April 20, 2009

A smaller Argentine soy crop may boost Brazilian soy exports to China this year and could help US farmers as well, industry watchers said.

The early yields from the Argentine soy crop have been very disappointing, and estimates suggest the crop could hit between 35 million and 37 million tonnes, well below earlier expectations of around 50 million tonnes, said the chief trader at a major US exporter.

"This is a disaster for them," he said.

As a result, the trader believes that Brazilian and North American farmers stand to gain as worried soy buyers turn to these markets.

He said Brazil should be able to pick up around 2 million tonnes in additional exports to China due to the smaller harvest in Argentina. Brazil, therefore, should export around 12 million to 14 million tonnes to China, compared with 11.9 million tonnes last year, he said.

Steve Cachia, a grains analyst with local consultancy Cerealpar, agreed that demand from China has been strong and hasn't shown signs of sagging due to the economic downturn.

Cachia warned that Brazil's smaller crop may hamper its ability to export more beans to China. But even so, exports could hit around 12 million to 13 million tonnes, he said.

Brazil is expected to harvest 58.1 million tonnes of soy in the 2008-09 crop year, down from 60 million tonnes in the 2007-08 soy crop, the National Commodities Supply Corp., or Conab, said this month.

Leonardo Menezes, an analyst at agricultural consultancy Celeres, said Chinese crushers have already been buying large quantities of 2008-09 beans in recent months.

The Brazilian crop is in the process of being harvested, with Mato Grosso, the No.1 soy-growing state, near the end of its harvest.

Brazil shipped 1.5 million tonnes to China in the first quarter, nearly double the amount shipped a year earlier. Almost 80 percent of these soy exports to China were in March alone, and the pace should remain strong in the coming months, Menezes said.

The first quarter is usually a slow month for Brazilian soy exports as a result of more fresh beans coming from the US harvest and due to the inter-harvest period in Brazil.

It's too early to project Brazil's exports for the full year, according to Menezes. But it's certain Brazil and the US will be able to poach exports to China from Argentina, he added.

Cachia warned that Brazilian soy exports are so strong that Brazilian crushers may see tight supplies in the domestic market for beans from September onwards.

As a result of tight supplies, smaller Brazilian crushers may suffer shortages, the trader for the US exporter warned.

Brazil is the world's second-largest soy exporter behind the US, and soy counts as one of the biggest revenue drivers for Brazil.