Early Brazil Soy Crop Estimates
Early estimates of Brazil’s 2005-06 soybean crop generally range from 56.1-63.1 million metric tons, up from this year’s 50-51 million ton crop, even though some observers believe soybean acreage could be down. The USDA in its July world supply/demand update forecast Brazilian soybean production for 2005-06 at 62 million tons. The private analyst Celeres on Monday forecast Brazil’s next crop at a record 63.1 million tons on a sharp 20.7% jump in average yield and a 1.1% expansion of plantings. Celeres says in a weekly report that given favorable weather, yields should recover toward the historical level of 2.69 tons/hectare from the drought-reduced 2004-05 level of 2.23 tons. Celeres sees Brazil’s soybean plantings rising 1.1% to 23.4 million hectares in 2005-06. The biggest increases are forecast for the states of Mato Grosso, Parana and Bahia. But planting will fall sharply in No.3 soy producer Rio Grande do Sul, Celeres says. Last Thursday, private analysts FNP Consultoria forecast a 7% increase in Brazil's soybean crop to 56.1 million metric tons in 2005/06 despite a 1.6 million hectare drop in the planted area to 21 million ha. Brazil’s agriculture secretary, Roberto Rodriques last week projected 2005-06 soybean production at around 60 million metric tons, up from this year’s official crop size of 50.2 million tons. Rodrigues says farmers will plant more corn in place of cotton because of bullish price prospects. "Corn shouldn't replace soy," he says. "Given corn's favorable price scenario its area is likely to expand at the expense of cotton, which is in surplus this year." Commenting on a drop in sales of fertilizers and crop chemicals, Rodrigues says, "Perhaps the (grains) area has fallen but not very much. Fewer crop inputs could be due to producers' cash problems."
Most soybean analysts and trading firms believe Brazilian producers will stick with soybeans because soybeans give them access to more credit and are a more liquid commodity than alternative crops.
However, Blairo Maggi, governor of the Brazil’s leading soybean growing state of Mato Grosso has a much different view of Brazil’s soybean production situation. Maggi on Thursday that Brazilian soybean plantings may decrease by 20% next year, while purchases of fertilizer and other supplies may be cut in half because of a strengthening Brazilian currency.
A stronger Brazilian real has slashed the amount of local currency that producers have to pay debt, transport and labor.
The real, which has risen 32% against the dollar in the past year to a three-year high, needs to slide about 20% for farmers to make enough money to maintain production levels, says Maggi, whose family company has the world's largest collection of soybean farms.
Editors note: Richard Brock, The Corn and Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.
To see more market perspectives, visit Brock's Web site at www.brockreport.com.