April 10, 2012

 

 

Even as they extended the run of downgrades to estimates for 2011/12 output and boosted a shift from corn and cotton, Brazil soy production will recover strongly next season, US farm officials said.

 

The USDA's Brasilia bureau cut to 66 million tonnes its estimate for Brazil's ongoing soy harvest, which was originally pegged at more than 72 million tonnes, but been hurt by drought in southern states, and disease in more northerly areas.

 

"Potential yields were not achieved across much of Brazil due to drought conditions in the south, Asian rust, disease, and pest pressure in the Centre West, and some white mould and pest pressure in the North East," the bureau said in a report.

 

Some 115,000 hectares of crop have been abandoned, mainly in Rio Grande do Sul, where much of what has been reaped so far, in a state still in the early stages of harvest, is "of very poor quality" and is "being heavily discounted upon sale".

 

The data extended a spree of downgrades for South American soy harvests, ahead of the USDA's April edition of its much-watched Wasde crop report, due on Tuesday. Oil World on Tuesday, warning that "new reports have been received confirming additional crop losses", said that South America's "supply situation could really become serious, and exports of soy and products may be forced to decline significantly in September 2012-January 2013".

 

However, the USDA bureau forecast a sharp improvement in the 2012-13 crop, of which harvesting will start early in 2013. Besides the hope for better yields, with the La Nina weather pattern blamed for the current crop losses not expected to return next season, soy sowings are to rise by one million hectares, an area approaching the size of Jamaica or Lebanon.

 

Some of this extra area will come from corn and from cotton, in which Brazil had been increasing its presence, challenging Australia for third rank amongst exporters.

 

"With the decline in cotton prices and the increase in soy prices, it is expected that soy profit margins will fare better than cotton margins for producers in 2011-12, and that this will continue into 2012-13," the bureau said.

 

However, much will come from new cropland, created from the pool of degraded pastureland, and set to boost sowings in Mato Grosso, the top soy state, by 400,000 hectares, with a further 250,000 hectares in the north east "Mapitoba" frontier. Furthermore, yield potential is being improved by the spread of irrigation and improved agronomic practices, besides increased use of advanced seed and fertilisers.

 

"For 2012-13 fertiliser usage is expected to increase due to significant forward purchases of fertilisers."

The extra harvest will feed through into a 31% rebound in exports to a record 35 million tonnes in 2012-13, as measured by Brazil's February-to-January crop year, with potential being boosted by infrastructure investment too.

 

Limited road and rail networks mean costs of transporting crop to ports from Brazil's interior have hit the equivalent of US$3.50 a bushel for soy, doubling since 2003, industry data showed.

 

While deadlines on projects such as new railway and port capacity are "almost never met", it appears that important parts of a North-South rail line, from Porto Nacional in Tocantins to Itaqui in Maranhao, and the BR-163 highway in Mato Grosso will be completed in time for next year's harvest.

 

Brazil's disappointing soy harvest this season, and subsequent unexpected decline in export hopes, has been a major prop to prices of the oilseed in Chicago, which this week returned above US$14 a bushel to seven-month highs.