Evening Report (VIP) -- October 16, 2012

October 16, 2012 09:57 AM
 

BRAZIL EXPECTED SURPASS U.S. IN BEAN PRODUCTION... South American crop consultant Dr. Michael Cordonnier says it was assumed Brazil would become the world's leader in soybean production at some point, but because of the worst drought in decades in the U.S., it could happen sooner than expected if Brazil has favorable growing conditions this year.

In the October Supply & Demand Report, USDA estimated 2012-13 U.S. soybean production at 77.84 MMT and Brazil's crop at 81 MMT. Conab, Brazil's supply-estimating agency, projects the Brazilian soybean crop at 81.4 MMT and Dr. Cordonnier pegs the crop between 81 MMT and 83 MMT. "The leadership role in soybean production may switch back and forth between Brazil and the U.S. for several more years depending on the individual growing season, but if soybean prices remain strong, eventually Brazil will emerge as the consistent leader," says Dr. Cordonnier.

Dr. Cordonnier cites the following reasons that will lead to Brazil eventually retaining its leadership role in soybean production:

  • Soybeans are the preferred crop of Brazilian farmers.
  • Brazilian farmers are very good at producing soybeans and the climate is well suited for soybean production.
  • A long growing season allows for multi-crops in the same year, which spreads out the risk of crop production.
  • Brazilian scientists have developed high yielding soybeans adapted to Brazil's conditions.
  • The demand for soybeans will continue to increase, especially in China.
  • There are hundreds of millions of acres of underutilized land, as well as pasture land, in Brazil that could be brought into production.
     

 

CONSULTANT LEAVES SOUTH AMERICAN CROP ESTIMATES UNCHANGED... Dr. Cordonnier left his South American crop estimates unchanged this week, but says Brazil's soybean acreage could increase even more than currently anticipated if wet conditions continue to delay corn planting in southern Brazil. Dr. Cordonnier pegs Brazil's soybean crop at 81 MMT to 83 MMT and the corn crop between 72 MMT and 73 MMT.

In Argentina, Dr. Cordonnier says corn planting is progressing slower than normal due to wet conditions, so if planting is delayed into November, it could impact yield potential and some farmers might decide to switch some acres to soybeans. He currently pegs the Argentine soybean crop at 55 MMT to 57 MMT and corn production between 26 MMT and 27 MMT.

 

 

U.S. DOES NOT SUPPORT STRATEGIC GRAIN RESERVE... At a ministerial meeting on food price volatility today conducted by the Food and Agriculture Organization of the United Nations, the U.S. said it does not support the idea of creating a strategic grain reserve to tame food price inflation. The U.S. says a strategic grain reserve program would be costly and could encourage hoarding and corruption in the food system.

"The fiscal, logistical and governance costs of regional reserves are considerable and could divert limited and valuable resources away from sustainable solutions, such as targeted support to producers, safety nets for poor consumers and increased investment in transportation and distribution infrastructure." said David Lane, U.S. ambassador to the UN.

 

 

CHINA PURCHASES CANADIAN SPRING WHEAT... Export sources say China has purchased at least 295,000 MT (could be as high as 500,000 MT to 600,000 MT) of Canadian spring wheat over the past two weeks, with delivery beginning in November. The purchase of high-protein wheat signals supplies for Chinese millers have tightened. This also led traders to speculate that China's wheat crop wasn't as big as indicated, or that protein levels were lower than expected.

 

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