October 12, 2009

South America is set to sow gangbuster soy crops this season, setting a record for production that is likely to weigh on international prices when the beans flood the market early next year.

 

Brazil, Argentina and Paraguay, the continent's top three soy producers, are all expecting the increase in planted area and favourable weather conditions to lead to unprecedented output.

 

Early planting in the southern cone of South America is set to start in the following weeks and recent showers bode well. In addition, a mild El Nino weather system is expected to boost crop conditions due to above-average rainfall in the region, according to T-Storm Weather.

 

Brazil, the world's second-largest soy exporter, is on track to grow 62.3 million to 63.3 million metric tonnes, up from the previous record of 60 million tonnes in 2007-08, according to the National Commodities Supply Corp., or Conab.

 

However, local consultancy Cerealpar sees production climbing as high as 64 million tonnes.

 

Argentina is also expected to plant a record area with soy this season, due in large part to a shift away from wheat and corn because of export limits on those crops. The country is the third-largest soy exporter and leads the world in soymeal and soyoil shipments.

 

Private analysts see planted area at 19 million to 20 million hectares, shattering the 2008-09 record of 16.6 million hectares.

 

If the crop gets the expected boost from El Nino, production could surge as high as 65 million tonnes, up almost 40 percent from the previous record in 2007-08, said AgriPac Consultores analyst Pablo Adreani. The increased planting of early soy will add to higher yields, he said.

 

But Adreani's forecast is much more optimistic than others. Panagricola S.A. Vice President Ricardo Baccarin is expecting production of 52 million to 53 million tonnes - still a national record.

 

Meanwhile in Paraguay, farmers are coming off a terrible season last year due to drought but are expected to grow 7 million tonnes of soy in 2009-10, up from the previous record of 6 million tonnes in 2007-08, said Luis Cubilla, an analyst at Paraguay's grain export chamber, or Capeco.

 

Soy is Paraguay's top crop and export product. The small, landlocked country is the world's fourth-largest exporter of the legume.

 

With three of the world's top four soy exporters expected to shatter previous output records next year, and a bumper crop in the fourth - the US - international prices are likely to come under pressure, said Steve Cachia, an analyst with Cerealpar in Parana state of Brazil.

 

"The big production will keep a lid on strong price increases on the Chicago Board of Trade and in the local [Brazilian] market," he said.

 

Prices in Argentina could drop by as much as US$20 a tonne come harvest time, AgriPac's Adreani said.

 

Although prices may dip, Eduardo Godoi, an analyst at consultancy AgRural in Brazil, said that exports should remain more or less steady with strong demand continuing from China and from local crushers.