Will official agencies review Brazil’s crop projections again?

By Guil Signorini, Department of Horticulture and Crop Science, The Ohio State University

The grain season continues to unfold in Brazil. Since the publication of our December article in the South American Update, official agencies have opened their eyes to the challenging weather conditions faced by grain growers in Brazil. Early in the season, USDA and CONAB were overly ambitious, projecting Brazil’s soybean production at 163 million and 162 million metric tons, respectively. While some patriotic commentators shared praise through social media networks, others were skeptical about two straight record-high seasons.

In their most recent reviews, USDA lowered its projection by 1 million metric ton (MT), and CONAB reduced theirs to 160.2 million MTs. At this point in a season with so many uncertainties, any projection offered is an informed guess at best. Based on connections and personal conversations with growers from different regions in Brazil, I’ll take the chance and suggest that both official agencies will soon review their numbers again. The current soybean season is unlikely to overcome 160 million MTs as both USDA and CONAB are sustaining through their projections. My estimation is that Brazil’s soybean production will fall short of 159 million MTs this season.

But the dynamics in Brazil’s grain crops and the implications of severe weather conditions early in the season should be of interest to the savvy Ohio’s Country Journal reader. While the expected behavior would be replanting, considering that weather conditions are expected to improve, we hear reports of abandoned areas and growers opting out of soybeans for the season. Growers with the aptitude and farming capabilities to grow cotton in Mato Grosso are opting for this crop in areas that require replanting. While it is difficult to predict how many acres previously planned with soybeans will be converted into cotton fields, one can infer that the change will affect the amount of land available for safrinha corn (double-crop following soybeans under normal conditions). Abandoned areas follow a similar logic. While it is difficult to predict the extension, it is plausible to infer that abandoned areas will not be sowed with corn later in the season. Surprisingly, CONAB has not reviewed its acreage and production projections for the safrinha corn. Yet, CONAB has marginally decreased both area and production projections for corn, suggesting that the substitution effect (cotton sowing in areas previously planned to grow soybeans) does not offset the negative impact of weather conditions on the overall corn crop. These are some of the reasons why CONAB is likely to review future projections, especially for soybeans, when the numbers become clearer for the agency. If anything, the only projections left for the 2023/24 season with the potential to increase are cotton acreage and production.

Another important point of attention is the effect of the production reviews (or the lack of them) on spot and future prices. The USDA Crop Outlook reported cash prices for soybeans rallying over $13 per bushel in certain locations of the U.S., although the expected cash price for American farmers remains at $12.90 per bushel in December. January and March 2024 soybean futures are bear-trending, closing the December negotiations at $12.92 and $12.97 per bushel, respectively. It is worth noting that while current prices for January and March 2024 are below 2023 prices, they are above other prices in the last 5-years. Research agencies suggest that a mild soybean crop failure in Brazil may not be reflected in Chicago futures prices because export premiums are operating low currently. Nevertheless, USDA’s and CONAB’s inability to observe and report on weather-related challenges Brazilian farmers face due to El Niño this season is curious and blurs the analysis. It has not been an easy crop season in Brazil, especially in the Center-West region where approximately 45% of the soybean production takes place. Some rainfall has been predicted by INMET, the National Weather Institute, across Brazil in the last few days of the year, which will hopefully put growers’ concerns at ease. The most recent CONAB report with crop projections for the 2023/24 season was released on Jan. 9, 2024.

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