January 5, 2012

 

 

As dry weather damaged crops in Brazil and Paraguay and conditions deteriorated in Argentina, Latin American Mercosur market group members' soy production is expected to fall 2.9%.

 

Hamburg-based industry researcher Oil World said total output for Mercosur members - Brazil, Argentina, Paraguay, Uruguay and Bolivia - will slide to 132.7 million tonnes in 2011-12 from 136.7 million tonnes a year earlier, 4.3 million tonnes less than forecast in December.

 

Soy futures rose 6.8% in Chicago trading last month, the oilseed's best monthly performance since August, amid concern dry weather will curb soy crops in Brazil and Argentina, the largest exporters behind the US.

 

"Favorable rainfall would still result in a recovery of soy and corn-crop prospects in Argentina," Oil World wrote. "Maturation is well advanced in most Brazil and Paraguay, where the crops already suffered irreversible damage."

 

The soy crop in Brazil will probably drop to 71 million tonnes from 75.3 million tonnes in 2010-11, Oil World said, cutting its forecast by 1.8 million tonnes.

 

Paraguay's production will fall to seven million tonnes from 8.37 million tonnes, the researcher said, lowering its outlook by 1.5 million tonnes.

 

"In some parts of Brazil the corn and soy crops are almost mature, so that rainfall from now on will partly be too late and probably even detrimental for harvesting," Oil World said. "The same is true for Paraguay."

 

The researcher said Brazilian soy production may turn out to be 1-2 million tonnes below its forecast, while Paraguay's harvest may also come in lower than its estimate.

 

Argentina's soy harvest is forecast to rise to 51 million tonnes from 49.4 million tonnes a year earlier, Oil World said, cutting its outlook by one million tonnes. The outlook requires "above-normal" rainfall soon, the researcher said.

 

"In Argentina rainfall in Jan and Feb would still be very beneficial," Oil World said. "There are significant moisture deficits in most parts of Argentina and there is a high risk that the required rainfall does not arrive in time to prevent additional irreversible damage."