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Fears of delayed soybean planting in Brazil on dry weather forecast: sources

New Delhi — As the Brazilian soybean planting season gets underway this week, there is forecast for dry weather during the coming weeks in the prime soy producing region of southern Brazil, such as Mato Grosso, according to a report published last week by the Instituto Nacional de Meteorologia, or Inmet.

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Soybean planting requires rain to retain soil moisture for crop development and a dry weather may force farmers to delay the sowing process by a couple of weeks, analysts and trade sources said.

Delayed planting could reduce soybean yield and thus lower the total soy production estimates for 2019-20 crop year ending August 31, 2020, the sources said.

According to the US Department of Agriculture, Brazilian soybean production in 2019-20 is projected at 123 million mt, up 5% year on year, assuming a normal weather.

The output may be revised downward if the forecast dry weather impacts Brazil's primary soy producing regions, such as Mato Grosso and Parana, unless above-normal rainfall is observed in the coming months, a trading source said.

If the US-China trade dispute continues, any downward revision in the total soy output estimates may push Brazilian bean prices upward, another trading source said.

Ever since the US-China trade dispute started last year, the Asian giant has looked to Brazil to replenish its huge soybean demand, as per data from Chinese Customs.

Any decrease in Brazilian soy harvest could also put additional pressure on China's domestic soy crushers, who are buying expensive South American beans, as the Chinese government has levied 33% import tariff on US-origin beans.

As the trade spat lingers on, Brazilian soybean has been selling at an average premium of $15/mt over US beans in 2019, S&P Global Platts data showed.

According to Platts assessments, the average monthly loading price for SOYBEX FOB Santos and SOYBEX FOB Paranagua since January 2019 have been assessed at $355.96/mt and $355.34/mt, respectively, while the average monthly loading price for SOYBEX FOB New Orleans soybeans was assessed at $340.49/mt during the same period.

Late last year, Mato Grosso and the neighboring states were hit by a severe drought that reduced total Brazilian soybean output estimates by as much as 10 million mt for 2018-19 crop year, before heavy rains in January restored production levels to some extent.

Inmet has forecast moderate rainfall in southern Brazil in October, which might accelerate the soybean planting process in the region, sources said.

-- Asim Anand, aanand@spglobal.com

-- Edited by Manish Parashar, newsdesk@spglobal.com