July 27, 2011


South America may plant more corn over soy



South American farmers may have an incentive to plant more corn, as high prices above even Chicago levels have encouraged them to rethink the "soy surge".


Soy overtook corn for sown area in Argentina in the 1980s, and now accounts for five times as much land, driving the country to third place in soy exports.


In Brazil, the region's top grower of both crops, soy took the lead 14 years ago, and now takes up about twice the area of corn.


Brazil-based crop consultant Kory Melby said that this "soy surge", which has encompassed 1.9 million hectares nationally over the last three years, was "related to cost of production and risk management strategies".


However, Melby also noted that "corn prices domestically are very strong", trading at a premium to Chicago futures, with the Brazilian market lifted by a disappointing second-crop winter corn harvest, besides strong international values.


Analysis group Oil World said that the "sharp" increase in prices was likely to spur extra sowings of the grain in southern and central areas, "as farmers are responding to the improved profitability of corn production".


Argentina is also hoping that talks with Beijing over opening corn exports to China will bear fruit.


"It is expected that Argentina will benefit considerably from rising Chinese corn import requirements in the years ahead," Oil World said. "This is likely to improve the attractiveness of corn growing and thus implies increased acreage competition for soy in Argentina."


The prospect of an intense so-called "battle for acres" between corn and soy echoes that witnessed in North America earlier in the year, which was won by corn, despite a poor early spring seeding period.


US corn sowings are currently estimated up 4.1 million acres on-year to their second-highest since World War II, in part at the expense of soy, whose plantings are believed to have dropped by 2.2 million acres.

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