It's well known that Brazil is growing more soybeans and, in turn, exporting more and more of the beans, meal and oil it produces. What you may not realize is that it is cozying up to your number one customer, the European Union (EU). Here's what's happening:
Since last January, the value of the Brazilian currency, the real, has fallen by around 60% against the dollar, which has made Brazilian ag exports more attractive. In fact, total Brazilian ag exports for the year ending Sept. 30 are up 11% over the previous twelve months.
As of this writing, Brazil's ag ministry says soybean planting intentions are up anywhere from 10 to 13%, or between 15.1 and 15.5 million hectares. In short, despite the lowest currency rate since 1973, the ministry is expecting a record soybean crop from Brazil this year.
In addition, for each of the past several years, Brazil's Agriculture Minister, Marcos Vinícius Pratini de Moraes, has talked about his country's goal of producing 100 million metric tons of “grains,” including soybeans. It has never quite managed to hit the target. But this year, ag ministry officials say that the 2001/2002 harvest will produce between 97.7 million and 100.3 million metric tons. The estimate is based on government investigation covering seed, equipment and fertilizer purchases, as well as bank applications for farm credit.
Meanwhile, EU representatives have been doing all they can to warm up to members of the Mercosul Trade Bloc, which includes soybean producers in Brazil and Argentina. British Prime Minister Tony Blair visited Brazil this past fall during the debates in the U.S. House over the Farm Bill. Blair admitted that the EU needed to reduce ag subsidies, which have long been a thorn in the side of Brazilians wanting to export more soy, pork, beef and other goods to Europe. Currently, Brazil exports about $16.5 billion in ag products to the EU, and it is believed that a bilateral trade deal could increase that amount.
EU Agriculture Commissioner Franz Fischler traveled through Brazil and Argentina recently, working toward an EU-Mercosul deal. At the same time, Fischler was determined not to allow Brazilian complaints about its whopping farm subsidies get in the way of any free trade deal that could be negotiated between Europe and the Southern Cone. “Free trade agreements,” he says, “have never included talks on domestic agricultural support and subsidies.”
Representatives from both Europe and South America are working hard to close a free trade deal before any U.S.-led free trade area of the Americas is put into place. Inking such a deal, depending on how it is drawn, could provide an added advantage to Brazilian exports of soy.