Crop failure concerns growing in Brazil

It is mid-March and you, American farmer, are getting ready to start planting the 2014-15 crop. Here in Brazil, we are already concerned about the size of the soybean area that will be planted up there, since the U.S. is expected to boost the acreage to a historically high level this year. But our main concern, for now, is still our own crop failure — a crop failure that you, who take some time once every two weeks to read this column, have known about since mid-January, when a heat wave and very dry conditions were already damaging some of our fields.

Just very recently, however, the Brazilian crop agency Conab, the USDA and most of the private consulting firms admitted that our soybean crop is smaller than 90 million tons (3.307 billion bushels). On March 10, the USDA reduced its forecast from 90 million tons to 88.5 million (3.252 billion bushels) — still a very large crop. Conab, for its turn, released a new estimate on March 12, cutting its number from 90 million tons to 85.4 million (3.138 billion bushels), compared to last year’s 81.5 million tons (2.995 billion bushels).

On March 7, AgRural had already cut its forecast to 86 million tons (3.160 billion bushels), after reducing its number to 88.8 million tons in January and 87 million tons in February. Although weather conditions have been much more favorable in March, further cuts might be done in early April, since many fields are still filling pods in Rio Grande do Sul (the southernmost state in Brazil) and in the country’s Northeast. By March 14, 59% of the Brazilian soybean area was harvested, according to AgRural.

An interesting thing is that many Brazilian farmers who were lucky enough to escape the heat and the drought are making more profits due to the crop failure. Even with more than half of the crop already harvested, domestic cash market prices are moving up, helped by the strong nearby contracts in Chicago and the weaker Brazilian “real” against the dollar. Also, last month the soybean exports hit a new record high for February, when ports shipped 2.8 million tons (102 million bushels).

A new record is expected in March, since 2.7 million tons (99 million bushels) were already shipped in the first two weeks of the month. Except for a sharp increase in road freight rates, logistical problems such as long lines of trucks and shipment cancellations have not been seen so far. We cannot forget, however, that the Brazilian soybean exports peak only in May, when total shipments can reach 8 million tons (294 million bushels) — too much for our fragile infrastructure.

The heat and the drought in the first two months of the year also resulted in higher domestic prices for corn. In February, Brazilian farmers sold 15% of their summer corn production, which is forecasted by AgRural at 28.9 million tons (1.138 billion bushels, compared to last year’s 34.6 million tons, or 1.362 billion bushels). A third of the corn area was harvested by March 13. At the same date, 90% of the second crop (“safrinha”) was planted. Due to excessive rainfall in late February, about 10% of the acreage in central Brazil was planted after the ideal window. This might result in lower yields, since the areas planted later will pollinate in early May, when the region’s dry season begins.

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