October 7, 2011


Brazil to suffer drop in soy output



Brazil is seen to endure its greatest drop in soy output next year if dry weather from the possible return of La Nina descends on the southern grain belt, the government said Thursday (Oct 6).


The government's crop supply agency Conab said output would fall to 72.18-73.29 million tonnes from the record 75.3 million tonnes last year.


If the crop eventually comes in at the lower end of the range, it would be the largest drop in outright tonnage from one year to the next since 1994, which is as far back as Conab's Web site data extends.


A smaller crop could provide support for soy prices. Global supply and demand fundamentals for the oilseed remain strong. The recent fall in futures prices in September is bringing big importers such as Egypt and China back to the market to try to rebuild their depleted inventories. And Brazil's forward delivery sales of the new crop for early 2012 are well above historical averages for this time of year.


Despite the initial outlook for a drop in production, this year's area planted to soy is forecast to rise 2-3.5 % to 24.66-25.04 million hectares from last year's record 24.18 million hectares.


An expected return to normal yields after unprecedented growth last year is partially behind the expected drop in output. Productivity is expected to fall to 2.927 tonnes a hectare from a record 3.115 tonnes per hectare in 2010/11 when abundant rains produced a bumper crop, Conab said.


"It depends on the chance of having a strong drought in the south but at this time it is very early to say," Silvio Porto, director of farm policy and information at Conab, said when asked why the agency saw the smaller crop from more area.


The government's outlook on the new crop that began planting in the past weeks is more conservative than private sector forecasts.


Crop analysts Safras e Mercado forecast in July another record soy crop of 75.3 million tonnes, with area growing to 24.7 million hectares from 24.2 million hectares last season. Safras' new forecast is due out on October 21 and is expected to show an even larger expansion in area from its July forecast.


On Monday (Oct 3), grains analysts Celeres forecast the new crop at a record 75.2 million tonnes, up from 74.9 million for the last crop.


Brazil's total corn crop is seen at 57.33-58.99 million tonnes from last year's 57.5 million tonnes, Conab said. The rise in output is accompanied by an increase in area to 14.18-14.47 million hectares from 13.83 million last year.


This expansion in area underscores the expectations of tight global supplies from a smaller than expected corn crop in the US and strong demand from the corn ethanol industry there, analysts say.


Brazil should harvest a cotton lint crop of 1.93-2.11 million tonnes, compared with 1.96 million tonnes last crop.


The total grain output this season is due to fall to 157-160.5 million tonnes, down from the record 162.9 million tonnes harvested last season, Conab said, also reflecting a conservative view on the chances of dry weather from a return of La Nina and drier weather in the south.

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