Brazil rains cloud national soy outlook as big farm state submerges

FILE PHOTO: People walk on a roof in a flooded area next to the Taquari River during heavy rains in Encantado, Rio Grande do Sul state, Brazil, May 2, 2024. REUTERS/Diego Vara/File Photo

By Ana Mano and Roberto Samora

SAO PAULO (Reuters) -The outlook for the soybean harvest in Rio Grande do Sul, which was on track to become the second largest producer in Brazil behind Mato Grosso state, is deteriorating swiftly after torrential rains flooded fields, with about a quarter of beans to be reaped.

The impact of the downpours, which left entire cities and farms underwater, could cause a drop in production of up to 15% in the state, Leandro da Silva, a manager at farm cooperative Cotrisal, said on Friday. He now sees output at between 19 million metric tons and 20 million metric tons.

FILE PHOTO: A drone view shows houses in the flooded area next to the Taquari River during heavy rains in the city of Encantado in Rio Grande do Sul, Brazil, May 1, 2024. REUTERS/Diego Vara/File Photo

Potential losses in Rio Grande do Sul bolstered soy futures in Chicago as they could reduce overall output in Brazil, the world’s largest soybean producer and exporter.

“There will be quantitative and qualitative losses,” Silva said by telephone from Sarandi, in the northwest of the state. “For me, what remains to be harvested will be 30% to 40% damaged (on average). In the most affected areas, you will have 70% to 80% of beans damaged.”

Before the heavy rains, national crop agency Conab had Rio Grande do Sul soy output at 21.89 million tons and state crop agency Emater had it at 22.25 million.

“It’s too early to talk about numbers but, yes, we are going to cut a part of Rio Grande do Sul’s production estimate,” said analyst Luiz Roque at Safras & Mercado.

“It will depend on what you can save from the affected crops, but there is the possibility of reducing the Brazilian harvest projection due to the problems in Rio Grande do Sul.”

Emater did not change its production forecast in a weekly report released on Thursday, but noted rains were disrupting harvesting of soybeans in Rio Grande do Sul, which still has 24% of the soy area to be reaped.

Conab will revise national projections on May 14. Its April soy output forecast for Brazil production in the 2023/24 cycle is 146.5 million tons, 5.2% lower than in the previous season because a drought in top grower Mato Grosso state slashed output there.

Analysts estimate up to 40% of the center and south soy areas of the state remain to be harvested, and about 10% in the north, making it difficult to estimate yields and losses at the moment.

They said around 5 million tons of soybeans are likely “at risk” due to rains and flooding, but suggested that final losses could be lower at around 1 million to 2 million tons.

Broker Adelson Gasparin, based in Passo Fundo, initially projected potential damage to 2.8 million tons of soy, but that can change as yield loss will vary in the different affected regions.

The heavy rainfalls slated to continue through the weekend have killed at least 37 people, left dozens missing or dislodged and destroyed logistics and power infrastructure.

Some fields remain entirely underwater, according to farmers, who circulated videos showing damaged crops and submerged farm equipment.

“The market will soon discover that the Brazilian harvest is far from 155 million tons” estimated by the U.S. Department of Agriculture, according to analyst Fernando Muraro at AgRural.

Muraro said everyone was bullish on Brazil because of Rio Grande do Sul, but cuts to national soy production are likely after recent climate events.

“Now, we will have to reduce the crop forecast again,” Murado said. “Just by how much we still don’t know.”

(Reporting by Ana Mano and Roberto Samora; additional reporting by Eduardo Simões; Editing by Frances Kerry, Jonathan Oatis and Bill Berkrot)