March 4, 2005

 

Brazil's southern soy crops wilt

 

 

As soybean plants wilt under scorching sun across Brazil's southern soybean belt, farmers are counting the cost of one of the driest summers on record.

 

Dry weather in November and December was followed by a virtually rainless February in Rio Grande do Sul, Brazil's No. 3 soy state, leaving farmers contemplating the loss of at least 50 per cent of their soy crop.

 

"The dry weather meant soy crops didn't really have a chance this year. Any rain that falls now will come too late to allow the crop to recover. Some farmers will just have to use the plants for silage," said Valde Luiz Baratto, commercial director at the Cotripa cooperative in the west of the state.

 

Baratto estimates farmers have lost 70% of their crop in his region, where around 200,000 hectares of soybeans were planted this year. Similar estimates are repeated by producers across the state and in southern and western regions of neighboring Parana state, the No. 2 soybean producer, leading associations and analysts to slash estimates in recent weeks.

 

On Wednesday, Abiove, the local crushers association, lowered its Brazilian 2004-05 crop estimate to 58.3 million tonnes from 61.5 million tonnes due to the drought, while Informa Economics reportedly lowered its Brazilian crop by five million tonnes to 56.3 million tonnes Thursday.

 

However, local producers and analysts say the final crop figure could be as low as 54 million to 55 million tonnes should the dry weather continue for the next week. That's because the southern crops are in the pod-filling and flowering stages where moisture is vital.

 

"The deterioration is constant. It' s a very delicate situation," said Anderson Galvao Gomes, analyst at the local Celeres agricultural consultancy.

 

At the start of the year, the U.S. Department of Agriculture was estimating a Brazilian crop of 64.5 million tonnes.

 

Unfortunately, no rain is expected until at least the middle of next week when up to 50 millimeters is forecast for Rio Grande do Sul and Parana, according to the local Somar Meteorologia weather service. However, temperatures are expected to remain between 35 degrees and 38 degrees Celsius.

 

The drought has spread right across the south with some 400 districts out of a total of 496 in Rio Grande do Sul declaring a state of emergency.

 

The drought has seized the attention of the international market, fueling a roughly 25 per cent run up in May soybean futures on the Chicago Board of Trade over the last five weeks. However, it hasn't had a major impact on local prices as the huge center-west harvest hits the market and the Brazilian real remains near two-year highs.

 

"Farmers here are getting the worst of both worlds. They are losing their crops and getting absolutely no price upturn because of it," said Celere's Gomes.

 

The other problem is that this loss doesn't make that much difference to the worldwide soy surplus, he added.

 

In Ijui, central Rio Grande do Sul, it hasn't rained for 30 days and many farmers are already claiming for losses on their crop insurance, says Romeo Orsolin, business director at the local Cotrijui cooperative. The fear is that southern Brazil is being hit by the same kind of extended dry period which plagued the US Midwest for five years until 2004, he said.

 

Brazil is the world's No. 2 soybean producing country after the US.