Oil World has, for a second time in two weeks, reduced its hopes for Argentina soybean crop, warning that, thanks to dry weather, it could be on course for a fall of more than 20%.
The highly regarded analysis group, which last week cut its forecast for the crop by 1.5m tonnes to 50.5m tonnes, said there was a "high risk" that the crop harvested early next year "will plummet to only 43m-48m tonnes".
The tentative revision depended on weather, which has turned worryingly dry in Argentina, the world's third-ranked soybean producer and exporter ?and in a period of the La Nina weather pattern, which has a history of denying the country adequate rainfall.
"Soybean crop prospects have deteriorated noticeably of late," Oil World said.
"Only light, but grossly insufficient, rainfall was received in the week ended December 16, and the severe temperatures caused severe stress to recently-planted summer crops."
Drought two years ago prompted a collapse in the harvest to some 32m tonnes, with better conditions in 2009-10 seeing production rebound to 54.4m tonnes.
'Prices to appreciate'
The Hamburg-based group said that Argentina's woes could lift prices across the oilseeds complex, which has already witnessed strong rises in the second half of 2010.
Chicago soybeans have risen by nearly 40%, with Paris rapeseed for February hitting a two-year high of E486.00 a tonne on Tuesday, up 48% since the end of June.
"Unless a clear turnaround to the better occurs in the key Argentine soybean growing areas, prices of oilseeds and products are set to appreciate," Oil World said.
The forecast came despite evidence of a drop-off in demand from China, the top soybean importer, amid reports that Beijing's measures to keep food prices low were squeezing crushers' margins.
"Following record shipments from the US, Argentina and Brazil to China in September-to-November, considerably less is expected for December," Oil World said.
"Chinese soybean buying activity has slowed significantly and some buyers are trying to delay shipments of US soybeans due to the current large stocks in Chinese ports."
