December 11, 2012

A record soy crop of 82.6 million tonnes for 2012-13 was forecasted by Brazil's government on Thursday (Dec 6), brushing off concerns over dry weather in the southern producing regions.

In its third report of the season, government agency Conab narrowed its forecast for the crop it said is 88% planted to a single number. The agency had expected a crop in the range of 80.1 million-83 million tonnes in November.

"The climate framework is favourable in all producing regions of the country," Conab said in its report, adding that dry conditions in Rio Grande do Sul had normalised. Brazil has been the world's No. 2 soy grower in recent years but will probably surpass the drought-stricken US in production of the oilseed this season with an expected rebound from a disappointing 66.4 million tonne crop in 2011-12.

However, the crop's potential could be limited as parts of No. 2 soy state Parana and No. 3 state Rio Grande do Sul received up to 60% less monthly rainfall in November than they did in previous years, delaying planting. Analysts at FCStone do Brasil reduced their forecast for the crop by 2% to 80.01 million tonnes on Tuesday, citing lower yield expectations.

But Conab left its forecast for soy field productivity nearly unchanged at 3.03 tonnes per hectare compared with 3.08 tonnes per hectare in November. Rains in the past few days have brought relief to the south and top soy growing state Mato Grosso has enjoyed above-average rainfall. Conab also said it expects a strong corn crop of 71.9 million tonnes, compared with the outlook of 71.6 million-72.9 million tonnes in November, even though farmers are favouring soy over corn planting during the summer crop.

"Corn is losing space to soy in all states where there is a competition for area," Conab's report said. Area planted with soy is expected to increase by 8.8% from last season while corn area should fall by 2.7%. Both the corn and soy forecasts are slightly above the median estimate of analysts in a Reuters poll, which expect a 70-million tonne corn crop and an 81 million tonnes soy crop.

The Reuters poll forecasts are the same as the USDA's estimates. Conab raised its forecast for exports from the record corn crop that was mostly harvested in May and is still leaving Brazil's ports to 20.5 million tonnes from 19 million tonnes in November, as Brazil helps refill low global grain stocks.

Brazil will likely export 15 million tonnes of corn and 36.4 million tonnes of soy from the new crop, though analysts have warned that the country's roads and ports are not prepared for such massive volumes. That could lead to delays in shipments next year. Brazil will likely produce a cotton lint crop of 1.5 million tonnes, down from 1.9 million tonnes last season, Conab said.

Wheat production, which was hurt by strong rains in southern Brazil during harvest period, was forecasted to fall to 4.46 million tonnes, down from last year's 5.7 million tonne crop. January soy rose 0.24% in Chicago to US$14.82 a bushel on expectations of a jump in Chinese demand and concerns about supplies from Argentina while March corn fell 0.3% to US$7.55 a bushel.