Brazil nears U.S. soybean crop size
Jul. 16, 2012
Weather, high international prices compounded by a favorable exchange rate, and a bumper Brazilian corn crop this year have generated widespread expectations for a record soybean harvest in 2013. That would come as a huge relief to local farmers who could only watch as a drought devastated their fields early this year.
Hopes have built in recent months as the water in the equatorial Pacific Ocean warmed, indicating a return of the El Nino climate phenomenon that tends to bring an early and evenly distributed rainy season to South America's grains belt.
"We're excited. I think El Nino will be confirmed and give us a lot of soy out there," said Roni Alessio, who grows soybeans and corn in Brazil's Mato Grosso do Sul state. "Many people have already pre-sold a good part of the crop."
Depending on when the rainy season begins, Brazilian farmers plant summer crops such as soybeans, corn and cotton between September and November. Earlier is better, as it allows growers to harvest during the first quarter and get their winter corn in the ground before Brazil's dry season sets in and frost poses a threat in southern states.
Farmers are all but certain to plant more soybeans this year than ever before, analysts said.
In the U.S., the world's leading soybean producer, a Midwest drought has withered expectations for the 2012-13 crop, sending Chicago soybean futures to an all-time high this week. The U.S. Department of Agriculture on Wednesday reduced its estimate for soybean production by 4.8%, to 83.01 million metric tons.
The drought has hit U.S. cornfields even harder, crushing hopes for a bumper crop and pushing corn prices up, as well.
"All the world is now turning its eyes to see what South American producers are going to plant," said Aedson Pereira, a grains analyst at Informa Economics FNP in Sao Paulo.
The answer, at least for Brazil, appears to be soybeans.
An outstanding winter corn crop this year should fatten Brazil's stocks of the grain and embolden farmers to cut back on corn in favor of soybeans during the main summer crop, analysts said. Brazil's corn yields have risen sharply in recent years as well-capitalized farmers adopted better fertilizers and seeds.
"Producers are going to reduce their corn acreage in the summer, invest a little more in technology and see if productivity compensates," Mr. Pereira said, noting that Brazil's corn yields have improved in recent years as farmers used better pesticides, fertilizers and seeds.
Driven by ever-rising global demand as well as a robust soymeal and soyoil industry, soybeans are perhaps Brazil's most-liquid cash crop, analysts said. China buys more than two-thirds of Brazil's soybean exports in a given year.
Informa Economics FNP estimated that Brazilian growers have fixed sales of their upcoming soybean crop about twice as quickly as last year. The firm estimated 34.5% of 2012-13 production has already been pre-sold with cooperatives and traders.
The Brazilian real, weakened by government intervention and market jitters about European debt, has made easily exportable soybeans even more attractive to local farmers. At BRL2.04 per dollar, the currency has sharply depreciated from year-ago levels of BRL1.58.
There has been little question that Brazil, with its warm, wet climate and vast expanses of undeveloped land, would eventually charge past the U.S. to become the world's soybean champion in addition to the No. 1 producer and exporter of commodities such as sugar, coffee and orange juice.
But that day may come sooner rather than later. Closely watched consultancy Agroconsult said Friday it expects Brazil's 2012-13 soybean production to rise 25% from the previous year to 83.1 million tonnes, barely eking out the U.S.'s drought-hampered crop as total acreage expands 11% and yields recover, thanks to El Nino.
"The 2012-13 crop has everything to be a year in which we finally surpass the U.S.," Agroconsult analyst Marcos Rubin said.
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