Brazil expects grain output to recover amid good weather

Brazil recently forecast that grain production would reach record levels in the new 2016/17 season due to favorable weather which would replenish corn stocks and help the country to rein in stubbornly high inflation.

In its first projections for the new grain season, Brazil’s agricultural statistics agency Conab said soy output could rise to 104 million tonnes from a drought-hit previous crop of 95.4 million. Brazil is the world’s largest soy exporter.

Conab forecast that Brazil’s 2016/17 corn crop will reach between 82.3 million and 83.8 million tonnes, sharply higher than 66.7 million tonnes last season, when local prices skyrocketed, increasing costs for poultry and pork processors.

Some key grain-producing regions in Brazil were affected by a prolonged drought this year, with the center-west state of Mato Grosso seeing heavy losses for the second corn crop.

As a result, Brazilian corn consumers had to resort to imports, mostly from Argentina. Brazilian corn prices hit a record high in June, around 57 reais per bag in the benchmark Mogiana region in Sao Paulo.

They have since slipped back to around 40 reais but remain above historical levels.

Brazil’s Agricultural Policy Secretary Neri Geller said to reporters after the release of Conab’s estimates that the government works with an outlook for favorable weather, expecting excellent production for the new crop.

“As soon as the first crop enters the market, prices will fall a lot. That would have a significant impact on inflation,” said Geller.

Besides export-oriented grains such as soy and corn, Brazil also expects good production of important staples such as beans and rice, which were also hit by the drought earlier this year, causing discontent among poorer Brazilians.

“We have expectations for strong beans production,” said Geller.

Conab expects the second corn crop – which is planted right after soybeans are harvested – to reach 56.1 million tonnes in the new season, compared to 40.8 million tonnes the previous year.

The total grain crop is expected to range between 210.5 million tonnes and 214.8 million tonnes, versus 186.3 million tonnes in 2015/16.

Geller also said the country has comfortable stocks of corn at the moment, indicating imports of the cereal in the new crop should be limited.