Paraguay's soy farmers face drought aftermath

 

 

Slashed this season by drought, the soy exports of Paraguay appear ready to remain constrained in 2012-13 thanks to a jump in local processing capability and an aftermath from lower farm profits.

 

US farm attaches in South American said that the Paraguayan crop had suffered even more severely "from one of the worst drought in history" than the US Department of Agriculture has officially factored in, estimating the harvest at four million tonnes, down nearly one-half year on year.

 

The figure was also below a 4.3 million-tonne estimate from the country's UGP farmers' association earlier this week, if above a 3.7 million-tonne figure from Oil World.

 

The harvest decline, blamed on "several weeks of extreme temperatures without rain", left shipments from Paraguay, the world's fourth-ranked exporter, also on track to near-halve, to 2.85 million tonnes, the USDA attaches said.

 

And while exports will recover in 2012-13, they will be limited to 4.3 million tonnes, below the five-year average before the current drought-affected season.

 

In part, this reflects increasing domestic processing of the oilseed, thanks to the launch in September of an Archer Daniels Midland plant with crushing capacity of 1m tonnes a year, comparable with a Cargill plant already in operation.

 

Paraguay will import increased quantities of soymeal and soyoil, instead, in line with South American peers Argentina and Brazil who have already developed substantial domestic crushing industries.

 

However, the USDA attaches noted a hangover too from this year's drought, in sapping farmers' spending power on the next crop.

 

"It is expected that Paraguayans may invest less in inputs during 2012-13 because of the large losses they experienced this year," the attaches said in a report. "Less fertilizer is expected to be used and less machinery purchased. Therefore yields are estimated to be lower."

 

Labour was "also an issue", with operators finding it hard to hire "people who are qualified and trained in the area of agricultural production and processing".

 

The 2012-13 harvest was pegged at seven million tonnes, a sharp recovery on this year, but below the 8.4 million tonnes two seasons before, despite comparable sowings.

 

Longer-term, Paraguay's soy exports also face the potential hurdle of a 10% export tax on the oilseed to raise cash for state coffers.

 

Plans for a levy, which Argentina also imposes, have been delayed, but not extinguished, by this season's poor harvest.

 

"It could take several years for congress to agree on and implement a new export tax law," the attaches said. "But most in the agricultural sector believe that it will happen eventually."