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December 22, 2010

Delayed Start to Soy Harvest in Brazil Could Have Repercussions

Due to the delayed arrival of the summer rains in Brazil, the planting of the 2010/11 Brazilian soybean crop was delayed as well. This delay in planting and harvesting the soybeans could result in ripple effects including:

A longer export window for U.S. soybeans - The first soybeans exported from Brazil are usually from the state of Mato Grosso, but if the harvest in the state starts three to four weeks later than last year, it is safe to say that exports from Brazil will also start several weeks later than last year as well. This delay could allow for some extra exports from the U.S.

Narrow harvest window in Brazil means more congestion - Even in good years, the Brazilian infrastructure is already taxed to the limit during the peak of the harvest and export seasons. The Brazilian harvest in early 2011 is going to be more concentrated than normal which raises the possibility that congestion at the grain elevators, rail terminals, and ports could be even worse than during a normal year. During the past year, there has not been any major upgrades at the main Brazilian ports which raises the possibility of lengthy lines of vessels at Brazilian ports in 2011. Generally, the infrastructure situation in Brazil is little improved compared to a year ago.

Increased risk of rains disrupting the soybean harvest - In recent years, farmers in Brazil have been planting more short cycle soybeans which are harvested early allowing time for the farmers to plant a second crop of corn, but these short cycle soybeans also help to spread out the harvest season. The longer harvest period lowers the risk that heavy rains might disrupt harvest activity. With a more concentrated harvest period in 2011, there is now a higher risk that heavy rains could impact a higher percentage of the soybeans than normal during harvest. Heavy rainfall during harvest can result in lower yields and poor seed quality.

Delayed start to safrinha corn planting - The delayed start to soybean planting also means that there will be a delayed start to safrinha corn planting as well. The ideal planting window for safrinha corn in Mato Grosso usually closes about the third week of February, but farmers may be forced to plant later than that this growing season. The delays could be even worse if heavy rains delay any of the soybean harvest. Estimates are that the safrinha corn acreage in Mato Grosso will decline by 10 to 35%. If the soybean harvest in the state proceeds without any major problems, then the decline might be on the lower end of the estimates. If heavy rains delay the soybean harvest in Mato Grosso, then the declines in the safrinha acreage will be on the upper end of the range.