January 16, 2008

Brazil soy estimates for 07-08 falter

Previous forecasts in Brazil assessed soy area to grow as much as 9 percent, yet groups like Celeres pulled it down to 3 percent to around 21.4 million hectares, as the group said more acreage will be used in favor of corn.

Anderson Galvao Gomes, an analyst at Celeres, said that farmers in the south planted more corn than expected which translates to lesser soy area than the market earlier thought.

The official crop estimate is 58.2 million tonnes, with Celeres projecting under 60 million tonnes for the first time this week after months of putting the crop over 63 million tonnes.

Celeres explained that higher Chicago Board of Trade soy futures could be expected due to the dwindling area dedicated for soy production. The recent record highs in corn prices caused by escalating demand from ethanol producers have driven farmers and key players to shift their attention to corn production.

A soy buyer at a multinational US company in Sao Paulo said that if Brazil harvests below 60 million tonnes of soy this year, Chicago will explode with US$13 a bushel.

Farmers have shifted to corn at the last minute, thus the soy planting area was not similar to what analysts have anticipated.

Daniel Sebben, a soy market analyst at consulting firm AgRural said that their group's last estimate has been over 63 million tonnes, but given the recent circumstances, they now expect their newest estimates to be similarly small.

However, despite the significant contraction of Brazilian soy crop, Gomes at Celeres still expects Brazil to export around 24.5 million tonnes in the calendar year 2008 compared to around 24 million tonnes in 2007 and 25.6 million tonnes in 2006.

Gomes said he is still optimistic about the 60 million tonnes target given the good crop conditions in Mato Grosso.