October 16, 2008

 

Paraguay's soy area expectations fall as prices slide

Paraguay's soy planting area this season will be in line with last season's or even lower because of a sharp fall in international soy prices.

 

This comes after early expectations of a sharp increase in Paraguay's soy planting area.

 

"Not only will the falling prices negatively impact the current season, but also sociopolitical stability in the farm sector," said Luis Cubilla, analyst at Paraguay's grain export chamber (CAPECO).

 

In August, Cubilla said he saw soy area from the world's fourth- largest soy exporter rising 5-7% percent this season.

 

The administration of Paraguay's new president, Fernando Lugo, has said it is considering ways to rein in the rapid expansion of soy cultivation due to concerns over the environment and displacement of poor, rural residents.

 

A sort of zoning programme in which soy is allowed in some areas and prohibited in others is apparently being considered, as are export taxes, according to local press reports.

 

Soy production in Paraguay is dominated by Brazilian farmers who have moved across the border joining the two countries to fuel a surge in farming.

 

However, there has been a backlash against the "foreigners" and growing resentment among the local population. Despite the resentment, a number of Argentine farmers have also been moving shop to Paraguay to escape the heavy regulation of the sector they face back home.

 

Despite the concerns in Paraguay, most farmers are still moving forward with the planting decisions they made earlier this year when the outlook was very positive.

 

"Supplies were bought or contracted in better times," Cubilla said. "This year wont be greatly prejudiced, but rather 2009."

 

Paraguay's soy production has surged in recent years, growing from 4 million tonnes during the 2004-05 season to an estimated 7.2 million tonnes in the 2008-09 crop year, according to the USDA.

 

Paraguay is expected to export 4.6 million tonnes of soy, 1.8 million tonnes of soymeal and 425,000 tonnes of soy oil from the 2008-09 crop, according to the USDA.