Record soy crop to boost investments in Paraguay

 

 

Paraguay's farmers hope this season's record harvest will raise US$2.5 billion, helping to revive investment aimed at boosting yields and clear debts carried over from last year's drought-hit campaign.

 

The poor, landlocked country is the world's No. 4 soy exporter and growers expect to harvest a record 7.4 million tonnes of 2009-10 soy, said Ulrich Bauer, president of the Paraguayan Chamber of Cereal and Oilseed Exporters.

 

Soy is the nation's biggest export earner and the bumper harvest should stimulate a wider economic expansion of 6 percent this year, reversing a sharp recession in 2009 and increasing dollar flows into the small financial system.

 

This year's record crop is also raising concerns among producers that leftist President Fernando Lugo could be encouraged to hike taxes on the sector, something he threatened to do soon after taking office two years ago.

 

Paraguayan soy exports, which go mainly to Argentina - where they are crushed into soyoil and pellets - as well as to the EU, are dominated by giant multinationals like Cargill and US-based Archer Daniels Midland Co.

 

Meanwhile, Paraguay's soy production remains modest when compared with that of neighbouring and Argentina, the world's No. 2 and No. 3 exporters, respectively, and its previous record crop was 2007-08's 6.8 million tonnes.

 

Production sank by more than 40% last year, saddling farmers with debts of some US$600 million and battering gross domestic product, which shrank 3.8%. Growers finished bringing in the 2009-10 crop late last month and the average yield was a record 2.8 tonnes per hectare, beating the previous high of 2.6 tonnes per hectare.

 

Paraguay's soy area has doubled over the past decade, but farmers are now focusing on investment to raise yields rather than dedicating even more land to the oilseed.

 

Some industry analysts think farmers could clear new lands in remote northern areas that are currently used for cattle ranching.

 

Despite the farming sector's vulnerability to drought and the ups and downs of global prices, analysts are still expecting soy output continue growing.