The International Grains Council has lowered its forecast for global soybean output in 2012-13 by almost 4%, as dry weather has affected yield potential in many areas of South America.

Production is forecast at a three-year low of 246.5 million tons, down 7.6% from 2011-12 because of lower output in all major producing regions.

The IGC tabulates its data over an aggregate marketing year covering all major producing and trading countries.

"Adversely dry conditions during the growing season have negatively affected yields in many areas, particularly northern Argentina, southern Brazil and Paraguay," it said in a recent report.

In southern Brazil states including Parana and Rio Grande do Sul, low soil moisture has significantly hampered crop development, it said.

Brazil's soybean output may fall 8% to 69.4 million tons from the record reached in 2011-12; down 3.3% from the IGC's earlier forecast, it said.

The IGC lowered its forecast for Argentina's soybean output in 2012-13 by almost 10% to 46 million tons, down 6% from last year's actual production.

"Prolonged dryness has resulted in irreversible yield reduction in some areas of Argentina," it said.

Paraguay's production may fall by 40% to just 5 million tons, it said.

Meanwhile, demand is strong.

Although the IGC lowered its forecast for China's soybean imports by 1 million tons, at 56 million tons, it would be a record, up 7% from last year.

The pace of South America's soybean exports from last year's harvest have been exceptionally strong, and shipments from Brazil and Argentina were almost three times higher during October-December than year earlier, IGC said.

However, shipments from South America will likely slow in the next few months due to reduced output, it said. The IGC lowered its forecasts for Brazil and Argentina's soybean exports in 2012-13 by 2.2% and 17%, respectively, while raising it forecast for U.S. soybean exports by almost 3% due to a shift in demand from South America.

The global soymeal trade will likely reach a record 58.4 million tons, up 2.6% on year, the IGC said, citing rising demand in East Asia and the European Union.

-By Sameer Mohindru, Dow Jones Newswires; +(65) 6415-4085; sameer.mohindru@dowjones.com

(END) Dow Jones Newswires

February 27, 2012 06:33 ET (11:33 GMT)