February 3, 2012

Brazil's parched southern soy belt expects rain

Brazil anticipates 10 days of rain in the southern soy producing states, bringing relief to the region hit by a three-month drought, forecasters Somar said Thursday (Jan 2).

Chicago soy futures prices have been trading up since early December on concerns over how drought in Brazil, Argentina and Paraguay will effect production of more than half the world's output of the oilseed.

Brazil's southern states of Parana and Rio Grande do Sul - the No. 2 and No. 3 soy growing states respectively - have been the worst hit on the soy belt.

Brazil put out a record 75 million tonnes of soy last season but was expected to harvest 71 million tonnes this year despite an increase in planted area due to the drought's effect on yields.

Rains were expected to reach Rio Grande do Sul on Thursday and linger for a week, before another two cold fronts arrive by the middle of next week, bearing more rain. The widespread showers that were expected should stop further losses from drought but much of the damage has already been done.

Both Rio Grande do Sul and Parana have sharply downgraded their crop output estimates.

The western part of Rio Grande do Sul has suffered from three months of drought. In January, it closed the month with only 21% of normal rainfall. The previous two months were not much better. Harvest in Rio Grande do Sul will not pick up speed until March.

Brazil's centre-west states, which are major producers of soy, will see recent favourable rains breaking up and weather turning drier for harvest, forecasters Somar said. Nearly 50% of the region's soy crop will be ready for harvest in the coming few weeks. Less than 10% of the crop has been harvested in the No.1 soy producer state of Mato Grosso.

The centre-west region has seen favourable rains over the past months that have forecasters expecting a record crop of around 22 million tonnes of soy from Mato Grosso.