December 14, 2011

Conab Releases Pessimistic View of Brazilian Soybean Crop

In their December report released last Thursday, Conab estimated the Brazilian soybean crop at 71.3 million tons, which was a decline from last month and approximately 4 million tons less than last year's production. With this new estimate, Conab clearly now has the lowest estimate for the 2011/12 Brazilian soybean crop.

In their commentary, they emphasized their concern about the possibility that La Nina could result in a dryer than normal growing season especially in southern Brazil. As a result, they have already reduced their yield estimates for the soybean crop in the three most southern states, Rio Grande do Sul, Santa Catarina, and Parana. For Rio Grande do Sul, they are estimating that the yields will be 15% lower than last year (2,845 kg/ha or 41.2 bu/ac in 2010/11 vs. 2,400 kg/ha or 34.8 bu/ac in 2011/12). In both Parana and Santa Catarina, they are estimating that the yields will be 7.7% lower in 2011/12.

This seems to be an overly pessimistic assessment of the crop especially in light of what they commented to be a fast and good start to the growing season. The state of Rio Grande do Sul is expected to plant 17% of Brazil's soybeans in 2011/12 and soybean yields in the state are traditionally some of the lowest in Brazil, but I think it is too early to declare the crop a disappointment especially since they have not even finished planting the crop (96% of the state's soybeans were planted as of Friday vs. an average of 83%).

Nationwide, they expect the soybean acreage to increase 0.7% (169,000 hectares) to 24.35 million hectares and the nationwide yield to decline 6% to 2,928 kg/ha (42.4 bu/ac) vs. last year's yield of 3,115 kg/ha (45.1 bu/ac).

The growing season is still getting started and anything can happen weather wise in the next three months, but I am more optimistic than Conab about the yield prospects for the 2011/12 Brazilian soybean crop. On our recent trip to Brazil, we did not travel through the state of Rio Grande do Sul, but in the states where we did travel, I thought the vast majority of the soybeans appeared to be in good to very good condition.