of between 1 and 3 inches fell across the region on Sunday, and further heavy showers are forecast for the region this week. Meanwhile, the El Nino weather phenomenon is expected to re-exert its influence the rest of February, bringing more moisture.
"If the forecasts are correct, we are on course for an excellent soybean crop," said Gustavo Lopez, grain analyst at Agritrend in Buenos Aires.
This good production outlook is, in part, because issues with lack of rain do not extend across the whole grain belt. In Cordoba and farther west, for example, they are still dealing with excess moisture in this El Nino-driven season.
Uranga also farms 7,500 acres in southern Cordoba where some soy area was lost to flooding. Excess moisture remains an issue, but the soybeans still look generally good, he said.
Argentina planted approximately the same soybean area as last year at 50 million acres.
Most farmers planted beans as a defensive play. With the Argentine election taking place midseason, nobody knew what the rules for selling corn would be at harvest and so opted for the oilseed, for which there is always a ready market.
However, with credit tight and prospective margins even tighter, investment in the crop was cut to a minimum.
"Farmers have been cutting every corner possible in an attempt to protect themselves," said Michael Dover, who farms 5,000 acres in Pergamino, northern Buenos Aires province.
But the crop has fared pretty well with disease and insect attacks limited so far. Argentina is on course for a crop of between 55 million and 60 million metric tons, down marginally from the record 61 mmt produced last year. USDA pegs the crop at 58.5 mmt.
The outlook is radically different for next year, though
The victory of Mauricio Macri in December's presidential election turned the local grain market on its head.
In Macri's first week on the job, the market-friendly right-leaning politician stripped away tariffs and restrictions on corn and wheat and devalued the peso.
The devaluation boosted margins all round, while the end of the quotas and tariffs of around 20% on the cereals made these attractive choices once again.
As a result, corn and wheat area will certainly bounce back next year, with preliminary forecasts indicating a 3-million-acre jump in each, and likely limit the size of the soybean crop.
Corn competes for acres directly with soybeans. Wheat is double cropped with soybeans and the cereal's growth won't pressure area, but soy yields are typically lower in this system.
But a couple of factors will offset the impact on soy.
Firstly, the more favorable conditions will prompt farmers to invest more in soybean crops. Fertilizer applications have been very low for a couple of years.
Meanwhile, total grain area will likely grow with marginal areas coming back into production, reversing the trend of lower acreage in recent years, notes Agritrend's Lopez. Overall grain area will be 81.5 million acres in 2015-16, down from 85 million acres in 2011-12, he noted.
And looking further ahead, the return of proper rotations instead of soy upon soy will increase yield potential, said Andres Alcaraz, communications manager at the Argentina Vegetable oil Industry Council (CIARA).
Alastair Stewart can be reached at firstname.lastname@example.org
Follow him on Twitter @astewartbrazil
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