June 20, 2011

Brazil Releases Agriculture and Livestock Plan for 2011/12

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

The Brazilian Agricultural and Livestock Plan of 2011/12 was released last Friday by the Brazilian president Dilma Rousseff. The plan calls for R$ 107.2 billion to be used to achieve eight objectives. The first and foremost objective is to increase total grain production in Brazil from 161.5 million tons in 2010/11 to 169.5 million tons in 2011/12 or an increase of 5%. The idea is to keep the domestic market supplied with ample stocks of grain in order to stabilize grain prices while still increasing agricultural exports, which account for about 40% of Brazil's total exports.

Soybeans are the main crop grown in Brazil and expectations are that the soybean acreage will increase approximately 3% in 2011/12. Strong corn prices are also expected to encourage farmers in southern Brazil to increase their full-season corn acreage as well. Livestock producers in southern Brazil have been clamoring for increased corn production in order to hold down their feed costs.

The second objective is to stimulate sustainable livestock production while at the same time reducing emissions of greenhouse gasses. Specific lines of credit have been established for ranchers under the Program for Low Carbon Agriculture (ABC) that is aimed at reducing greenhouse gas emissions from cattle ranching. This program was launched in July of 2010, but has gained little attention from producers. The program offers low interest loans (5.5% with 15 years to repay) for a variety of programs designed to increase food production while still safeguarding the environment.

For the first time, improved cattle production is one of the major objectives of these yearly plans. The government is allocating resources to renovate 1.5 million hectares of degraded pastures in order to increase the carrying capacity. Improvements in the cattle herd are also being targeted as a way to increase the productivity and beef production in Brazil.

Sugarcane and ethanol production are also being signaled out in the yearly plan. Lines of credit of up to R$ 1 million will be available for sugarcane producers to renovate and expand their sugarcane acreage. The objective is to avoid a repeat of ethanol shortages during the intra-harvest period (December to March) that resulted in spikes in ethanol prices during the last two intra-harvest periods.

Citrus growers should also be pleased because the plan lays out help in stabilizing orange prices. Orange growers have asked the government to establish programs to help avoid the wide oscillations in orange price that have occurred in recent years.

The last three main objectives of the plan are aimed at providing increased credit for small and medium producers in Brazil. As part of this program, the minimum prices have been increased for crops typically grown by small family farmers in Brazil. The hope is that by increasing the minimum prices, incomes for small family farmers can also be increased.