Soaring world prices this year should continue to fuel breakneck growth in Brazil's soybean production, but a battle over how to regulate genetically modified crops may also hurt the nation's export business, industry analysts said.
Latin America's farming giant has quadrupled soy output since 1990, to an estimated 59 million tonnes this season.
"With Chicago soy futures above $6 a bushel, Brazilian production should continue to grow indefinitely," said Anderson Galvao Gomes, a soy specialist at grain analyst Celeres.
"World prices would have to fall to below $4.50 a bushel to stop expansion here," he added. The Chicago Board of Trade March 2004 soybean contract traded at $8.08 a bushel on Friday, near a 6-1/2-year high.
China's continuing record appetite for soy imports is one reason for the high prices.
Also, the first US case of mad cow disease on December 23 has buoyed hopes of increased demand for soybean meal, if meat and bone meal is banned from livestock feeds.
"It's hard to calculate the exact effect of mad cow on soy prices," soy analyst Flavio Franca at Safras e Mercado said. "But it appears to support soy prices and drive demand."
Brazil is set to become the world's No. 1 soy exporter in 2003/04, displacing the United States as leader, according to the US Department of Agriculture. Brazil should also pass its North American counterpart in total soy output within four years.
But analysts say Brazil's attempts to regulate its black market in genetically modified soybeans may stress the already taxed infrastructure through which Brazil's No. 1 farm export is shipped abroad.
Recently, after the federal government granted amnesty to farmers who already possess illegal genetically modified soybeans to plant and sell their crops, No. 2 soy growing state Parana passed a law banning such soy.
Parana Gov. Roberto Requiao said genetically modified soy was risky to human health and the environment and that the state could earn a premium abroad for soy that has not been genetically modified.
Analysts, however, say they know of no evidence that suggests Brazil would earn more for conventional soy.
Parana's rules complicate the outlook for Brazil as a reliable exporter. Parana is also home to Brazil's main grain port, Paranagua, through which much of Brazil's soy is shipped overseas. It, too, has banned the entrance of genetically modified soy.
"This is only going to worsen logistical problems in the short term," soy analyst Seneri Paludo at Agencia Rural said.
Even without screenings for illegal soy, which backed up hundreds of trucks along the state border a few months ago, the truck line-up leading to Paranagua last season grew to more than 100 kilometres (60 miles) during the peak of harvest.
"The other ports simply can't handle the extra volumes of soy required to make up for Paranagua. It could be chaos if the federal government or courts don't step in and override Parana's ban," Franca said.
Brazil's Supreme Federal Court on December 10 gave a new twist to the controversy by suspending Parana state's ban until it delivers a final ruling.
Another cloud over Brazil's soy sector might be disease.
In 2002/03 farmers lost 3 million tonnes of soy crop to a fungus called Asian soybean rust, according to the government crop research department, Embrapa.
Agronomists already have reported cases of rust in the center-west soy belt. But this year the disease should not take even close to the same toll.
"You simply won't see the same level of losses that you saw last year," said Jose Tadashi Yorinori, Embrapa's soy rust specialist.
"Everyone is prepared for rust this year. We lost so much last year because the producers were unprepared."
Many producers already have purchased fungicides in anticipation of soy rust.
Others said they were monitoring their fields closely and would apply agrochemicals when necessary.
"Rust is only a short- to medium-term problem," said soy specialist Carlos Cogo at Cogo Analysts.
"After 3 to 4 years, we should have resistant strains of soy seed that will allow us to further limit any losses to the disease".
Comments
Comments are closed.