December 22, 2010

Oil World lowers Argentine soy crop forecast

For a second time in two weeks, Oil World has lowered its hopes for Argentina soy harvest, warning that it could be on course for a fall of more than 20% on dry weather.

The highly regarded analysis group, which last week cut its forecast for the crop by 1.5 million tonnes to 50.5 million tonnes, said there was a "high risk" that the crop harvested early next year "will plummet to only 43 million-48 million tonnes".

The tentative revision depended on weather, which has turned worryingly dry in Argentina, and in a period of the La Nina weather pattern, which has a history of denying the country adequate rainfall.

"Soybean crop prospects have deteriorated noticeably of late. Only light, but grossly insufficient, rainfall was received in the week ended December 16, and the severe temperatures caused severe stress to recently-planted summer crops," Oil World said.

Drought two years ago prompted a collapse in the harvest to some 32 million tonnes, with better conditions in 2009-10 seeing production rebound to 54.4 million tonnes.

The Hamburg-based group said that Argentina's woes could lift prices across the oilseeds complex, which has already witnessed strong rises in the second half of 2010.

Chicago soy have risen by nearly 40%, with Paris rapeseed for February hitting a two-year high of E486 a tonne on Tuesday, up 48% since the end of June.

"Unless a clear turnaround to the better occurs in the key Argentine soybean growing areas, prices of oilseeds and products are set to appreciate," Oil World said.

The forecast came despite evidence of a drop-off in demand from China, the top soy importer, amid reports that Beijing's measures to keep food prices low were squeezing crushers' margins.

"Following record shipments from the US, Argentina and Brazil to China in September-to-November, considerably less is expected for December. Chinese soybean buying activity has slowed significantly and some buyers are trying to delay shipments of US soy due to the current large stocks in Chinese ports," Oil World said.