Soybean output in parts of South America may be smaller than previously estimated because of dry weather, and delayed shipments from the region are reducing supplies in China, the world's biggest consumer, Oil World said.

Argentina's soybean harvest may be 49 million metric tons, less than the 50 million tons estimated two weeks ago, the Hamburg-based researcher said today in an e-mailed report. Paraguay may produce 7.8 million tons, below the previous forecast of 8.2 million tons. Output in Brazil, set to become the world's biggest exporter, may also be lower than previously expected, while remaining at a record level, Oil World said.

A drop in soybean stockpiles in China will accelerate through the first half of April as South American exports are delayed because of shipping bottlenecks in Brazil and reduced farmer selling in Argentina, according to the report. As of late January, Argentina farmers had only sold about 13 percent of the crop, a record low, Oil World said. Prices rose to a record last year on the Chicago Board of Trade after drought damaged crops in the U.S. and Chinese demand gained.

"We expect that Chinese soybean stocks will be down sharply from a year earlier at the end of July 2013," Oil World said. "It will be difficult to replenish stocks of imported soybeans because arrivals from South America will be hardly sufficient to cover Chinese crush requirements in May, June and July amid the sharply reduced exports from the U.S."

Farmer Sales
In Brazil, producers have sold about 60 percent of soybean crops, compared with 57 percent at the same time a year earlier, Oil World said. Trucking costs from Mato Grosso, the biggest growing region, are as much as 80 percent higher than a year earlier as rain muddied roads, diesel prices rose and new legislation required drivers to make more frequent rest stops.

A new highway connecting the Brazilian port city of Santos to northern Mato Grosso is set to open April 5, Oil World said. The route stretches from the Atlantic Ocean to the Pacific Ocean, traveling through Bolivia and Peru to northern Chile. The route from Mato Grosso to eastern China may be about 17,500 kilometers (10,900 miles), compared with 26,000 kilometers when shipped via the ports of Santos or Paranagua.

"The resulting reduction of transportation costs will increase profitability of soybean growing in central and northern Brazil and thus improves China's market access to Brazilian soybeans," Oil World said.