Asian rust to hit soybean overseas

The Asian soybean rust fungus is expected to hit the soybean crop overseas in the coming months. Luckily, it will not affect the Indian crop.

The US crop, to be harvested in November, has been affected and this is likely to lead to a drop in the global soybean crop for the crop year 2005-06 (July-June), traders warned.

"The US crop to be harvested in November 2005 is affected. High use of pesticides would be required, thereby increasing overall production costs. This is likely to impact the production figures also," said T Gnansekar, an independent commodity analyst.

The Asian rust fungus erodes the yield. Brazilian farmers have been fighting the fungus attack for over three years now and they have been spraying pesticides before initiating sowing.

Farmers in Brazil and Argentina have been facing a pesticides shortage besides rising cost of production for soybean. US farmers are better placed to absorb the shock but they will still face a loss of yield.

According to the US department of agriculture's Economic Research Service (ERS), the net economic losses from an outbreak of Asian rust in the US would range from $640 million to $1.3 billion in the first year.

Analysts feel that farmers holding around 1 million acres in the southern US may switch over from soybean to cotton to avoid the pest.

The exact extent of the loss of yield in the US will become clear by February 20005.

By March 2005, the crop from Brazil and Argentina, estimated at around 60-64 million bushels and 35-38 million bushels respectively, should arrive in the market.

"The extent of the Latin American crop affected, be it because of fungus or weather conditions, will affect the carryover stock," Miteshbhai Saiya, a Mumbai-based trader said.

China is a growing market for soybean and overall demand is good. At present, the domestic and overseas markets are in a bear phase, with soybean actually slipping last week on the Chicago Board of Trade.

Last week, the Buenos Aires-based consulting firm Agripac said in its forecast that a cut in Argentina's 2004-05 soybean crop by 1 million tonnes following dry weather appeared inevitable.

Soybean did better in the Indian market, with Indore's National Board of Trade witnessing February soyoil trades at Rs 357.10 per 10kg Saturday, up Rs 2.7 from Friday.

March soyoil futures rose to Rs 352.80 per 10kg.

Analysts and traders are expecting prices at CBOT to see a short term rise caused by the Asian rust attack or unwanted rains though the Latin American March 2005 harvest is likely to be large enough to bring down prices in the market in the short term.

However, the 2006 US crop is bound to be affected. "Thus, a long-term position would be better than a short-term one," Gnansekar said.

India's next soybean crop is not being threatened by the fungus, so a global soybean shortage may open up new opportunities for exporters.