A Brazil soybean comeback
Curitiba (Brazil) – In just 30 days, the grain crop went from heaven to hell in South America. Up until November, Brazil, Argentina, and Paraguay were heading for another record season in 2011/12. But an extended drought period coupled with high temperatures that hit the crops at the time they need water the most, during the reproductive stage of development have dried up the dream. The potential was for 135 million tons (mmt) of soybeans and over 93 mmt of corn. But because of the influence of the La Niña, the three South American countries lost about 20.0 mmt of soybean and more than 6 mmt for corn, Gazeta do Povo's (a Brazilian newspaper) Crop Expedition data shows. In the most battered by the drought in southern Brazil alone, the damage is estimated at about US$ 4 billion.
The extreme losses have raised the soybean prices in the Chicago Board of Trade, but had a extraordinary effect over the domestic markets in South America. In Brazil, prices even surpassed their 2008 peaks. At times, farmers sold their soybeans at higher price than those traded in Chicago, a very unusual situation. In an attempt to secure grains for the second semester of 2012, the Brazilian crushing industry had to pay higher prices than those offered by the export market. While the board of trade dropped to the $13.80, local buyers were offering farmers $ 14.70 per bushel in Parana state.
With strong international demand, driven mainly by the Chinese market, the country has accelerated its soybean exports, despite the reduced supply. In the first four months of 2012, a period that usually concentrates the shipments, the country increased soybean sales by 36%, 11.25 mmt, 3 mmt more than in the first quarter of 2011. More than half of that amount was shipped to China. Soybean oil and soybean meal exports were also up, by 20% and 8%.
The fast export pace reduced the Brazilian soybean stocks to one of the lowest levels in recent years and forced the crushing industry to slow down. According to Brazilian Association of Vegetable Oil Industries (Abiove), the country will process 34.5 mmt of soybeans this year, 6.25% below last year (36.8 mmt). To prevent a greater decrease in crushing, the domestic industry is preparing to import more soybeans than usual this season. "There is a risk of shortage in the last quarter. So we have started to plan ahead to seek [soybean] in Mato Grosso, if necessary "says Luiz Lorenzo, president of Cocamar, a large cooperative in Northern Paraná. The state, which is the second top soybean producer of the country and also one of the most affected by drought in Brazil, expects to crush 1 million ton of soybean this year.