May 30, 2012

Brazilian Processors Scrambling for Soybean Supplies

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

With a much smaller soybean crop than anticipated at the start of the growing season and with soybean exports at a record pace, processors in Brazil are becoming more concerned about running out of soybeans to process later this year. As a result, processors are already trying to source additional soybeans from Paraguay, but with very limited success.

The problem in Paraguay is that their soybean crop was impacted by the dry weather even more so proportionally than in either Brazil or Argentina. The country lost approximately 4 million tons of potential production leaving only 4.5 million tons. As a result, Paraguay is only expected to export 3 million tons, which would be half of last year's exports. Merchants in Paraguay are indicating that soybean supplies are very tight and that nobody is selling.

The states of Parana and Rio Grande do Sul normally bring in 600,000 to 700,000 tons of soybeans to keep the processors operating until later in the year, but this year, they may have to bring in one million tons or more. Paraguay is normally the source for 70% to 80% of these additional soybeans with the remainder coming from Mato Grosso, but this year they may have to bring in additional supplies from Mato Grosso. They would prefer buying their soybeans from Paraguay because it's only a few hundred kilometers away and it's cheaper than bringing the soybeans all the way from Mato Grosso. It'Ms another example of how high transportation costs are one of the biggest problems in Brazil.

Rio Grande do Sul is already bringing in soybeans for processing and the total may end up being 500,000 tons, which is 200,000 more than during a year when the soybean yields are normal. It is very expensive to truck in soybeans from Mato Grosso and biodiesel producers in Rio Grande do Sul are looking for alternative sources of vegetable oils such as canola. They feel bringing in soybeans from Mato Grosso to make biodiesel would simply be too expensive.

Processors in southern Brazil have already slowed operations in an attempt to stretch very tight supplies, but even with these measures, they are going to have to bring in additional soybeans. The Cocamar Cooperative in Maringa, Parana estimates that soybean supplies may start to run out in the state by September and that new supplies will have to be brought in from Mato Grosso, but getting additional soybeans from Mato Grosso may not be easy.

According to export officials from the state Ministry of Agriculture, since the first of the year, Mato Grosso has exported 44% more soybeans than during the same period last year. Soybean producers in the state have already sold approximately 94% of their 2011/12 production, which is 11% more than last year at this time.