The extended dry weather in the eastern Cerrado region of Matopiba and Mato Grosso prompted INTL FCStone, an international ag consultancy, to lower its Brazilian soybean crop view by 1 million metric tons (mmt) Thursday.
It now predicts a crop of 97.8 mmt (3.59 billion bushels), well down on initial expectations of a 100 mmt crop and at the lower end of the range of analyst forecasts.
Of main concern are the dry conditions in Matopiba, which stretches across Maranhao, Tocantins, Piaui and Bahia states, because normal rainfall levels for this region are already lower than other areas, said Natalia Orlovicin, market intelligence coordinator at INTL FCStone.
The damage caused by the lack of moisture in the vegetative phases of soybean development has already significantly reduced yield potential there, she explained.
INTL FCStone predicts the region will produce 10.3 mmt, slightly down on last year despite a substantial increase in planted area of about 7%.
This is the third year running that the region has suffered losses due to drought, which could lead some to rethink investments in this frontier region.
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The big story of the 2015-16 soybean crop has been the dry weather in Mato Grosso, the No. 1 producing state that accounts for about 30% of Brazil's crop.
Orlovicin said the lack of rain has significantly reduced yield potential of short-cycle beans planted early in September and October.
Abundant rainfall across the state since Christmas has helped stabilize many crops, but some losses are irreversible.
INTL FCStone pegs the state's crop at 27.3 mmt, slightly down on last year despite a 5% increase in area.
The losses in the northern portion of the state will cause problems for farmers who heavily forward-sold their crop.
The Mato Grosso Agricultural Economy Institute (IMEA) estimates the state's farmers have committed around 55% of their projected soybean crop, but many producers in the north have already sold 70% or more. With losses of 25% and more expected by some farmers in Sorriso and Sinop, big producing districts, they will be forced to renegotiate with trading companies.
In compensation, the conditions have been favorable for crops in southern Brazil.
The above-average rainfall has brought occasional problems, while the lack of sunshine hours and disease may clip yields on occasion. But, generally, the crops in the region are in good shape and production will overall likely be a record, said INTL FCStone.
INTL FCStone pegs first-crop corn output at 27.9 mmt (1.1 billion bushels), down from last year. Despite the delays to the soy crop caused by the late arrival of rains, the consultancy expects second-crop area to rise marginally on last year to 9.7 million hectares (24.1 million acres).
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