March 6, 2012

Brazil's main southern grain states pushed down harvest this season and export estimates on Monday (Mar 5) because of drought.

The fresh downgrades in the leading South American soy crop may give further support to Chicago soy futures which have been on a three-month tear, rising 21% since hitting a 14-month low mid-December.

Strong demand and damage to Brazil's and Argentina's soy crops due to the recent dry weather, widely attributed to the effects of La Nina, have renewed concerns of global food shortages similar to those seen in 2008.

Grain crop analysts Celeres revised Brazil's 2011/12 soy crop lower to 69.8 million tonnes, down from the 72 million seen in early February, as the effects of drought become more apparent. Brazil harvested a record 74.9 million tonnes of soy last season, Celeres said.

Later in the day, the local grain crushing industry Abiove said Brazil would harvest 69.5 million tonnes, down from February's estimate of 71.9 million tonnes. Abiove also said soy exports would fall to 32 million tonnes from 33 million tonnes in its previous estimate. The grain industry association gave no explanation for the revision in its estimates.

Soy farmers had harvested 38% of the expected crop by March 2, up from 29% a week earlier and 24% a year ago, Celeres said. Historically, 22% of the crop is harvested by the first week of March.

The soy harvest is at its peak amid dry weather in the big production states. Local meteorologists Somar forecast dry, hot conditions in the main soy belt for the next week which will favour field work and the flow of grain to silos and trucks and onwards to ports for ships headed abroad.

Mato Grosso, Brazil's No. one soy state, is forecast to harvest a record 22.2 million tonnes, up from 20.5 million last year, after it dodged the drought that blighted states further south and expanded its planted area. Crops in No. two and No. three soy states Parana and Rio Grande do Sul have been ravaged by drought.

Parana, which put out a record 15.4 million tonnes last season, will bring in 11.2 million tonnes this year. Rio Grande do Sul will bring in 8.1 million tonnes after a record 11.2 million tonnes the year before, Celeres data showed.