Soyabeans and soya meal extended their gains this week, as heavy rain in Argentina’s key growing areas deepened fears over a disruption to production.
In the first two weeks of the year, parts of the soyabean growing areas have suffered six months worth of precipitation, ruining the fields which had been seeded. Farmers had until this week to replant, but sustained rainfall has meant that the fields could not dry up.
Argentina is the world’s largest exporter of soyabean meal, an important livestock feed ingredient, as well as a leading soyabean producer. This year’s rains follow last year’s flooding, which triggered a sharp decline in the country’s production and a surge in prices.
Soyabean meal, which hit a six-month high earlier this week, has jumped more than 10 per cent so far this year to $345.4 a ton. Soya beans are up 2 per cent this week to $10.63¼ a bushel, 7 per cent higher from the start of the year.
Analysts have been downgrading their output forecasts for Argentina. “The estimates for the 2016/17 Argentine soyabean production are declining to as low as 50-51m tonnes,” said Michael Cordonnier at consultancy Soybean & Corn Advisor. After the devastating floods last year, output was at about 56m tonnes, down from just over 60m in 2015.
The Rosario Board of Trade announced that it was cutting its harvest forecast for the current season to 52.9m tonnes, down from an earlier estimate of 54.4m, due to the “ extraordinary weather events that occurred in recent weeks”.
The rain induced reduction in planted acreage follows a switch among the country’s farmers from soyabean to corn and wheat, after the government scrapped export taxes for the two grain crops. While the weather in Argentina is causing angst over soyabean output, increases in output elsewhere are expected to help outweigh any production losses.
“South America’s largest soyabean producer, Brazil, is set for a record harvest this season. Furthermore, smaller South American producers, Paraguay and Uruguay, are also set for a year of record output,” according to the UK’s Agriculture and Horticulture Development Board.
The International Grains Council this week cut its 2016/17 global soyabean production numbers fractionally, to 334m tonnes, but the figure is a 5.7 per cent increase from the previous year and a new record.
In addition to Brazil, analysts are expecting another bumper US harvest, said the IGC. Total consumption is predicted to increase by 4 per cent, while inventories up thanks to increases in the US. Steady increases in Asian demand is expected to push up traded volumes by around 3 per cent.