October 23, 2008


Soy demand rises slowly for Argentina's soy giant



Soy prices will soon rebound after the sell-off triggered by the global financial crisis and demand will grow slowly but steadily, according to one of Argentina's leading producers.


Gustavo Grobocopatel, general manager of Grupo Los Grobo, said a drop in demand could only be caused by a sea-change in eating habits in top soy consumers such as China, India and the EU which he sees as unlikely.


The oilseed accounted for nearly a quarter of the South American country's export earnings last year, and a 40 percent slump in prices from July's record high has alarmed farmers at the start of the 2008/09 sowing campaign.


The price slump has cast a cloud over the boom that has changed the face of Argentine farming in the decade and helped lift the country out of a 2001/02 economic crisis.


Grobocopatel, who farms more than 100,000 hectares in Argentina, said soy prices were unlikely to fall much further.


Tumbling prices have not stopped Argentine growers from expanding soy area. Estimates say last season's 16.6 million hectares could rise to 18.2 million hectares in 2008/09, an increase that could mean record output of more than 50 million tonnes.


Soy crops are expanding partly because of high fertilizer costs, drought and taxes cutting margins on wheat and corn, forcing some out of crop rotations.


This worries Grobocopatel, who says his decisions rest more on rotation needs and soil preservation than on quick profits, and about half the land he manages is planted with soy.


Grobocopatel blames high export taxes on grains for leading some farmers to skip crop rotations that help preserve the nutrient content of soils.


Grobocopatel said that the main person hurt by the lack of rotating crops is the farmer. Soy on soy yields less than soy on corn, so there's a big incentive for farmers to rotate. Many times the government policies don't encourage this.


Corn exports currently face export taxes of 25 percent, and wheat shipments have a levy of 28 percent. Soy is taxed at a higher rate of 35 percent, but profit margins are still bigger, making the oilseed a safer bet for many farmers.


Argentina is the world's No. 3 soy exporter and the top supplier of soyoil and meal.

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