Brazil Crop Acreage
South American farmers are poised to greatly increase their soybean production in 2009-10. South American soybean acreage is expected to expand more than two million hectares in 2009-10 (42.78 million hectares in 2008-09 vs. 44.93 million hectares in 2009-10) and yields are expected to return to more normal levels after the extremely dry growing season of 2008-09. For its part, Brazil is expected to plant 22.3 million hectares of soybeans (up 3.2% compared to 2008-09) and 13.5 million hectares of corn (down about 5% compared to 2008-09).
During the 2008-09 growing season Brazilian farmers planted 21.6 million hectares of soybeans, which ended up producing 57.5 million tons of soybeans. For the 2009-10 growing season, it is estimated that the Brazilian soybean acreage will increase 700,000 hectares to 22.3 million hectares, which represents an increase of 3.2%. The majority of the increase will come from switching out of full-season corn in southern Brazil into additional soybean acreage. There will probably be only limited expansion of soybean production into the new lands of central Brazil.
The total 2009-10 Brazilian soybean production is expected to be approximately 62.5 million tons, which would represent an increase of five million tons over last year or an increase of 8.6%. The nationwide soybean yield is projected at 2810 kg/ha (40.7 bu/ac), which is certainly higher than last year's drought affected crop (2629 kg/ha or 38.1 bu/ac), but slightly lower than the type of yields recorded during good growing seasons.
There are several reasons why the soybean yield might be slightly sub-par in 2009-10. First, the soybean acreage increase will come mostly from southern Brazil and while the yields in Parana are comparable to Mato Grosso, the yields in Rio Grande do Sul and Santa Catarina are generally lower than in Mato Grosso. The other reason why a slightly lower yield was chosen is due to the fact that Brazilian farmers will probably continue to be conservative in their fertilizer applications which would make it two years in a row of reduced fertilizer application, thus holding down the yield potential.
Domestic soybean prices are not that outstanding, but they are good enough to make some money growing soybeans in southern Brazil and they are certainly much better than the domestic corn prices. It would take a May 2010 CBOT price of US$ 10-11 to make a profit growing soybeans in central Mato Grosso, but in southern Brazil, it is much cheaper to grow soybeans due to the reduced cost of transportation and in Parana for example, farmers can make money growing soybeans with a May 2010 CBOT price of US$ 8-9. Therefore, nearly all the new soybean acreage in Brazil will be the result of switching out of full-season corn production into soybeans.
The Brazilian corn acreage is expected to fall 600,000 hectares to 13.5 million hectares. Nearly all the declines will occur in southern Brazil where depressed corn prices are pushing farmers to switch some of the full-season corn acres into additional soybean production. The total Brazilian corn production is estimated at 53.0 million tons, which would represent 3 million tons more than last year. The 2009-10 nationwide corn yield is estimated at 3,925 kg/ha or 60.5 bu/ac, which is an improvement over the drought reduced 2008-09 corn yield of 3,532 kg/ha or 54.4 bu/ac.
Sugarcane Expansion Continues In Brazil Unabated
A true success story in Brazil has been the development of the sugar and ethanol industries in Brazil. Brazil leads the world in the development and utilization of alternative fuels and there does not appear to be any end in site. Many people wonder if Brazil can expand their row crop production at the same time that they are expanding their sugarcane production as well.
The sugarcane industry in Brazil continues to expand at breakneck speeds. The Minister of Agriculture announced last week that 40 new sugar mills are expected to open in Brazil by 2010. Brazil already has 410 sugar mills in operation. Conab also announced that Brazil will produce 558 million tons of sugarcane during the 2008 harvest which represents an 11.4% increase over last year. Fifty seven percent of the sugarcane will go toward the production of 27 billion liters of alcohol (17.3% increase over last year) and 43% of the sugarcane will go toward the production of 32.8 million tons of sugar (4.5% increase over last year).
There are now 8.98 million hectares of sugarcane production in Brazil, but it is still small compared to other crops in Brazil. Of the 276 million hectares of cultivated land in Brazil, 72% is devoted to pastures, row crops occupy 15.5%, and only 3.2% is devoted to sugarcane production. The remaining 10% has permanent crops such as citrus, fruits, and coffee. Pasture occupies about two and a half times more land in Brazil than all the other crops combined.
The state of Sao Paulo is the leading producer of sugarcane and alcohol in Brazil. The state is expected to produce about 325 million tons of sugarcane in 2008, which represents 58% of the total Brazilian crop. The state of Parana is second in production with 47 million tons or 8% of the total. The remaining sugarcane production is spread throughout Brazil.
The high concentration of sugarcane production in Sao Paulo is raising concerns that the state is becoming to dependant on a single crop. Concerns are also being voiced about environmental problems that accompany sugarcane production, notably air pollution. When sugarcane fields are being prepared for manual harvest, the lower leaves on the plant are burned off to allow easier access for the cane cutters. This burring can create excessive smoke and air pollution. Municipalities in the state are already banning the burning of sugarcane fields which forces the producers to move to mechanical harvest which does not require burning. Mechanical harvesting raises it own concerns because mechanical harvesting requires much less labor, which increases unemployment in rural areas.
I saw the consequences of this burning myself the last time I was in Brazil. As we flew over the state of Sao Paulo I could see a half dozen fields of sugarcane burning at the same time. The result was a blue haze of smoke hanging over the state. During the dry season there are no frontal systems or rain showers to clean out the atmosphere so this haze might persists for several months causing a plethora of respiratory problems./p>
Another much bigger concern in Brazil is deforestation and the clearing of virgin land to increase crop production. Very little land is being cleared for sugarcane production, but as sugarcane takes over pastureland in southern Brazil, ranchers are increasingly moving to the southern edge of the Amazon where they can purchase land to expand their cattle operations. So as a consequence of increasing sugarcane production in Sao Paulo, land is being cleared in Mato Grosso and other states in central Brazil to increase cattle production. Therefore, in an indirect way, the expansion of sugarcane production in Brazil is putting increased pressures on land clearing in the Amazon region.
The Amazon rain forest occupies approximately half of the total Brazilian landmass, but outside of the Amazon Region, nearly all of Brazil is suitable for crop production or ranching. The tropical and semi-tropical climate allows for year-round crop production. Central Brazil has a distinct dry season, but if irrigation is available, the temperatures are warm enough during the dry season for row crop production. There are few physical constraints to expanded row crop production in Brazil. The true constraints may be economic, political, environmental, and the needed infrastructure for further expansion.