April 1, 2013

Brazilian Central Bank Expects Ag Sector to Grow 6% in 2013

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The Brazilian Central Bank is optimistic that the agricultural sector in Brazil will show healthy growth in 2013. According to a report issued late last week by the director of the Political Economic Division of the Central Bank, Carlos Hamilton Araujo, the agricultural sector in Brazil is expected to expand 6% in 2013 after contracting 2.3% in 2012. The problem in 2012 was a severe drought in southern Brazil that significantly reduced grain production in Brazil. The loses were partially offset by higher commodity prices resulting from a drought in the U.S. in 2012. The higher prices were a benefit for farmers, but it hurt the bottom line for Brazilian livestock producers.

The Central Bank expects the overall Brazilian economy to expand 3.1% in 2013 after expanding only 0.9% in 2012. The industrial sector is expected to expand 2.3% in 2013 after contracting 0.8% last year. The service sector is expected to expand 3.1% in 2013, which is 1.4% more than last year.

The industrial and the agricultural sectors were the two that suffered the most last year. Brazilian grain production is expected to set a new record high in 2012/13 after farmers expanded their soybean and corn acreage and the weather during the growing season has generally been favorable. The 2012/13 Brazilian soybean crop, which is already 70% harvested, is expected to set a new record and the corn crop has the potential to be a record as well if the weather is beneficial for the safrinha corn crop. For the industrial sector, Araujo expects the reduction in interest rates and taxes to show positive results in 2013.