May 9, 2012

Oil World lowers Argentina's 2012 soy crop forecast

Due to drought, Argentina's 2012 soy crop forecast has been cut by Oil World, for the second time in two weeks, by 1.5 million tonnes.

Oil World now forecasts Argentina's 2012 soy crop at 41.0 million tonnes, down from 49.2 million harvested in 2011, the analyst said on Tuesday (May 8).

The latest reduction follows a series of cuts in Oil World's Argentine crop forecasts in April totalling four million tonnes because of bad weather in the country. Oil World had only on April 24 cut its forecast by 1.5 million tonnes.

Argentina is the world's third-largest soy exporter after the US and Brazil. Estimates of South American soy production continue to shrink as farmers harvest the remainder of the southern hemisphere crop, a factor driving down forecasts for US and global inventories and keeping up prices.

The Buenos Aires Grains Exchange on May 3 cut its forecast of Argentina's 2012 soy crop by two million tonnes also to 41.0 million tonnes.

Oil World also warned of a high risk it will cut its present forecast of Brazil's soy crop of 65.0 million tonnes, which is already down from 75.3 million harvested in 2011.

A further 0.5 million-tonne reduction in the 65.0 million-tonne estimate cannot be ruled out as crop yields in the Brazilian state of Rio Grande do Sol have turned out below expectations, Oil World said.

"With South American supplies dwindling, world demand for soy and products will increasingly shift to US origin from June and July 2012 onward it," said.

The bullish supply fundamentals "will limit the downward potential of soy and product prices in the near to medium term", it said.