Aug. 6 (Bloomberg) -- South American farmers deciding now about what to plant for the next season probably will favor soybeans over corn as profit prospects are better for the oilseed than for grain, Oil World said.
While prices have declined for both crops, lower profit outlook "was more pronounced in corn than for soybeans," the Hamburg-based researcher said today in an e-mailed report. Brazil’s soybean production may be a record 87 million to 89 million metric tons, compared with a five-year average of 70.1 million tons, Oil World said, citing private estimates. Brazil is the second-biggest soybean producer after the U.S., according to the U.S. Department of Agriculture.
"Farmers in South America will favor soybeans at the expense of corn plantings," Oil World said. "This is based on current futures prices and current estimates of costs for production and harvesting."
Soybean futures on the Chicago Board of Trade, the global benchmark, have tumbled 16 percent this year, less than the 34 percent decline for the most-active corn contract. Production in the U.S., historically the largest grower of both crops, is projected to rebound to records as fields recover from last year’s drought, which slashed output and sent prices to all-time highs.
Profits for Argentine farmers "are under even greater pressure" amid export taxes, unfavorable exchange rates and high energy costs, Oil World said. Production costs are higher for corn, so farmers may plant more soybeans or sunflower seeds instead, according to the report.
Profit margins for farmers in South Cordoba in Argentina are about $75 a hectare (2.47 acres) for corn, compared with $507 a hectare in November 2012, while farmers who rent land might lose about $50 a hectare, Oil World said. Farmers might make $148 and $139 a hectare on first-crop and second-crop soybeans, less than half the amount a year earlier.
Farmers usually start planting soybeans in October and November in Brazil and Argentina, while corn is often sown beginning in August and September. Harvesting of wheat crops begins in September.
Cold weather and frost during the last 10 days of July caused "considerable damage" to wheat, rapeseed, olives and coffee, Oil World said. Frost in Brazil’s Parana state destroyed 300,000 to 500,000 tons of wheat out of production previously estimated to reach 2.7 million tons. Farmers in Argentina were unable to plant as much wheat as originally intended, and some crops in Paraguay also were damaged, which will cut the country’s wheat output below 1.3 million tons.
Frost conditions "at several locations were the worst in more than 40 years," Oil World said. "The extent of the impact from recent frost is still uncertain."
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