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April 12, 2016

Conab April Report - Soybean Production Lower, Corn Higher

Brazilian soybean production lowered 2.19 million tons - In Conab's April Crop Report, they lowered the 2015/16 Brazilian soybean estimate 2.19 million tons from 101.17 million tons to 98.98 million tons. The soybean acreage was little changed from last month, therefore the bulk of the reduction was the result of lower yields. Conab now estimates the Brazilian soybean yield at 2,988 kg/ha (43.3 bu/ac), which is down from last month's estimate of 3,043 kg/ha (44.1 bu/ac).

The biggest yield reductions occurred in northeastern Brazil where the yields this month are 12% to 20% lower than last month. They also reduced the yields in Parana (-3.7%) compared to last month and they reduced the yield in Mato Grosso do Sul (-2.8%). They left the soybean yield unchanged in Mato Grosso which is in contrast to the Mato Grosso Institute of Agricultural Economics (Imea) that has been lowering their yield estimate on a weekly basis for the last seven weeks. The only state where Conab increased the yield from last month was Rio Grande do Sul which increased 2.1%.

I agree with their lower assessment of the Brazilian soybean crop and I think they might lower it even more in future reports. The yield reports out of northeastern Brazil are probably going to get worse and I am also concerned about the harvest in Rio Grande do Sul. The frontal systems have been stalling out over southern Brazil resulting in very heavy repetitive rains just at the time the farmers are trying to harvest their soybeans. If this pattern persists, it could result in poorer quality seed and potentially lower yields.

Safrinha soybeans in Rio Grande do Sul after corn - Conab referenced an unusual development in Rio Grande do Sul. For the second year in a row, farmers in the state have planted a second crop of soybeans after harvesting their first crop of corn. Farmers planted early maturing corn hybrids in late July or early August and harvested the corn for either silage or grain in December or January. As soon as the corn was harvested, they quickly planted a second crop of soybeans. Conab estimated that this safrinha soybean crop increased the total soybean acreage in the state by 0.5% to 1.0%. This is very interesting because it is the opposite of the cropping sequence in central Brazil where a second crop of corn follows the first crop of soybeans.

Brazilian corn production increased 1.34 million tons - Conab increased the Brazilian corn estimate by 1.34 million tons from 83.51 million tons to 84.65 million tons. The big change in corn production came from the safrinha corn crop that increased 1.85 million tons from 55.28 to 57.13 million tons. The safrinha corn yield was increased 1.2 bu/ac while the safrinha corn acreage surged 182,000 hectares compared to March. In March, Conab estimated that the safrinha corn acreage increased 1.8% compared to last year and now they estimate that it increased 3.7% compared to last year. I thought they were too low in their safrinha acreage last month and now I think they are more in line with other estimates.

Where I disagree with Conab is the safrinha corn yields. They estimate the Mato Grosso safrinha corn yields down 1.5% compared to last year, but they have the safrinha corn yields in Parana up 0.7%, Goias up 2.6%, Mato Grosso do Sul up 4.7%, and Brazil in general up 0.9% compared to last year.

The weather during much of March was favorable for safrinha corn development, but the weather has definitely taken a turn for the worst over the last several weeks. A blocking high pressure in eastern Brazil has prevented cold fronts from moving into central Brazil resulting in hot and dry conditions. The forecast is calling for more of the same conditions at least for the next 1-2 weeks. In Rio Verde for example in southern Goias, the forecast for the next 10 days is for temperatures in the range of 90° to 95° F (32° to 35° C) with very little chance of rain.

This is bad news for the later planted safrinha corn crop that will be pollinating and starting to fill grain during April. Even if scattered showers return to central Brazil toward the end of April, it is possible that significant damage to the safrinha corn crop will have already occurred. Therefore, I feel Conab's estimate of the safrinha corn crop is overly optimistic and that it will likely decline in subsequent reports.