August 31, 2010

Brazil set to produce bumper 2010-11 soy crop

Brazil's soy farmers could notch up a bumper crop in the upcoming 2010-11 crop season as farmers shift away from corn.

Brazil, the world's second-largest soy exporter after the US, is likely to expand the area dedicated to soy by 3-5% in the 2010-11 crop season.

Although farmers have not started planting yet - and factors from the weather through to price swings can alter estimates - several organisations are already suggesting the likelihood of a second consecutive record for production of 70-71 million tonnes. But most, however, admit a lot can happen before the beans start to trickle into the warehouses in December or January.

A new record crop could bode bearish for world soy prices on the CBOT but traders also see continued demand from buyers such as China. This demand will therefore soak up any extra beans from Brazil and can continue to support prices. CBOT November soy on Monday (Aug 30) were 4 cents higher in early trade at US$10.30 a bushel.

If the forecasts are proven accurate, the bumper crop will rise above this year's record of 68.7 million tonnes on 23.4 million hectares to deliver extra supplies for local crushers and bean-hungry importers such as China.

Recent high prices are also likely to stimulate the likelihood of more soy being planted compared to other crops, analysts said.

Although La Nina weather phenomena can cause prolonged periods of dry weather especially in southern Brazil, this could further prompt farmers to plant more soy than corn, analysts said. With more fields planted with soy instead of corn, farmers will see new records in its top three soy states of Mato Grosso, Parana and Rio Grande do Sul.

Carlos Lovatelli, president of Brazilian Vegetable Oils Industry Association, or Abiove, also pegs Brazil's soy crop at around 70 million tonnes.

In addition, large industry agricultural groups are betting on soy prices staying attractive compared to other crops. Analysts said new entrants to Brazil's soy market such as Argentina's agricultural conglomerate, Grupo Los Grobo, are planting soy on new lands. States such as Piaui, Maranhao and Bahia states are new frontier regions for soy, he said.