Soy harvest expectations contract on the back of Brazil heat

By Jane BYRNE

- Last updated on GMT

Soy harvest expectations contract on the back of Brazil heat

Related tags: European union, International trade, Eu

Warm weather in Brazil and Paraguay looks set to shrink the global soybean harvest by 3 per cent, claims the latest grains report by the USDA.  

The US Department of Agriculture (USDA) released its March World Agricultural Supply and Demand Estimates (WASDE) on Monday.

Soybean is the main crop to see a material change in the USDA supply estimate, but prices for it, along with wheat and corn have been buoyant in recent weeks, said UK-based equity analysts Shore Capital in a note on the US projections.

“We believe the bullish soybean price is explained through declining estimates for its harvest but we suggest the wheat and corn price appreciation is more closely related to supply fears in regard to the political situation surrounding Russia and Ukraine.

In aggregate, these two countries account for around 17% of the wheat export market and about 19% of the corn export market based on current USDA estimates,”​ said analyst Phil Carroll in reaction to the US forecasts.

The situation in the Black Sea though, he said, is likely to have more of an impact on future supply estimates for corn and wheat than current harvest expectations.

Meanwhile, a spokesperson for the EU feed manufacturers federation (FEFAC) told FeedNavigator.com today that the EU feed sector shares the general political concerns regarding the crisis in the Ukraine.

"In this context we welcome and support the announced EU Council support measures that include the signing of the EU and Ukraine Free Trade Agreement [set for November], which had been shelved at the end of last year. 

This would open EU market access to tariff rate quota (TRQ) grain imports from the Ukraine, which would offer additional market flexibility and fluidity to EU feed users,"​ he said.

Latest crop estimates

Soybeans

End stocks of soybeans have been revised down by the USDA in the March report by 3% or 2.4m tons to 70.6m tons – this has mainly been driven by a reduction in its production estimate of 2.3m tons, leaving its forecast for the global soybean harvest at 285.4m tons.

The downward revisions on the harvest expectation come from a 1.5m ton reduction for Brazil on the back of hot, dry weather during the flowering and filling stages.

Similar weather conditions have also impacted expectations in Paraguay, leading to a 1.2m ton estimate reduction.

Wheat

The USDA’s report puts world wheat production in FY2013/14 at 712.7m tons, a 0.8m hike on the prior month’s estimate, with this slight surge driven by a 1.1m ton increase for India and 0.5m tons more for Australia.

But the boost in wheat figures is offset by lower expectations for China, Uruguay and Paraguay.

Consumption expectations for wheat have also risen by 0.8m tonnes with greater demand from India, Iran, Australia, Iraq and Morocco, offset by lower feed demand in the EU, Russia and South Korea.

The USDA also notes stronger import demand from the Middle East and North Africa is helping to drive an increase in exports from the EU.

The estimate for wheat end stocks remains broadly unchanged at 183.8m tons, said the US agency.

Corn

World corn production is now expected to be 967.5m tons for 2013/14, up 0.9m tons on last month’s estimate with the increase driven by China in the main and a small increase from the EU, said the USDA.

Consumption expectations have also risen but only by 0.4m tons with South East Asia accounting for half of the upward revision.

 

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