September 6, 2005

 

ASA Weekly: Lack of monsoon threaten India's soybean crop; potential rust spread to minimally impact soybean crop

 

Lack of monsoon threaten India's soybean crop

 

Monsoon activity in India further weakened over the past two weeks, which is likely to have a negative impact on production of soybeans, according to USDA.

 

Monsoon rains have mostly been confined to north-eastern states and a few places in central and south India, which were earlier experiencing below-normal rainfall. Most parts of western and northern India remained dry for the third consecutive week.

 

Rains are badly needed in India for normal crop development. An early withdrawal of the monsoon from north and central India could not only jeopardize the standing crops, but also adversely impact planting of crops this fall.

 

Potential rust spread to minimally impact soybean crop

 

USDA predicted that Hurricane Katrina could spread soybean rust spores further throughout the Midwest.

 

Eastern Texas, Arkansas, Kentucky, southern Indiana and Ohio have all been named as states susceptible to an outbreak of the disease.

 

However, the risk to crops from the disease is minimal even if plots are infected. USDA expects that it could take up to a month before the disease reached a critical stage, long after the crops have reached maturity, thus decreasing the potential for damage.

 

This would also leave plenty of time to spray crops with fungicide, USDA said.

 

Immediate agricultural impacts of Hurricane Katrina

 

Direct damage done to crops and livestock by Hurricane Katrina is conservatively estimated at US$1 billion, according to Terry Francl, senior economist with the American Farm Bureau Federation.

 

Considerable harm was done to cotton, soybeans and corn crops in Mississippi and Louisiana. However, the effect on farm production and prices nationwide could be eased as there had been strong harvests of crops elsewhere.

 

However, Katrina's impact is already felt throughout the US agricultural industry in the form of a severely crippled river shipping and Gulf port system and rising fuel costs, Francl said.

 

The lack of shipping movement on the Mississippi was holding up corn and soybean exports, and prices paid to growers were being cut. Rising fuel prices due to the disruption of oil output would further undercut growers¡¯ bottom lines, Francl said.

 

Meanwhile, the US Army Corps of Engineers has begun assessing the Mississippi River Channels and the deep-draft ports in the Gulf region to determine impediments to navigation, according to Randy Gordon, of the National Grain and Feed Association.

 

The Coast Guard is also doing underwater surveys and has reported on navigational aides such as buoys missing and misplaced, as well as an unusual amount of silt.

 

It also remains to be seen how port and river traffic will be handled. Should the government prioritise in some way, it is possible that grain going out could be of lower priority than humanitarian relief or even oil or steel components coming in.

 

Many factors lead to lower planted area in Brazil

 

USDA expects Brazil's 2005-06 soybean area at 21.9 million hectares and production at 61 million tonnes. Despite a reduction in area from last year, due primarily to poor returns for the 2004-05 crop, a more normal yield is expected to lead to record production.

 

USDA's forecast is below that of some private analysts in Brazil. For example, Safras and Mercado predicted the crop at 63.5 million tonnes, Celeres at 63.1 million tonnes.

 

Most private estimates say that the area will fall, with the FNP Institute predicting an area down 7 percent from last year and the Brazilian Association of Soybean Producers (Aprosoja) expecting a 4 percent reduction. USDA sees this dramatic area reduction forecasts as excessive and possibly meant to encourage small producers to reduce area, thus supporting prices.

 

USDA says the expected reduction in Brazil's planted area is due to five primary factors: current low commodity prices, a strong currency, a high rate of unpaid debts, tight private credit, and high input costs.

 

USDA believes the greatest obstacle for Brazil's producers is the current exchange rate. Most producers purchased imported inputs for planting last year's summer crop at an exchange rate of 3 reals/dollar but sold the crop at around the current rate of 2.3 reals/dollar. At the current rate, dollar returns on soybean are said to be very discouraging to producers.

 

USDA forecasts Brazil's soybean exports from February 2006 to March 2007 at 24 million tonnes. The estimate is based on the expected greater supply as a result of an increase in production as well as less export competition from the US, according to USDA.

 

US & South America Soybean/Products Balance
	US			Argentina			Brazil
	Actual	Estimate	Proj.	Actual	Estimate	Proj.	Actual	Estimate	Proj.
	2003/04	2004/05	2005/06	2004/05	2005/06	2006/07	2004/05	2005/06	2006/07
Soybeans	thousand tonnes
Carryin	4,853	3,059	7,886	1,630	2,046	4,341	3,129	2,086	1,058
Production	66,778	85,484	78,653	33,000	39,000	39,000	50,500	51,000	62,000
Imports	151	136	82	540	590	485	350	470	200
Crush	41,631	45,994	45,994	25,072	26,800	27,500	29,172	29,634	32,309
Exports	23,946	30,209	30,890	6,500	8,700	9,400	19,571	19,542	22,936
Other	3,146	4,590	4,031	1,552	1,795	2,010	3,150	3,322	3,575
Usage	68,723	80,793	80,915	33,124	37,295	38,910	51,893	52,498	58,820
Carryout	3,059	7,886	5,706	2,046	4,341	4,916	2,086	1,058	4,438
Soymeal	thousand tonnes
Carryin	200	191	227	347	354	529	763	469	425
Production	32,953	36,536	36,501	19,807	21,172	21,725	22,920	23,730	25,459
Domestic use	28,590	30,118	30,527	700	850	950	8,784	9,400	9,900
Net Exports	4,372	6,382	5,974	19,100	20,147	20,914	14,430	14,374	15,434
Usage	32,962	36,500	36,501	19,800	20,997	21,864	23,214	23,774	25,334
Carryout	191	227	227	354	529	390	469	425	550
Soybean oil	thousand tonnes
Carryin	676	488	769	99	74	100	150	93	90
Production	7,748	8,716	8,648	4,513	4,824	4,950	5,258	5,448	5,816
Domestic use	7,651	7,847	8,006	140	145	155	2,710	2,785	2,920
Net exports	285	588	585	4,398	4,653	4,820	2,605	2,666	2,896
Usage	7,936	8,435	8,591	4,538	4,798	4,975	5,315	5,451	5,816
Carryout	488	769	826	74	100	75	93	90	90

 

USDA Export Sales (tmt) - Week of 25 August 2005

		New	Accum.				New	Accum.
Country	Commodity	Sales	Exports		Country	Commodity	Sales	Exports
Canada	Soybeans	1.2	369.4		Philippines	Soymeal	0.1	469.3
Cuba	Soybeans	1.5	128.6		Salvador	Soymeal	16.7	112.9
Denmark	Soybeans	11.8	73.3		Taiwan	Soymeal	3	25.1
Japan	Soybeans	16.3	3110.3		Venezuela	Soymeal	2.5	143.1
Mexico	Soybeans	20.2	3421.3		Egypt	Soyoil	0.1	0.3
Taiwan	Soybeans	5	1486.4		Jamaica	Soyoil	0.4	11.7
Canada	Soymeal	16.8	912.6		Mexico	Soyoil	1.1	164.6
Dom. Rep.	Soymeal	0.8	253.1		Trinidad	Soyoil	0.1	5.1
Egypt	Soymeal	8	153.2
Honduras	Soymeal	2	101.7		Export Sales Totals (tmt)
Hong Kong	Soymeal	0.6	10.5			Outstanding	Accum.	New
Japan	Soymeal	7.9	368.4		Commodity	Sales	Exports	Sales
Mexico	Soymeal	12.4	1027.3		Soybeans	699.2	29,878.20	37.9
OPAC Is.	Soymeal	0.5	5.7		Soymeal	401.7	5,594.80	61.6
Panama	Soymeal	4.7	113.2		Soyoil	27.3	408.2	1.9