February 1, 2012

Oil World cuts South America's soy forecasts

Following drought in Argentina and Brazil, Oil World has cut its forecast of 2012 soy crops in the two countries by a combined four million tonnes, it said on Tuesday (Jan 31).

Hamburg-based Oil World said it has cut its forecast of Argentina's 2012 soy crop to 46.5 million tonnes from 48.5 million tonnes forecast on January 24 and 52 million tonnes forecast in December.

This would be down on the 49.2 million tonnes harvested in 2011 in Argentina. Argentina is the world's third-largest soy exporter, with the US the largest and Brazil in second place.

Oil World said it has cut its forecast of Brazil's 2012 soy crop to 70 million tonnes from 72 million tonnes estimated on January 24 and 72.8 million it forecast in December.

This would be down on the 75.3 million tonnes Brazil harvested in 2011.

Droughts in the two South American countries have been a major issue in soy markets in past weeks, with Argentina in special focus.

"There is increasing concern about this year's South American crops," Oil World said, adding that recent rainfall had not been enough and irreversible crop damage was now being suffered.

Forecasts of only scattered South American rainfall in the two weeks to February 12 imply continued crop stress and further soy deterioration, it said.

The lower South American harvests will contribute to a global soy production deficit this season that will enforce a "pronounced decline" in soy stocks, it said.

"The soy and corn crop losses in South America will shift foreign demand to the US origin in 2012," it said. "This is likely to result in lower-than-expected US stocks at the end of this season."