March 22, 2010

 

South American soy harvests likely to break records

 

 

With the soy harvest in full swing or kicking off across South American fields, fears of damage from too much rain are fading fast, and farmers are gearing up to deal with record crops.

 

Brazil, Argentina and Paraguay, the world's top soy exporters after the US, are all on track to harvest the largest amount ever, but the bumper crops are going to strain the countries' harvest, transport and storage capacity.

 

In Brazil, the world's No. 2 soy producer, production is seen jumping more than 18% from last year to 67.5 million tonnes, according to the National Commodities Supply Corp., or Conab.

 

The previous high mark was set in 2007-08, when Brazilian farmers grew 60 million tonnes of soy. So far, about 46% of the crop has been harvested, according to reports.

 

Across the border in Argentina, the harvest is just starting. Analysts estimate Argentina's soy crop at between 52-55 million tonnes, with the likely total coming in at 53 million tonnes, said analysts. This is up from the previous record of 48.8 million tonnes grown in 2006-07.

 

Production prospects are basically set - barring a major weather problem - and the Buenos Aires Cereals Exchange is expecting relatively dry weather throughout the harvest.

 

Paraguay is expected to produce 7.2 million tonnes of the oilseeds this season, up sharply from the 3.4 million tonnes grown last year, when the crop was battered by drought, according to Capeco. Increased planted area and favourable weather is expected to push output up 20% from the previous record set in 2007-08.

 

About 75% of Paraguay's crop has been brought in from the fields so far, and about 15-20 days are left in the harvest period. While some intense storms are expected toward the end of the month, warm conditions and strong sunshine will help fuel quick evaporation and allow farmers to get back to work, according to analysts.

 

Meanwhile, benchmark soy futures at the CBOT have been trending higher ahead of a major US planting intentions report on March 31, but traders said the record South American crop had limited the increases and would remain a bearish factor in the market over the longer term. Nearby CBOT May futures ended up 2.25 cents, or 0.2%, at US$9.6175 a bushel on Friday.

 

The huge output is a boon to South American farmers, but getting it all to port is going to test the region's infrastructure. A chief trader at a major US soy exporter complained that Brazil is struggling to handle all the beans.

 

A lack of trucks, badly surfaced roads and crowded ports are causing bottlenecks, the trader said. Recent bad weather has also added to delays at Brazilian ports, traders said.

 

Argentina faces a challenge from a much larger share of early soy planted this season on land traditionally planted with wheat, and then a second, late soy crop. Many farmers gave up on wheat and went straight to early soy due to drought that made wheat a risky bet.