Uruguay is currently harvesting what is considered a record crop of soybean the ever expanding oil seed that as in neighbouring countries is taking over land from other exploitations and has made Mercosur the world’s leading producer and exporter.
Although insignificant compared to the jumbo crops of Brazil and Argentina, stoked besides by benign climate, Uruguay’s 800.000 hectares should collect 1.7 million tons of soybean, with prospects of a million hectares and two million tons for the next season.
With average price in the range of 330 to 350 US Dollars per ton, the Uruguayan soybean crop should represent 500 million US dollars making it the main agriculture industry of the country, according to Montevideo market sources.
This in spite the fact the Mercosur soy crop this year will be 35 million tons higher particularly because of Argentina’s rebound following a year of drought and fiscal disputes with the government.
However China’s economy sped ahead at almost 12% in the first quarter, demand from the rest of Asia remains particularly strong and even when the US had a record crop its stocks are low and must be replenished.
China’s grain and oil information office revealed that May imports of soybean will be above 5.5 million tons, which is 1.2 million more than the record established this month of April.
China’s soybean oil industry increased capacity is demanding more beans and less oil (one of the reasons for the dispute with Argentina, China’s main oil supplier) which will also benefit Uruguayan, Brazilian and Paraguay bean exporters.
Paraguay, the fourth Mercosur full member, has a record soy crop and is contributing with several million tons to the 35 extra million tons of the group made up by 22 million from Argentina, 9 million from Brazil and the modest 600.000 from Uruguay.
But Uruguayan market sources also point out to the fact that the next harvest in 2011 could mean surprises. Another record crop from Mercosur and the US, with replenished stocks, increased planted area, could have an impact on prices and expose the whole industry’s high dependency on Chinese demand, as it is being experienced by Argentina with its soybean oil production.
China has temporarily suspended oil imports from Argentina alleging non compliance with certain maximums for refining by-products.
Another issue to take into account is that this year’s soy crop in Uruguay was quite uneven regarding quality. This is because the early planted oil seed had yields of up to 2.500 kilos per hectare. However the soy planted as a second crop following on winter wheat or barley had much lower yields (as low as 1.000 kilos).
Therefore farmers must work out their costs for different crops very carefully before playing all chips on soy beans, recommend local agronomists.