April 29, 2004
Paraguay Soy Output East Down 11% In 2004/05
After last year's record yields, soybean production this Marketing Year (MY) 2004/2005 was severely affected by drought, down 11 percent from previous estimates to 4.0 million metric tons (MT). Sunflower seed production is forecast to remain stable. A new tax on soybean and soybean product exports, enacted in March 2004, will increase transaction costs and lower the price paid to producers, according to a U.S. Department of Agriculture Foreign Agriculture Service agricultural attache.
Executive Summary
After last year's record yields, soybean production this Marketing Year (MY) 2004/2005 was severely affected by drought. Sunflower seed is forecast to remain stable. A new tax on soybean and soybean product exports, enacted in March 2004, will increase transaction costsand lower the price paid to producers.
The result of this year's soybean harvest will set the rhythm for next year's planting of wheat, corn, and other second crops. The feeling is if producers do not come out ahead in this years harvest, due to drought and lower yields, they may either lack the capital or enthusiasm to plant next year. Most producers plant soybeans after wheat or corn. After last year's bumper soybean crop (average yields were said to be around 2.9 MT/ha), many producers were left very well off, in terms of profit and mood. However, this year's severe drought may squelch their enthusiastic mood, as well as squeeze their pocketbooks, as profits are likely to be lower.
The crushing industry is growing in Paraguay. Currently crushing capacity is at 4,850 MT/day with several businesses planning to expand.
Outbreaks of soybean rust, while much feared, have not surfaced in the past years, although there were a few outbreaks in the southern provinces in the past. Rarely does Paraguay obtain the optimal meteorological conditions necessary for soybean rust outbreaks (mild temperatures, high humidity). However, producers and agricultural outreach specialists are always on the look out for rust.
Soybean Production
Soybean planted area is expected to increase in Marketing Year (MY) 2005/2006 to 2 million hectares (has) for a production of 5.0 million MT. Yields are expected to return to normal after the severe drought during MY 2004/05 reduced yields to record lows. Expansion is expected to occur in Alto Parana, southern Canindeyu, and western Caaguazu. Production during MY 2004/2005 was severely affected by drought during the period January - March. Disparate yields were recorded throughout the soybean production areas from 1.0 MT/ha to 3.0 MT/ha. FAS Buenos Aires reduces MY 2004/05 production estimates to reflect falling yields to 4.0 million MT, down from an original forecast of 4.5 million MT. FAS Buenos Aires's production estimate for MY 2003/04 was increased to 4.5 million/MT as a result of new information confirming higher yields than previously reported.
Sunflower Production
FAS Buenos Aires forecasts sunflower seed production for MY05/06 to remain stable at 50,000 MT. Sunflower seed production for MY04/05 is estimated to be 50,000 MT. Output is mainly destined for domestic consumption.
Cottonseed Production
Due to the difference in FAS marketing years between cotton lint (August - July) and cottonseed (March - February), comparisons between the two may not always coincide. Paraguayan cotton harvesting usually ends by the end of April. Ginning is finished by the end of May. Therefore, cottonseed ginned in May 2004, is included in the MY04/05 cottonseed production estimates
By weight, roughly 55 percent of raw cotton is seed. In Paraguay, cotton lint production for MY04/05, which translates to MY05/06 for cottonseed production, is likely to around 125,000 MT. Using a lint-to-seed ratio of 1.62, FAS Buenos Aires forecasts MY05/06 cottonseed production at 202,000 MT.
FAS Buenos Aires revises MY04/05's cottonseed production preliminary estimate to 162,000 MT based on 100,000 MT of cotton lint production. Likewise, FAS Buenos Aires revises down MY03/04 cottonseed production estimate to 97,000 MT, based on lower cotton lint production of 60,000 MT.
Sesame Seed Production
Over the past few years sesame seed production in Paraguay has increased due to low production costs and high yields. While data is not exact, industry estimates planted area this year to be between 30 - 40,000 hectares, mainly in the Chaco and Oriental regions. Nearly all production is destined for export to markets such as Japan, Mexico, and Brazil.
Consumption
Soybean Crush
Installed crushing capacity in Paraguay is currently 4,850 MT/day with expansions planned in the coming years. Five crushers account for nearly all production of soy by-products. Over the past 4 years, the Paraguayan crushing industry accounted for between 25 - 30 percent of domestic soybean consumption. It is likely this percentage will increase this year, as crushing facilities are likely to buy up available production to fill capacity and to satisfy demand. Similarly, a new export tax on unprocessed soybeans provides an added incentive to export soy meal and oil instead of unprocessed beans (See Trade Policy Section).
Due to possible increased capacity and demand, FAS Buenos Aires forecasts MY05/06 crush will be 1.6 million MT. Accordingly, soy meal and oil production will be 1.264 million MT and 288,000 MT, respectively. Because of the added incentive to export processed soybeans due to the export tax, FAS Buenos Aires increases its MY 04/05-crush estimate to 1.4 million MT. This translates into soy meal and oil production of 1.106 million MT and 252,000 MT, respectively. Based on information obtained from the Paraguayan Chamber of Grain and Oilseed Exporters (CAPECO), FAS Buenos Aires revises its MY03/04 crush estimate to 1.25 million MT. Soymeal and oil production is also revised to 995,000 and 226,000 MT, respectively.
Soybean Feed, Seed, and Waste
Industry estimates seed use is between 70 - 80 kilograms/ha. FAS Buenos Aires forecasts soybean MY05/06 feed, seed, and waste domestic consumption at 140,000 MT. Feed, seed, and waste for MY04/05 and MY03/04 are adjusted accordingly, calculating 70 kilograms/ha. Most industry sources concur that 8 - 10 percent of soy meal is consumed domestically, mainly as animal feed. FAS Buenos Aires forecasts MY05/06 soybean meal feed, seed, and waste consumption at 125,000 MT.
Approximately 50 percent of soybean oil produced in Paraguay is consumed domestically. The oil is usually mixed with other types of oils to produce cooking oils and margarines for the domestic market. FAS Buenos Aires forecasts MY05/06 soybean oil food use consumption at 140,000 MT. Accordingly, FAS Buenos Aires estimates MY04/05 soybean oil food use to be 120,000 MT and soybean oil food use for MY03/04 is revised to 110,000 MT.
Sunflower Seed
Approximately 70 - 80 percent of sunflower seed produced in Paraguay is processed. Sunflower seed domestic consumption for MY05/06 is forecast at 40,000 MT. Sunflower meal and oil production for MY05/06 is forecast at 17,000 MT and 15,000 MT respectively. Estimates for MY04/05 and MY03/04 remain unchanged.
Cottonseed
Total installed cottonseed crush capacity is approximately 4,000 MT/day. However, actual crushing is not near capacity. Cottonseed crush is not forecast to expand significantly in the next year. As prices are low compared to other commodities. Most cottonseed oil is used in the production of comestible mixed oils for the domestic market. FAS Buenos Aires forecasts MY05/06 cottonseed crush at 152,000 MT for production of cottonseed meal and oil of 69,000 and 24,000 MT, respectively. FAS Buenos Aires lowers MY04/05 cottonseed crush estimate to 127,000 MT. Production of cottonseed oil and meal are estimated at 58,000 and 20,000 MT, respectively. FAS Buenos Aires revises MY03/04-crush estimate to 70,000 MT as a result of lower production and increased exports. Cottonseed meal and oil production for MY03/04 is estimated at 32,000 and 11,000 MT, respectively.
Trade
Soybeans
Approximately 70 percent of soybean production is exported to markets in South America and Europe. Historically, more than 45 percent of exports are shipped to Brazil , 20 percent to Europe, and 10 percent to Andean countries. Several factors will affect soybean trade over the next MY. First, a new export tax regimen on soybeans and soybean products will increase export costs (see Trade Policy Section).
Exports through the Port of Paranagua in Brazil have become complicated over the past month as the state government of Parana (in which Paranagua is located) forbids the entry, commercialization, and/or transit of biotech products through its territory. Before offloading at the port, the product is tested for biotech content. If the test is positive, the product is not allowed to be offloaded and is sent back to its origin. Many Paraguayan exporters have decided to not risk the rejection of their product and are foregoing the Paranagua port. Shipments instead are being sent through more distant ports in Brazil, translating into increased transportation costs, or through Argentine or Uruguayan ports. Lastly, the fall in MY04/05 production due to drought may diminish exportable supply, as processors buy up available soybeans for manufacturing.
FAS Buenos Aires forecasts MY05/06 unprocessed soybean exports at 3.3 million MT, up 32 percent from MY04/05. FAS Buenos Aires's estimate for MY04/05 is reduced to 2.5 million MT, as a result of the drought. Exports during MY03/04 are revised to 2.8 million MT, in line with industry estimates.
Soybean Products
Exports of soybean products will also be taxed according to the new export tax regime imposed by the Paraguayan Government (See Trade Policy Section). Approximately 90 percent of soybean meal and 50 percent of soybean oil is exported. Major destinations for soybean meal include Brazil, Peru, and Chile.
The major market for soybean oil is Venezuela which accounts for over 55 percent of Paraguayan soy oil exports. FAS Buenos Aires forecasts MY05/06 soybean meal and oil will follow the pattern of the past two years with regard to destinations and trade share.
FAS Buenos Aires forecasts MY05/06 soybean meal exports at 1.1 million MT. Major destinations will be Brazil, Peru, and Chile. Soybean oil exports during MY05/06 are forecast at 140,000 MT. The major export destination will remain to be Venezuela. Export estimates for MY04/05 are revised upward to 950,000 MT for soybean meal. Soybean oil estimates for MY04/05 are reduced to 125,000 MT. FAS Buenos Aires revises export estimates for MY03/04 soybean meal exports to 850,000 MT, based on the fact that a significant amount of exports, especially to destinations in South America, are not accounted for in official customs statistics of importing countries. Therefore, the use of derived demand of importing countries does not always capture all imports. Accordingly, soybean oil exports during MY03/04 are revised to 105,000 MT, given that domestic consumption has been adjusted upward.
Sunflower Seed and Products
A small amount of unprocessed sunflower seed is exported. While official statistics are not readily available, FAS Buenos Aires assumes, and industry contacts concur, the bulk of unprocessed sunflower seed exports goes to Brazil and other South American countries. A large part of sunflower seed meal and oil is exported, according to industry contacts, mainly to South America. One industry contact, whose facility is responsible for more than 60 percent of sunflower seed meal and oil production, exports 80 percent of its production of the two by-products. In the past, official USDA supply and demand tables did not reflect any trade in sunflower seed oil and meal. In light of new information, FAS Buenos Aires proposes this information be included.
Accordingly, FAS Buenos Aires forecasts MY05/06 sunflower seed exports will remain stable at 7,000 MT. Sunflower seed oil and meal exports will reach 8,000 and 7,000 MT, respectively. FAS Buenos Aires revises MY 04/05 estimates for sunflower seed meal and oil exports to 8,000 and 7,000 MT, respectively. Sunflower seed exports for this period remain unchanged. Sunflower seed meal and oil exports for MY03/04 are revised according to new information to 7,000 and 5,000 MT, respectively. Sunflower seed exports for this period remain unchanged.
Cottonseed and Products
Industry contacts inform FAS Buenos Aires that Paraguay exports unprocessed cottonseed. Due to the lack of official export statistics, however, FAS Buenos Aires previously reported zero exports of Paraguayan cottonseed. However, Brazilian officials do report the import of cottonseed from Paraguay, confirming industry information. Due to the increased cotton crop forecast for MY05/06, FAS Buenos Aires forecasts MY05/06 cottonseed exports at 30,000 MT. Likewise, cottonseed exports during MY04/05 are revised to 15,000 MT. NOSIS, a private source, reports Brazilian unprocessed cottonseed imports from Paraguay were 15,000 MT during MY 03/04. FAS Buenos Aires revises its MY03/04 estimate to 17,000 MT to reflect this new information, as well as to take into account other undocumented exports.
Cottonseed meal exports from March 2003 through February 2004 totaled at least 10,000 MT, calculated from derived demand of importing countries. The principal destinations were Colombia, Chile, and Brazil. FAS Buenos Aires forecasts MY05/06 cottonseed meal exports will increase due to the increased crush and steady domestic consumption. FAS Buenos Aires forecasts MY 05/06 cottonseed meal exports at 44,000 MT. Cottonseed meal exports for MY04/05 are estimated at 33,000 MT, due to reduced production and steady domestic consumption.
Exports for MY03/04, as well, are reduced to 12,000 MT as a result of lower production and steady domestic consumption. Paraguay does export any significant amount of cottonseed oil.
Policy
Export Taxes
The Paraguayan Congress recently approved an export tax on soybeans and soybean products. For unprocessed soybeans, the tax is US$3.20/MT, calculated as 4 percent of $80.00/MT. Soybean oil and meal are taxed at $0.00256 per liter/kilogram. It is estimated that this tax will increase fiscal revenues by approximately US$12 million.
Biotechnology
Given that Paraguay shares a common border with Brazil, and the fact that Paraguayan soybeans transit Brazil before they are exported, Paraguay's policy with regard to genetically modified organisms (GMO) is highly influenced by Brazilian policy. At this stage, Paraguay does not have any variety of genetically modified (GM) crop approved for commercialization. At present, the Paraguayan Congress is evaluating a Biosecurity Law Proposal. Currently, relevant laws or regulations in force by the Paraguayan Government (GOP) only regulate approval for experimentation with GMOs; commercialization and/or imports are forbidden. It is expected that this situation will change shortly, once new biosafety legislation is approved and implemented.
The current regulatory framework applied to GMOs and to biosecurity is incomplete, unclear, and without a legal framework. The GOP in recognition of its need to regulate GMOs has proposed a biosecurity law based on discussions within the Biosecurity Commission, regulations in place in MERCOSUR countries, and the results of three public hearings.
The objective of the new law is to promote the safe use of modern biotechnology, to create an adequate level of protection related to the use of GMOs and GMO by-products, to prevent adverse effects on agricultural production, conservation, and sustained utilization of biodiversity, as well as to stimulate the productive and technological development of the country. This law establishes general principles that regulate:
1. The research, development, manipulation, transport, transit, storage, production, commercialization, importation, exportation and utilization of GMOs;
2. GMO release into the environment; and,
3. The elimination and final disposition of GMOs when necessary. No provision for a traceability system has been made under the proposed law, nor does it contemplate any tests for GMO content on shipments arriving in Paraguay.
GMO products would bear a label that contains specific information required by the Ministry of Industry and Commerce.
Source:USDA
