February 9, 2012

Brazil will likely have to wait at least another year because of a crop-damaging drought to finally surpass the US as the top exporter of soy.

The USDA raised eyebrows in the South American nation at the end of last year when it predicted Brazil would ship out a world-leading 38.5 million tonnes of soy amid expectations for a strong 2011-12 crop. The USDA's World Agricultural Supply and Demand Estimates report last month trimmed that forecast to 36.2 million tonnes, still beating the US's expected exports of 34.7 million.

But analysts say further cuts to Brazil's numbers are likely in the next WASDE report, which the USDA is due to publish Thursday.

"The possibility was initially quite large that Brazil would assume the lead in exports during this crop year," said Flavio Roberto de Franca, a soy analyst at Brazil's Safras & Mercado agriculture consultancy. "But that has become totally unviable with these losses, as we've got a lack of rain out there. Maybe next year."

Safras & Mercado is one of several Brazilian grains consultancies to have slashed estimates for the current soy crop in recent days, as word of larger-than-expected losses have trickled out of southern states such as Parana and Rio Grande do Sul. The firm predicts Brazil will produce 70.3 million tonnes of the oilseed, down 6.9% from its initial forecast, with exports seen declining for the first time in several years.

Agroconsult, another consultancy, on Wednesday said it expects Brazil will harvest 71 million tonnes of soy in 2011-12, down 3% from its previous estimate published in January. Analysts participating in the firm's annual crop tour returned from Parana last week having seen farms that lost as much as 60% of their soy due to sparse rainfall since November.

The local Celeres consultancy this week said it sees Brazil exporting 33.7 million tonnes of soy, down 3.7% from a month earlier. But the setback for Brazil, already the top producer and exporter of commodities such as sugar, coffee and orange juice, may prove temporary. Agriculture has been a key pillar of the emerging powerhouse's increased clout in the global economy during recent years, with soy among its most lucrative exports.

For the past half-decade, Argentina and Brazil have accounted for a greater share of world soy output than the US, and Brazil's "vast reserves of farmland could permit a continued significant expansion in soy area," according to the USDA.

Improved technology, expanded use of high-quality seeds, and better fertilisation have given the sun- and rain-drenched country one of the best productivity rates in world.