October 28, 2011

Commodities Account for Nearly Half of Brazil's Exports

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

Due to higher volumes and increased prices, commodities now account for nearly half of all the exports from Brazil. According to the Foundation for Export Studies (Funcex), the export of iron ore, petroleum, soybeans (including meal and oil), sugar, and meats account for 47% of all of Brazil's exports. Iron ore alone accounts for 16% of Brazil's exports and the prices for iron ore have increased 54% since 2010. The prices for agricultural and livestock exports have increased 37% since last year. The majority of Brazil's agricultural and livestock exports are destined for Asian markets, especially China.

The increase in meat exports from Brazil over the last decade is of particular note. According to the USDA, in 2001 Brazil produced 6.56 million tons of poultry, which equated to 12.7% of the world's poultry production. That put Brazil in fourth place in 2001 after the United States (27% of the total), China at 18%, and the European Union at 13%.

In 2011, the USDA is projecting that Brazil will produce 16% of the world's poultry, which if achieved, would be an increase of 26% in Brazil's market share of world poultry production over the last ten years. That would put Brazil in third place behind only the U.S. and China, but the rate of growth of poultry production in Brazil would indicate that Brazil could surpass China within the next few years.

In 2011, Brazil is projected to produce 12.3 million tons of poultry which would equate to 98% that of China's production. In 2012, Brazil's poultry production is estimated to be 98.5% that of China. Since 2001, the annual increase in U.S. poultry production has averaged 1.5% per year. In China the increase has averaged 3.7% per year and in Brazil, it has averaged 6.8% per year. If these rates of increase continue, Brazil will surpass China within a few years and assume second place in poultry production.

While commodity exports from Brazil continue to increase, the chief economist for Funcex, Fernando Ribeiro, is concerned about the lack of breath of Brazil's exports. The economist point s out that half of Brazil's exports is concentrated into just five products and most of those products go to just one country, China. He feels this could leave Brazil vulnerable to price fluctuations and at the mercy of foreign economies.