Heavy Rains Devastate Brazil's Soybean Harvest, Threatening Global Supply

Brazil's major soy-producing state of Rio Grande do Sul is struggling to cope with the devastating impact of heavy rains, floods, and landslides that have submerged farmlands and threatened the country's soybean output. The torrential rains, which began on April 29, 2023, are expected to continue in the coming days, exacerbating the already dire situation. Losses in soybean productionin the state are estimated to reach between 1 million and 2 million tonnes.

Why this matters: The disruption to Brazil's soybean harvest has significant implications for the global food supply, as Brazil is a major player in the global soybean market. This could lead to price increases and shortages, affecting consumers and industries worldwide.

Rio Grande do Sul, Brazil's southernmost state, accounts for a significant portion of the country's soybean production. The heavy rains have disrupted harvesting, with about 25% of soy fields remaining unharvested. Entire cities are underwater, and grain fields in lower areas are flooded. The devastation has led to varying estimates of the potential impact on soybean production.

Leandro da Silva, a grains unit manager at farm cooperative Cotrisal, estimates that production in Rio Grande do Sul could be slashed to between 19 million and 20 million metric tons. Seasoned broker Adelson Gasparin projects potential losses of 2.8 million tonnes to the state's soy crop. Luiz Roque, an analyst with consultant Safras & Mercado, sees 4-5 million tons of Rio Grande do Sul soy production "at risk".

Current projections from national crop agency Conab put Rio Grande do Sul's soy output at 21.89 million tons, while state crop agency Emater projects output at 22.25 million tons. However, these figures are likely to be revised downward in light of the ongoing heavy rains and flooding. Conab is set to revise national grains projections on May 14, 2023.

The disruption to harvesting has been significant, with 76% of the planted area already reaped in northern areas of the state, while in southern areas, about 40% of the soy crop remains to be harvested. The heavy rainfalls have not only impacted agriculture but have also claimed at least 31 lives, left dozens missing, and destroyed logistics and power infrastructure.

The flooding in Rio Grande do Sul has led to a surge in soybean prices, with the July soybean contract on the Chicago Board of Trade rising 29 cents to $11.99-1/4 a bushel. Adriano Gomes, a grains analyst at consultancy AgRural, noted that "these very voluminous rains, with no sunny breaks to harvest (grains), always end up causing quality losses." Don Roose, president of U.S. Commodities, added, "It's the time of year where we talk about rain makes grain, but also rain makes mud."

The situation in Brazil has also shifted attention back to Black Sea supply risks, particularly in southern Russia and Ukraine. Drier weather forecasts for grain areas in southern Russia and Moscow's latest strike on Ukraine's port city of Odesa have contributed to the soybean rally. In contrast, wheat prices have fallen slightly following forecasts of little rain in southern Russia and parts of top U.S. wheat state Kansas. wheat state Kansas.

Heavy rains continue to batter Rio Grande do Sul, and the full extent of the damage to soybean crops and the impact on Brazil's national output remains uncertain. The coming days will be pivotal in determining the fate of the remaining unharvested fields and the overall losses incurred. Brazil, a major player in the global soybean market, is struggling to cope with this natural disaster and its far-reaching consequences for the world's food supply.

Key Takeaways

• Heavy rains and floods in Rio Grande do Sul, Brazil, threaten soybean output.
• Losses estimated at 1-2 million tonnes, impacting global food supply.
• Brazil is a major player in the global soybean market, making this a significant issue.
• Soybean prices surge, with July contract rising 29 cents to $11.99-1/4 a bushel.
• Full extent of damage uncertain, with coming days crucial for remaining unharvested fields.