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Brazil expects bumper soy crop, despite La Niña

13 Apr 2018 19:26 (+01:00 GMT)
Brazil expects bumper soy crop, despite La Niña

Rio de Janeiro, 13 April (Argus) — Brazil is set for a record 2017-18 soybean harvest, with public agencies posting increases in their latest forecasts.

This reflects the milder-than-expected development of La Niña, the anticipated severity of which led to early conservative forecasts for Brazilian soybean production.

Brazil's National Agricultural Supply Company (Conab) has increased its forecasts for the 2017-18 soybean harvest by 886,700t to 114.96mn t. This is 1.9mn t higher than its March forecast. The increase is based on a 3.5pc expansion of the planted area, to 35mn ha. In the 2016-17 cycle, when the weather was considered ideal, Brazil produced 114mn t of soybeans.

The United States Department of Agriculture (USDA) has estimated an even larger increase for Brazilian soybean production, in line with the recovery of crops after the dry weather during planting. The agency has increased its forecasts by 2mn t from last month, to 115mn t for the 2017-18 soybean harvest. This would be 900,000t up on last year.

Unstable weather in the current harvest season has been caused by the La Niña climate phenomenon.

"In the second half of 2017, La Niña was expected to be of medium-to-strong intensity, but this did not happen, mitigating the impact forecast at the time of soybean planting," said Renata Tedeschi, a climatologist at Brazil's center for weather forecasting and climate studies (CPTEC). "A medium intensity La Niña creates more rainfall in the north and northeast of Brazil and drier weather in the south. For the central-west and southeast, the effects vary between dry spells and excessive rainfall."

The dry weather put soybean planting back beyond the ideal window in several regions, reducing expected productivity.

In Mato Grosso, Brazil's leading soybean producing state, the dry weather seen during planting of the 2017-18 crop lowered expectation for the state's productivity at the time. But crops have recovered as the cycle has progressed and should end the current season with increases in both productivity and production. Conab estimates that the area planted in Mato Grosso with soybeans will be 2.1pc up year on year and productivity will be up by 1.1pc year on year, resulting in a 3.2pc increase to 31.5mn t for the state's soybean production.

The harvest in Brazil has taken in 80pc of the planted area, according to Conab, but it is lagging behind in the south and in Matopiba because of the excess rainfall since March.

Heavy rainfall has boosted grain production in Matopiba but is hampering the ongoing harvest.

"The rainy weather has been added to seeds that are suited to the local climate and the application of more fertilizer to leverage soybean production this season. Now, too much rain is slowing the harvest down, but we do not expect any damage as far as quality is concerned," said the president of an agricultural group that operates in the region.

The southern region also suffered losses because of the unstable weather. The forecast decline in local crop productivity will limit soybean production in the 2017-18 season. Conab estimates a 2.2pc fall year on year in Parana's soybean production to 19.2mn t, while Rio Grande do Sul farmers are expected to harvest 16.6mn t in the current cycle, down by 11pc year on year.

Record soybean production in the 2017-18 harvest will be accompanied by rising soybean prices, which have been increasing since the beginning of the year, likely sustaining fertilizer purchases for use in the 2018-19 crop. Demand is expected to increase after the current harvest has ended but purchases are still being held back at the moment by the annual increase in barter rates between soybeans and fertilizer seen in the first quarter.