PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 16:03 UK, 25th Feb 2014, by Agrimoney.com
Brazil wetness, Oil World data revive soy futures

Soybean futures pared losses as Oil World, citing drought, cut forecasts for soybean crops in South America even as excessive rains are rising as a problem, and potentially driving importers back to the US.

Oil World - which market rumour said last week had cut its Brazilian harvest forecast by 4.5m tonnes to 85.0m tonnes, as Agrimoney.com reported on Tuesday confirmed the revision, citing the dry spell still affecting eastern parts of the country, supporting sugar and coffee prices.

"Considerable irreversible losses have already occurred from drought," Oil World said, highlighting the likelihood of a further downgrade should rains not prove forthcoming in southern areas.

"There is a high risk that a further downward revision will become necessary for Brazil if the urgently required rainfall does not arrive in Rio Grande do Sul, the southern-most state, in the next two weeks."

The German-based group also cut its estimate for the forthcoming Argentine harvest by 1m tonnes, making smaller cuts to figures for Bolivia, Paraguay and Uruguay, reducing the total production forecast for South America's top five producing states in 2013-14 by 7.0m tonnes to 151.8m tonnes.

The US Department of Agriculture, whose data set global benchmarks, sees these five countries producing 158.7m tonnes of soybeans, including 54.0m tonnes from Argentina and 90.0m tonnes from Brazil.

'Threatening quality issues'

However, the Brazilian downgrade comes as excessive rains are becoming an increasing problem for farmers in western growing areas, including in the top producing state of Mato Grosso.

Doane, the US broker, said: "The weather situation in South America has continued bullish, but now for opposite reasons.

"For months it was dryness threatening lower-than-expected yields. But now excessive rain in the midst of harvest is threatening quality issues and harvest field losses."

In New York, Anne Frick at Jefferies Bache said that "heavy thunderstorms during the weekend for portions of Mato Grosso and Parana likely mean local flooding and delays to fieldwork.

"This may include harvest delays for soybeans and first crop corn," besides delaying planting of second crop, or safrinha, corn which should ideally have been sown by last Thursday.

'Diminishing farmers' hopes'

Michael Cordonnier, the respected crop scout, said that "wet weather over the last several weeks in Mato Grosso is diminishing farmers' hopes for a record soybean crop as well as delaying the planting of the safrinha corn crop".

Besides meaning "flooded fields waiting to be harvested", the rains have affected crop quality of what is reaped.

"Some farmers have harvested their soybeans at high moisture in order to allow enough time to plant safrinha corn, only to find that their grain is being discounted by as much as 12% when they deliver it to the grain elevator."

"The wet weather is also increasing the incidence of soybean rust on the late maturing soybeans," he said, adding that farmers are reporting that "seeds at the bottom of the plant have been most impacted".

Separately, Chicago-based broker RJ O'Brien said that its South American researchers had warned that "quality issues are mounting" in Mato Grosso because of the heavy rains, although yields are "still holding up well".

'Could not have come at a worse time'

The rains have also worsened Brazil's notorious transport infrastructure, washing away bridges and in central Mato Grosso breaking a dam which has flooded the BR-163, the so-called "soybean highway" for trucks taking crops to port.

"Water eroded much of the shoulder leaving only one lane open for traffic," Dr Cordonnier said, adding that officials had warned that repairs could take several months.

"This new problem along the highway could not have come at a worse time as the harvest ramps up and thousands of trucks use this highway on a daily basis hauling grain to southern ports and bringing back fertilizers and other products."

Chinese buyers, the top importers, have been buying 3-5 South American soybean cargoes daily, although this has slowed this week thanks to a declining dollar, boosting the competitiveness of US supplies, RJ O'Brien said.

Big order

The USDA on Tuesday revealed the sale of 568,000 tonnes of US soybeans to an "unknown" importing country, for 2013-14 delivery.

The US has already sold, or already exported, 43.22m tonnes of soybeans for 2013-14 delivery more than the 41.1m tonnes forecast for the whole year, with Chinese buyers expected to cancel orders as South American supplies come onstream.

The data helped soybean futures for May recover early losses to stand up 0.1% at $13.88 a bushel in mid-morning deals in Chicago.

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