April 25, 2012

Argentine soy crop forecast lower due to drought

Hamburg-based oilseeds analyst Oil World has further reduced its forecast of Argentina's 2012 soy crop by 1.5 million tonnes on Tuesday (April 24) due to drought damage.

Oil World now forecasts Argentina's 2012 soy crop at 42.5 million tonnes, down from 49.2 million in 2011. The deteriorating harvest outlook is likely to support global soy prices, it said.

The latest reduction follows a 1.0 million cut in Oil World's Argentine crop forecast on April 17 and a 1.5 million cut on April 10.

Argentina is the world's third largest soy exporter after the US and Brazil. Argentina's government on Thursday (April 19) cut its soy crop forecast to 42.9 million tonnes.

"The soy crop estimates in South America are not yet stabilising," Oil World said. "The drought in northern Argentina has turned out to be the worst in at least 50 years. Abandonment of soy fields is unusually large and yields in the affected areas are down by around 50%."

US soy hit a 7-1/2 month high on Friday (April 20) because of strong export demand, a weaker dollar and concern about South American harvests. Although soy prices have since pulled back, the deteriorating South American crop outlook is likely to support the market, Oil World said.

"In the near to medium term, additional downward potential in soy futures will be rather limited," it said.

A slight improvement in soy crop outlooks in Bolivia and Uruguay cannot compensate for severe soy losses in Argentina, Brazil and Paraguay, Oil World said.