December 13, 2016
Brazil Crops Generally in Good Condition, Minor Pockets of Dryness
Brazil Soybeans - The weather last week in Brazil was generally OK with the exception of areas of dryness in southern Brazil and in northeastern Brazil. In Rio Grande do Sul the weather has generally been dryer than normal for most of November and early December. The soybeans in Rio Grande do Sul are 90% planted. The soybean planting will not be completed until later in January because they plant a small safrinha soybean crop in the northwestern region of the state after some of the full-season corn is harvested in late December or early January.
The soybeans in Rio Grande do Sul are still very small and in vegetative development, but Conab lowered their estimate for the soybean crop in the state by 2.2 bu/ac in their December report compared to November stating "The preoccupation now is the forecast for low precipitation for the second half of December and the first half of January."
The soybeans in southwestern Rio Grande do Sul are already feeling the impact of dry weather. In the municipality of Bage, which is located in southwestern Rio Grande do Sul, the soybeans were planted generally during the first week of November and there has been below normal rainfall since planting with temperatures above 30°C (86°F).
The forecast for the region and for most of southern Rio Grande do Sul is for hotter and dryer than normal weather this week with improved chances of rainfall next week. Farmers are very concerned that their soybean yields will be disappointing. This is not a big soybean producing region since most of the soybeans are grown in the northern half of the state.
The other area of dryness concern is northeastern Brazil. The weather was favorable in northeastern Brazil up until several weeks ago when it turned dryer and some areas have been two weeks without rain. The forecast is for some rainfall this week and then a dryer pattern is forecasted to return once again next week. There have been some reports of replanting in northeastern Brazil due to sub-par germination.
There are also pockets of relative dryness in northern Parana. In the municipality of Maringa, up until this past weekend, they have received only 1.8 inches or precipitation since November 1st and some of the soybeans have already lost some of their yield potential. Over the weekend, there were good rains across northern Parana registering 1-2 inches, so the soil moisture should be stabilized for the time being.
In contrast to the dryer pockets in southern and northeastern Brazil, the soybeans in the big state of Mato Grosso are expected to do very well this growing season due to favorable weather conditions. Conab is estimating that the soybean acreage in the state will increase 1% to 9.14 million hectares (22.5 million acres) and the crop is currently rated in good condition. They are anticipating a statewide soybean yield of 3,123 kg/ha (45.2 bu/ac), which would be 9.7% more than year's drought plagued crop. The total soybean production in the state is estimated at 28.8 million tons or a new record high.
The Mato Grosso Institute of Agricultural Economics (Imea) is more optimistic concerning the soybean crop in the state. Imea is estimating a slightly greater acreage (9.31 million hectares) and a higher yield (47.0 bu/ac) compared to Conab. As a result, Imea is estimating the Mato Grosso soybean crop at 30.4 million tons, which if achieved, would set a new record for the state surpassing the old record of 28.6 million tons set in 2014/15.
Brazil Corn - The full-season corn in southern Brazil is generally rated in good condition in spite of some dry pockets in Parana and Rio Grande do Sul. The earliest corn in southern Brazil will start to be harvested by the end of December.
Conab is estimating the full-season corn crop at 27.74 million tons (33% of Brazil's total corn crop) and they are estimating the safrinha corn crop at 56.07 million tons (66% of Brazil's total corn crop), so it will be the safrinha corn crop that will determine Brazil's 2016/17 corn production.
There is a lot of speculation concerning the safrinha corn acreage in Brazil. Conab will issue their first acreage estimate in their February Crop Report. The Mato Grosso Institute of Agricultural Economics (Imea) is estimating that the safrinha corn acreage in the state will increase 4.1%. I am estimating that the safrinha corn acreage in Brazil will increase 5% and the analysts with the highest Brazilian corn estimates (some are as high as 93 million tons) must be anticipating that the safrinha corn acreage will increase 15% or more.
We already know that the safrinha corn will be planted during the ideal window (if the weather during January does not get too wet), which should result in very good yield prospects. In fact, Conab is estimating that the nationwide safrinha corn yield will increase 37% compared to last year and that the safrinha corn yields in Mato Grosso will increase 42%. Imea is estimating that the safrinha corn yields in Mato Grosso will increase 30%.
The one thing that could derail this optimistic scenario concerning the safrinha corn crop is the price of corn. Domestic corn prices in Brazil have been declining for several months and they are expected to continue moving lower until they reach the export price of corn. Conab stated in their December report that they expect the corn price in northern Mato Grosso to fall to R$ 15.00 to R$ 17.00 per sack or $2.00 to $2.30 per bushel by June, which would be equivalent to the export price.
Brazilian farmers have forward contracted very little of their anticipated corn production and the price prospects going forward do not look good. If these price forecast turn out to be accurate, Brazilian farmers could still significantly increase their safrinha corn acreage, but they may end up cutting back on inputs to save costs, and that in turn, could impact the potential corn yields.