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July 17, 2018

July WASDE Increases Brazil Soy Production, lowers Brazil Corn

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

The most notable change for WASDE's South America crop production estimates was for the crops in Brazil. The USDA lowered their estimate of the 2017/18 Brazilian corn crop 1.5 million tons to 83.5 million. Conab lowered their estimate 2.0 million tons to 83.0 million. They are both going in the right direction, and I am anticipating that they will lower their corn estimates a little more in subsequent reports.

In the July WASDE report, the 2017/18 Brazilian soybean production was increased 0.5 million tons to 119.5 million. Also of note is their estimate for the 2018/19 Brazilian soybean crop. WASDE is estimating the next soybean crop in Brazil at 120.5 million tons. I agree with their assessment for next growing season, but the next soybean crop in Brazil might actually be bigger than what they are estimating. In my June 12th report, I anticipated that Brazilian farmers would increase their soybean acreage 3-4-5%. A 3% increase in acreage, coupled with good weather, could produce a 123 million ton soybean crop in Brazil in 2018/19.

Brazilian farmers realize that they are "in the driver's seat" as far as soybean production is concerned. Domestic soybean prices have remained relatively firm in Brazil while U.S. soybean prices have collapsed. It appears that an El Nino is developing in the Pacific Ocean and an El Nino generally results in good weather during the Brazilian growing season.

With that said, not everything is optimistic in Brazil. If the higher freight rates remain in place, they will result in lower prices paid to farmers. Additionally, higher freight rates will drive up the cost of imported fertilizers and chemicals due to the higher transportation costs. A weaker Brazilian currency will also make imported fertilizers and chemicals more expensive. Therefore, Brazilian farmers are looking at a higher cost of production for their 2018/19 crops.

Looking ahead, with good weather in South America during the 2018/19 growing season, the South American soybean production in 2018/19 could be 22-25 million tons larger compared to 2017/18. Under the same good weather scenario, the South American corn production in 2018/19 could be 20-23 million tons larger compared to 2017/18.