August 3, 2010

Brazil's 2010-11 soy output seen to fall marginally

Brazil's 2010-11 soy harvest is likely to fall 1.1% from the record crop in 2009-10, Celeres said on Monday (Aug 2) in its first estimate for the crop this season.

The 2009-10 crop that just finished turned out around 68.5 million tonnes but Celeres estimated the coming season would produce only 67.71 million tonnes as concerns about the profitability of soy make growers reconsider how much to plant.

"The current uncertainty about the profitability of soy production in the 2010-11 crop has made some growers cautious about expanding," Celeres said in a soy report, particularly in more remote center western areas with inferior transport infrastructure.

Soy futures perked up last week however, rising to a six-month high on Friday (July 30) on the CBOT. They gained from a rally in wheat tied to drought in Europe and Russia, along with technical buying.

Though soy futures are still trading within the same range as last year, Brazil's currency, the real, has regained the strength it temporarily lost versus the dollar during the 2008-09 credit crisis, cutting incomes in local currency.

The total planted area was expected to fall some 0.6%, or 138,200 hectares, to 23.19 million hectares, even though soy would expand into some land in southern areas that last year were planted with corn, Celeres said.

The biggest reduction would be in the country's largest soy state, Mato Grosso in the Center West, with a drop of 372,000 hectares. The central state of Goias would see a drop of 96,800 hectares. These reductions would be only partly offset by gains in southern states Rio Grande do Sul and Parana of 124,200 hectares and 118,700 hectares respectively.

Planting of soy usually begins in mid-September in Brazil, which is the world's second largest soy growing nation, enabling more definite estimates to be made later on.

South American crops are likely to suffer drought later this year due to the La Nina weather anomaly that tends to reduce evaporation of sea waters of its coast and cut rainfall. If that kicks in around planting time, it could leave seeds with insufficient soil moisture when they germinate.