South America Dryness Seen Slowing World Soy Stockpile Growth

Feb 18, 2014 9:30 am ET

Feb. 18 (Bloomberg) -- Dry weather in South America means global stockpiles of soybeans probably will increase by a smaller amount than previously expected by the end of the season, Oil World said.

Global inventories may be 12 million to 13 million metric tons larger than a year earlier at the end of the 2013-14 season, less than annual growth of 16 million tons expected in January, the Hamburg-based researcher said in an e-mailed report. Oil World plans to update its estimates for stockpiles for the season ending Aug. 31 in its report released next week.

The crop in Brazil, pegged by the government at a record 90 million tons, has suffered from “a severe moisture deficit” in January and early February, reducing production potential for at least a quarter of the country’s growing area along with parts of Paraguay, Oil World said. Argentina has seen “unfavorably dry” conditions in La Pampa and southern Buenos Aires province while other areas have seen excess rain, it said.

“Global soybean production will still turn out sharply above estimated consumption,” Oil World said. “But the surplus will be less than expected previously.”

Soybeans have slumped about 9 percent in the past year on the Chicago Board of Trade on the outlook for record global production, led by top exporters Brazil and the U.S. Oil World said in January that the global soybean harvest would be 287.79 million tons, 7.7 percent higher than the previous season. That would have left world stockpiles at 79.2 million tons at the end of 2013-14, compared with 63.1 million a year earlier, according to the January report.

Sunflower Crop

Dry weather also threatens to cut Argentina’s sunflower crop to a 30-year low of about 2.3 million tons, Oil World said today. Ample supplies of sunflower oil in the Northern Hemisphere will still mitigate an increase in global prices, “at least in the near to medium term,” it said.

Separately, Oil World said new demand for non-genetically modified soybeans is emerging from China, the top consumer of the oilseed. China may want to import “several million tons” in coming years, Oil World said, citing private estimates. The price premium for GM-free soybeans has climbed to as much as $80 a ton, which may spur some Brazilian farmers to expand area. The South American country will produce about 6 million tons of GM- free soybeans this year, mostly grown in Mato Grosso and sold for export.

“Farmers in other states have now renewed interest to resume cultivation of conventional soybeans, thus partly reversing their total shift to GM soybean varieties done in preceding years,” Oil World said. “This is true primarily for Rio Grande do Sul, Minas Gerais and Goias, where non-GM soybeans may be sown on several thousand hectares next season.”

--Editors: John Deane, Sharon Lindores