July 18, 2012

 

Indonesia may shift to South American soy

 

 

As drought cuts output from the US, Indonesia may turn to Argentina, Paraguay or Brazil to supply some of the 1.6 million tonnes of soy it is expected to import this year, an industry association said on Tuesday (July 17).

 

The worst drought since 1956 to scorch the US grain belt has already cut estimated output, and quality, of the corn and soy crops, sending benchmark global prices soaring as concerns rise about supplies and exports.

 

The US drought helped November soy hit a contract high of US$16.07 earlier on Tuesday (July 17).

 

The USDA on Monday (July 16) rated the corn crop, which had once been estimated to total a record 14 billion bushels this year, at only 31% good-to-excellent, down nine percentage points on last week. The soy crop rating was cut to 34% good-to-excellent, down six percentage points from the previous week.

 

"Buyers are not yet looking at other countries, but if the Americans have more problems, then maybe," said Benny Kusbini, chairman of the National Soy Council of Indonesia which represents 2,000 farmers and producers.

 

"If buyers cannot get soy from the US, maybe from Argentina, Paraguay and Brazil," he told Reuters.

 

Indonesia currently buys 80% of its soy needs from the US. It buys 15% from Brazil and 5% Canada, Kusbini said.

 

Indonesia, however, may be unable to buy a significant amount of soy from major South American producers Brazil and Argentina as their crops have also suffered due to drought.

 

As a result of the damage to the American crops, analysts estimate global soy output in 2011-12 will decline to 235.9 million tonnes from 264.7 million tonnes a year ago. Indonesia uses soy as a protein-rich substitute for costlier meat.

 

Kusbini said imports this year will be unchanged from a year ago at about 1.6 million tonnes, lower than his April estimate of over 1.8 million tonnes.

 

Annual soy consumption may rise by between 3% and 5% this year from last year's 2.4-2.6 million tonnes, he said. Stocks are currently around 300,000 tonnes, he added.

 

Indonesia produces about 600,000-800,000 tonnes of domestic soy and Kusbini said this year's harvest, which will peak in August, is likely to remain at these levels.

 

"Indonesia cannot produce more than one million tonnes per year, because prices cannot compete with those from the US," he said, adding that the government's goal of ending its reliance on imports by 2014 was impossible.

 

"Who will plant the soy? The farmer? How about the price? We cannot compete with the overseas price," he added.

 

Earlier this month, the statistics bureau said soy output would fall 8.4% at 779,740 tonnes in 2012, as planting areas declined. The government has indicated it may scrap its 5% tariff on soy imports as it seeks to combat higher global prices and boost domestic processing, but Kusbini said the state should boost that amount to 27% and increase investment in domestic soy farms.