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August 3, 2012

By Year's End Soy Stocks in Brazil Expected to be Extremely Low

Soybean stocks in Brazil are destined to be some of the lowest on record before the new crop becomes available early in 2013. Estimates are that only 500,000 tons of soybeans will be left in Brazil by the end of the year compared to the normal amount of 2.5 to 3.0 million tons. Many grain elevators in the countryside report that their silos are nearly empty and the remaining soybeans they do have are already spoken for.

The low stocks are the result of drought-lowered production in 2011/12 and the rapid pace of soybean exports in 2012. To complicate the problem even further is the fact that neighboring Argentina and Paraguay also had very disappointing soybean crops. There are reports that processors in Rio Grande do Sul have already imported soybeans from Argentina to keep their operations ongoing.

Many cooperatives report that they are only holding back enough soybeans to process into soybean meal to satisfy their members' needs for poultry and hog production. Independent poultry producers are already cutting back or are eliminating their production, at least temporarily, due to the high cost of soybean meal.

As a result of the lack of soybeans, many processors will shut down operations much earlier than normal this year. Generally, they shut down for annual maintenance during December and January, but this year many will close several months earlier than normal. By October, the amount of soybeans in the countryside is expected to be near zero.

As Brazil's soybean exports wind down, more pressure will be put on the newly harvested American crop to meet the world demand. American exporters should have a strong early start to the export season and it could be an extended export season depending on when the new crop gets planted in Brazil.

If the weather cooperates and there is sufficient moisture available for germination, farmers in Mato Grosso will start planting their 2012/13 soybean crop on September 15. These early planted soybeans would then be ready for harvest in early January. For every week that planting is delayed, the beginning of harvest would be pushed back as well.

The earliest harvested soybeans in Brazil usually go to processors who are will to pay a premium for the soybeans so they can get their crushing operations up and running. Since most of the processors will shut down earlier than normal this year, there will be an even greater incentive than normal for the processors to purchase all the early harvested soybeans in Brazil. Brazilian farmers will also have an incentive to plant as early as possible and to plant early maturing soybeans so they can capture those premiums.