February 20, 2006

Brazil's 2006/07 soy plantings may slowdown on large global supplies

Building global soybean supplies should pressure prices and affect Brazilian 2006/07 soybean plantings, a US Department of Agriculture economist said Friday.

"What we are anticipating is that large soybean stocks and a large US crop make prices very competitive from the US," said Edward Allen, senior economist and grains analyst at the USDA's Economic Research Service, at the annual Agricultural Outlook Forum.

"With large stocks and a large crop, we expect that US prices will move the soybeans into the export market," he added. "This implies that the Brazilians will end up holding large stocks and have a disincentive to plant soybeans."

A strengthening of the Brazilian currency, the real, has also hurt profitability for that country's soy producers and should factor into a slowdown in Brazilian soy plantings, he noted.

"We are not anticipating a weakening of the Brazilian currency," Allen said. "We expect the US dollar will remain relatively weak compared to the Brazilian currency; this will help the competitiveness of US soybeans.

"The history has been one of expansion, but low prices are likely to put the brakes on expansion," he said. "The slowdown may be even more significant outside of Brazil--in smaller producers such as Canada, for example."

The USDA forecast on Feb 9 that old-crop 2005/06 global soybean ending stocks would total 53.83 million tonnes, up from the estimated 2004/05 global soybean ending stocks tally of 44.87 million tonnes.

Brazil's 2005/06 soy production was seen at 58.50 million tonnes, while 2005/06 US soy production was seen at 84 million tonnes, the USDA said on Feb 9.