By Nicolás Misculin

VEINTICINCO DE MAYO, Argentina (Reuters) - Standing in his fields among tall, dry corn plants, farmer Dario Sabini inspects the smaller-than-usual corn cobs before taking the yellowing leaves of the crop that should be green at this time of the season, to crinkle them between his fingers.

"We are seeing here corn that's already gone. The plant is already yellow, it will not come back," said the farmer from the town of Veinticinco de Mayo, some 200 kilometers (125 miles) west of Buenos Aires. The town has been hit by a recent drought. 

The dry weather has forced grains exchanges in Argentina, the world's top exporter of soy oil and meal and the No. 3 for corn, to cut their forecasts for the current crop, though farmers like Sabini say the reality is likely worse.

"Their math does not add up," he said.

Sabini, who produces soybeans, corn and beef on a ranch of more than 3,000 hectares (8,000 acres), is one of thousands of rural producers in Argentina affected by dry and hot weather since January amid the climate phenomenon La Niña.

The arid climate has led to repeated cuts to harvest forecasts. The Buenos Aires grains exchange currently estimates 49.6 million tons of soybeans and 49 million tons for corn in the 2024/25 harvest - though this may well drop further.

"It has to rain. Hopefully it will rain soon and we can improve to yields of 2,000 kilos (per hectare). With less than that, it's very complicated," said farmer Juan Gardey, standing next to soybean plants wilting in the dry heat in Veinticinco de Mayo.

"You see a lot of aborted flowers and you can see that their development has stopped."

The fall in the harvest could become a major problem for Argentina which relies heavily on grain exports for much-needed foreign currency to prop up its embattled economy. Those dollars help boost state coffers and support the local peso currency.

However, agro-climatologist Eduardo Sierra, who advises the Buenos Aires grains exchange, said harvests of soy and corn would likely end up well below current forecasts - depending on when rains arrived.

"If it started to rain now, you could have 45 million tons of each crop. Every week in February that goes by without rain, you lose 5 million tons more," he said, estimating that both soy and corn would end up closer to 40 million tons.

The previous harvest produced about 50.2 million tons of soy and 49.5 million tons of corn.

Most experts do predict rain to arrive in the next few weeks, but the amount and area of ​​coverage are big unknowns.

After a recent heat wave, the Buenos Aires exchange predicts uneven rainfall ahead that could improve the situation of crops over large parts of Argentina's farmland, but it warned that the showers "will leave some areas without relief."

LESS TAXES, MORE SALES?

With high costs of inputs and rent, compounded by international prices lower than in recent years, the situation has become critical for some farmers.

"The outlook is pretty uncertain, yields are going to be low for both corn and soybeans. Basically, everything is complicated," farmer José Cozzi, from the Lobos region in Buenos Aires province, told Reuters.

Concerned about the situation, the government of libertarian President Javier Milei last month cut taxes at least until the end of June on agricultural exports in order to speed up grain sales that generate the foreign currency the country needs.

However, farmers said that the benefit they were seeing from higher local prices had not fully reflected the tax cuts to 26% from 33% for soybeans, to 24.5% from 31% for processed soy and to 9.5% from 12% for corn and wheat.

Data from the major Rosario grains exchange shows the price of soybeans rose from 295,500 pesos before the tax cuts to around 315,000 pesos late last week, but with limited trading volume. 

"The price of soybeans hasn't changed much, an increase but not really significant," said Gardey. "I imagine that, like us, many producers also have very little stock to sell today." 

Javier Domínguez, who farms in the towns of Suipacha and Mercedes in Buenos Aires province, said the hit from the drought plus the limited benefit from the tax cuts would tamp down the impact on exports.

"With crops with deficits like these, I think that the tax reduction will not have the desired effect," he said.