MercoPress. South Atlantic News Agency

US confirms poor soy crops in Argentina and Brazil; prices soar to 2008 levels

Warm temperatures and a lack of rainfall further reduced yield and production prospects

Drought in major soybean producers Brazil and Argentina cut their production more deeply than expected the US government said on Tuesday in a report that drove prices to near their highest since 2008.

While a more than 20% rally in soybean prices this year has reignited concerns over food prices, the outlook for corn supplies appeared upbeat after the Agriculture Department said end-season stockpiles would be higher than traders estimated as ranchers use more wheat in livestock rations.

In its regular review of global fundamentals, USDA cut its forecast of the crop in the tow giants for the fourth month in a row. It lowered the Brazil crop by 3.6% from March's estimate and Argentina's by 3%.

Since December, USDA has cut its projection of Brazil's crop by 12% and Argentina's by 13%.

Chicago Board of Trade soybean futures gained 0.6% to $14.39 per bushel, within 20 cents of their 2011 peak. Corn futures, which drove most of last year's early surge in food prices, dipped 0.3%, while wheat was unchanged.

“...Warm temperatures and a lack of rainfall since late February in the Brazilian southern state of Rio Grande do Sul further reduced yield and production prospects,” said USDA. “Argentina and Paraguay soybean production estimate also are further reduced this month, reflecting the damaging effects of this year's drought”.

Brazil likewise issued a forecast on Tuesday, estimating the crop at 65.6 million metric tons, down 3.2 million tons from its March forecast. The Agriculture Ministry estimated exports at 31.2 million tons, down from 32.4 million tons in 2010/11. Brazil is the world's largest soybean exporter.

US soybean exports would gain slightly because of the smaller crops in South America, said USDA. It forecast overseas sales of 1.29 billion bushels, up 1% from the March forecast and far below 1.5 billion bushels in the previous marketing year. Farm-gate prices for U.S. soybeans would be the highest ever, discouraging some buyers.

Soybean production around the world was forecast for 240 million tons, down 2% from a month ago mainly due to drought losses in South America. The global stockpile would be drawn down by 20% throughout 2011/12 marketing year.