July 7, 2011
Brazilian Producers More Cautious After USDA Report
Brazilian farmers may be rethinking their aggressive expansion plans for the 2011/12 growing season after the USDA indicated that there will be a larger planted acreage and greater grain stocks than what had been anticipated by the market. The USDA report in conjunction with interest rate hikes in China has convinced some farmers in Brazil to be more cautious in their expansion plans. This attitude could change of course if weather problems in the U.S. starts to lower production estimates.
The Mato Grosso Institute of Agricultural Economics (Imea) had estimated in early June that they anticipated farmers in the state would increase their soybean acreage by 3.5% during the 2011/12 growing season. If soybean prices would soften over the next few months, these expansion plans may not be met.
One thing that favors Brazilian corn producers is the fact that the domestic price of corn in Brazil has not fallen as much as the international price due to expected reductions in the safrinha corn production. The damage to the safrinha corn from the recent frosts and freezes in southern Brazil has not yet been fully assessed, but it is expected to be very significant. Some estimates put the losses in Parana at 35%. The cold weather in southern Brazil coupled with ongoing dry weather in Mato Grosso, is going to result in a much lower safrinha corn crop than what had been anticipated.
The strong domestic price of corn is already a major concern for livestock producers in southern Brazil who are have been operating under negative margins due to the high cost of feed. They have already petitioned the federal government for assistance before many of swine and poultry producers in southern Brazil go out of business.
In southern Brazil full season corn and soybeans compete for the same acreage, so if farmers in southern Brazil decide to plant more corn, it would take away some soybean acreage. Farmers in Brazil will start to finalize their 2011/12 planting intensions over the next two months and corn planning generally begins in southern Brazil during the month of September.