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Touch and go for gains in grains: South American farmers have a lot to gain from the US drought, if only they can break free of the red tape that hinders them.

The worst drought in decades in the United States is opening up new opportunities for South American grain and bean producers, but farmers warn that the same erratic weather patterns hitting the north could unleash fury on their rid&. In addition, government meddling and poor infrastructure pose major challenges to their harvests.

This year, Brazil is widely expected to overcome the US as the world's top soybean producer with a record crop of 83.5 million tons, compared with 82.06 million ton output from American farmers. And President Dilma Rousseff has proudly proclaimed that the country is heading for a record harvest of grains and beans totaling 185 million tons.

"The severe climate conditions that struck the main US agricultural belt last year have played a major role in South American farmers' decision on what to sow in 2013 and coming years," Thiago Masson, trade coordinator for Brazil's farmers' association, told Latin Trade.

But in Brazil the 10.4 percent growth in the area planted with soybeans comes at the expense of other products. The area planted with wheat is declining by 12.5 percent and with cotton by 29.9 percent. Corn remains essentially unchanged, Masson said.

On the other hand, in neighboring Argentina, the world's number three soybean supplier, earlier hopes for an unprecedented 57 million ton output, just at a time of solid global prices due to climate conditions in the US, are now fading for lack of rain. Consequently, the Buenos Aires Grain Exchange is revising down its forecast to a more modest 50 million tons.

"While we are still expecting good [grains and beans] harvests, there are areas where there's too much water, and others where there's too little," Daniel Pelegrina, deputy chairman of Argentina's leading farmers' association, told Latin Trade. "You have to be very cautious when making predictions."

Adding to Argentine farmers' problems, government meddling in the form of export quotas, export tariffs of up to 35 percent for soybeans, and foreign exchange restrictions make planters' lives difficult, Pelegrina said. Argentina is the world's number one supplier of soymeal and soy oil, while the bean and its derivatives are by far the country's largest money earners, though tensions are permanent in relations between the government and producers.

Number four soybean exporter Paraguay is aiming for a record 8.4 million ton crop, according to official figures. However, lack of rains and hot weather are posing a major threat to areas in the north that are yet to be harvested, farmers' leaders warn.

Comparatively tiny Uruguay, the world's sixth largest supplier, is also expecting an unprecedented soybean harvest--of 2.6 million tons--and is having areas with too much or too little rain as well, Eduardo Blasina, head of Blasina y Asociados agrifood consultants in Montevideo told Latin Trade.

As in Argentina, soybeans are now Uruguay's top export item, having overcome beef for the first time. Also as in Argentina, Uruguay's farmers have other problems not attributable to Mother Nature. Lack of proper roads and railroads and the government's sluggishness in dredging rivers, combined with high fuel-import bills, are pushing up costs and giving Uruguayan producers major headaches, Blasina said. "Ships can load up only to 70 or 80 percent capacity for lack of dredging. They don't have these kinds of problems in the United States," he added.

David Haskel reported form Buenos Aires.
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Comment:Touch and go for gains in grains: South American farmers have a lot to gain from the US drought, if only they can break free of the red tape that hinders them.(INDUSTRY REFORT: COMMODITIES)
Author:Haskel, David
Publication:Latin Trade
Geographic Code:3ARGE
Date:Mar 1, 2013
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