January 11, 2012

Argentina's 2012 soy crop may still pick up

The drought-hit soy plantings of Argentina in early 2012 may still improve if there will be enough rain in the near future as the crops are still in an early growth phase, Hamburg-based oilseeds analysts Oil World said on Tuesday (Jan 10).

US corn and soy futures rose on Monday after hotter-than-expected weekend weather in drought-hit Argentina and southern Brazil deepened concerns about crop losses in the two major soy exporting countries.

"In Argentina, the bulk of the soybean crop has not yet entered the reproductive stage and can therefore still recover if rainfall arrives on time," Oil World said.

Showers are expected in Argentina's main farm areas this week, but some observers question whether the amount of water forecast to hit the drought-stricken Pampas will be enough to revive key corn and soy crops. Argentina is the world's third largest soy exporter, with the US the largest and Brazil in second place.

"Should precipitation turn out insufficient to break the drought, market participants must be prepared for renewed price increases," Oil World said. "If it stays too dry, the (Argentine) soybean crop will fall below our current estimate of 51 million tonnes," Oil World said. This would still be up from 49.3 million tonnes harvested in early 2011. "However, the most important phase of development is still ahead and rainfall in the second half of January and in February - and for late planted soybeans even in March - would still have a beneficial effect."

With soy harvesting about to start in Brazil, dry weather would be favoured to help work, it said.

But parts of Brazil's soy crop have suffered irreversible crop damage, it said. Oil World is retaining its forecast of Brazil's early 2012 soy crop of 71 million tonnes, down from 75.3 million in early 2011.

Brazilian analyst Celeres on Monday cut its forecast to 74.4 million tonnes, down from its December estimate of 75.6 million tonnes.