April 2, 2014

After prices rose relative to corn, farmers in Brazil and Paraguay are planting a second crop of soy this year, signalling oilseed supplies will remain ample and the market may soon turn bearish, Oil World said.

The soy harvest is currently under way in South America, and some farmers who usually replant fields with corn are now sowing a second round of soy, the Hamburg-based researcher said in an e-mailed report. Planting of second-crop soy in Brazil may total 750,000 hectares (1.9 million acres), up from 130,000 last year, it said. Paraguayan farmers may plant 550,000 hectares this year, according to the report.

Soy prices rose about 3.4% in the past year even amid prospects of record South American harvests as demand from China, the biggest consumer, cut stockpiles in the US corn fell 24% in the same timeframe on the Chicago Board of Trade. South America's additional soy area means as much as three million tonnes will be produced in June and July from the second harvest, Oil World said.

Soy production in South America's top five growing countries will be 151.45 million tonnes in the 2013-14 season, 5.5% larger than the prior year, Oil World said last week, raising its estimate from a previous forecast of 150.6 million tonnes. Brazil's second soy harvest will still be small compared with its so-called safrinha corn crop, which government forecaster Conab estimates at 43.76 million tonnes in 2013-14.

Soy prices may fall "in coming weeks" as large global supplies make up for shrinking US inventories, and as Chinese demand slows, according to Oil World report.

Slowing Chinese demand and some cancelled shipments mean Brazil's soy exports may fall to as low as five million tonnes in April, compared with at least six million tonnes in March, Oil World said. That would mark the first drop in exports between those two months in at least 10 years, according to the report.