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.
losses have already occurred from drought," Oil World said, highlighting the
likelihood of a further downgrade should rains not prove forthcoming in
"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.
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.
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
"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
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
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 ¼ a bushel in mid-morning deals in Chicago.