August 7, 2012

Governor of Mato Grosso do Sul Requests Emergency Soy Imports

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Even as soybean stocks in Brazil continue to dwindle, exports of soybeans, soybean meal, and soybean oil continue at an accelerated pace. During the month of July, exports of soybeans and soybean meal were the highest since July of 2006. Soybean exports during July were 10.5% more than in July of 2011. Additionally, 1.54 million tons of soybean meal were exported during July, which was 30.5% more than last year. Only soybean oil registered a decline during the month with 152,000 tons exported, which was 6.5% less than last year.

Brazil is expected to essentially run out of soybeans within two months and that has many processors and livestock producers extremely worried. Brazilian processors usually shut down operations in November or December for annual maintenance, but this year many will cease operations two months earlier than normal.

The early end to soybean processing in Brazil has led the governor of the state of Mato Grosso do Sul to ask the federal government for help in importing 300,000 tons of soybeans into the state to avoid a shortage of soybean meal for the livestock industry in the state. The soybean meal shortage should start to appear within two months and the new crop harvest will not begin until January of next year at the earliest.

He is also asking for a very quick response from the federal government because the soybeans need to be imported within 30 days or the price of soybean meal in the state will skyrocket.

His request may be difficult if not impossible to achieve because all the other major producing countries in South America are also running out of soybeans. The most convenient source of imported soybeans would be from neighboring Paraguay, but the soybean production in Paraguay was even more impacted by last season's drought than it was in southern Brazil. Argentina is the second largest soybean producer in South America, but most of their supplies have already been contracted. There is a remote possibility that the needed soybeans could be obtained from Bolivia, but the cost of purchasing and transporting the soybeans from Bolivia to Mato Grosso do Sul would be extremely high.

The domestic prices of soybeans in Brazil continue to be at historic high levels. The average statewide price in Parana last week was R$ 81 per sack of 60 kilograms. This is down slightly from the peak of R$ 83 per sack a week earlier.