USDA Outlook: Global soybean production forecast to fall 5% year-over-year to 251.5 million tonnes in 2011/2012, driven by lower South American crops

Andrew Rogers

WASHINGTON , February 13, 2012 (press release) – The following article is excerpted from the February Oil Crops Outlook published by the Economic Research Service of the USDA.

INTERNATIONAL OUTLOOK

Global Soybean Stocks To Fall in 2011/12 as Yield Losses Accumulate in South America

Based on lower South American crops, global soybean production for 2011/12 is forecast down to 251.5 million metric tons, compared to 257 million last month and the 2010/11 total of 264.2 million. It was previously anticipated that soybean production gains for South America would partly offset the reduction in U.S. output, but this now seems unlikely. Lower soybean output is expected to reduce global ending stocks 13 percent this year to 60.3 million tons.

In Brazil, soybean production for 2011/12 is forecast 2 million tons lower this month to 72 million. Much of the reduction is related to larger crop losses seen for Parana. With only about half of the usual seasonal precipitation in this southern State, the current drought rivals one from 3 years ago in severity. Farther south, the soybeans in Rio Grande do Sul are less developed, but rain is urgently needed to ease the stress on these later-sown crops. Despite these threats to soybean production in the South, Brazil may still harvest its second-largest crop ever this year due to higher area and favorable growing conditions for other regions. The pace of harvesting in Mato Grosso has been stalled by a persistence of wet weather there. Thus, only about 6 percent of the country’s soybean harvest has been completed to date.

A smaller harvest is expected to trim 2011/12 soybean exports from Brazil to 37.8 million tons from last month’s forecast of 39 million. Even so, this is still likely to set a record volume of soybean trade for the country by a wide margin. Brazil’s soybean shipments are also forecast to well exceed U.S. exports (34.7 million tons) this year.

Across the border in Paraguay, the weather has been just as dry as in Brazil’s western Parana, with very little rainfall since early December. Reduced area and sharply lower yields are seen shrinking Paraguay’s soybean crop this year to 6.4 million tons, compared to last month’s forecast of 7.6 million and last year’s record crop of 8.3 million. As a result, the reduction in Brazil’s 2011/12 shipments will be compounded by lower soybean exports from Paraguay, which are seen being 800,000 tons lower this month to 5 million.

A Make-or-Break Period Lies Ahead for Argentine Soybean Yields

December precipitation for central Argentina was near a historic low for the month. The drying was exacerbated by several episodes of intense heat. Since mid-January, however, the rainfall has moderately improved, helping to stabilize crop conditions and encouraging a resumption of soybean planting. The Argentine Government reported that 18.5 million hectares of soybeans were sown through February 2. Since farmers are very near the end of the feasible planting window, minimal increases in sown area are likely from this point on. USDA lowered its 2011/12 forecast of soybean area harvested for Argentina by 100,000 hectares this month to 18.6 million.

Despite some temporary relief, moisture deficits persist in Argentina. Water demand by crops will increase significantly there over the next 2 months as they advance into a reproductive stage. The smaller reserve of soil moisture makes the rainfall received for February-March even more crucial in determining soybean yields. If rains continue like they did a year ago (after a similar bout of early dryness), yields can still be close to average. Conversely, it is possible that soybean yields could collapse as they did 3 years ago when the drought continued unabated. Most affected now are the earliest-sown soybean fields, where the plants have been stunted by the adverse growing conditions. And where planting was deferred, Argentine farmers were forced to use short-season (but lower-yielding) soybean varieties. This month, lower estimates of soybean area and yields for the most-developed fields reduced the 2011/12 production forecast for Argentina to 48 million tons from 50.5 million.

Smaller supplies are expected to reduce Argentine soybean exports in 2011/12 to 8.9 million tons. This is down 900,000 tons from the previous forecast and below the 2010/11 exports of 9.2 million. In contrast, the Argentine crushing industry is more resistant to a crop reduction as it enjoys a significant advantage in the export of soybean products. Operating rates for processors are still close to record highs although in a year from now, the crop losses should constrain the industry’s growth. The Argentine soybean crush for 2011/12 is forecast at a record 38.9 million tons, up from last year’s 37.6 million but down 600,000 tons from last month’s forecast. Similarly, Argentine exports of soybean meal and soybean oil would be trimmed but still expanding. Soybean carryout stocks in Argentina are also likely to tighten, which could curtail exports early in the next marketing year.

Although Uruguay’s production of soybeans is dwarfed by its larger neighbors, it has expanded rapidly over the past decade. This year’s area was estimated up to a record 1 million hectares. But the region’s dry and hot weather encompassed Uruguay, too, and is anticipated to reduce its soybean yields. The country’s soybean crop is forecast down 100,000 tons this month to 1.7 million. Nearly all the soybean crop in Uruguay is exported.

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