February 16, 2005

Brazil's soy growth slowing down

A government official in South America says the Brazilian soybean crop estimate is likely to taper off as the growing season continues, and long-term growth in the industry may slow down altogether.

US Agriculture Counselor Bill Westman issued his report earlier this week, forecasting the country's soybean production at 61.8 million tons on 23 million hectares, in 2005.

The estimates translate into 1.68 billion bushels of soybeans on 56.83 million acres, as measured by US standards. The average estimated yield is a little short of 34 bushels per acre.

In his report, Westman says several factors are breaking down the expansion of Brazil's soybean industry. He cites lower prices and higher production costs the leading influences on the trend to slow development in the soybean growing regions.

After years of expanding as much as 15 percent annually, Brazilian soybean acreage will likely expand only nine percent this season.

The fight against Asian Soybean Rust is also hampering Brazil's soybean producers. Fungus is a major consideration in the nation's rising production costs. Profit margins for Brazilian soybean farmers are narrowing due to low international prices and an unfavorable exchange rate relative to the US dollar, he adds.

The counselor also reports that Brazil's farmers are being pressured to improve crop management. This leads to more problems as they face tight profit margins and, in some cases, steep losses. Because of the mounting stresses on Brazil's agricultural expansion, Westman predicts that the South American country is unlikely to overtake the US in soybean production in the near future.

Westman says current production estimates will likely drop in the coming weeks, largely due to drought in the southern soybean growing areas of Brazil.