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September 15, 2015

Brazil's 2015/16 Production - Soybeans +3%, Corn Unchanged

Brazilian farmers will start planting their 2015/16 soybean crop starting Tuesday, September 15th, when the soybean-free period ends, provided that the soil moisture is sufficient to support germination and stand establishment. The first soybeans planted in Brazil are usually in central Mato Grosso and I expect that to be the case again this year.

In spite of the lower soybean prices internationally, Brazilian farmers are actually seeing an increase in the domestic soybean prices thanks to the stunning weakening of the Brazilian currency compared to the U.S. dollar. Late last week, the Brazilian real traded at 3.86 to the dollar which prompted the Brazilian Central Bank to announce that they will intervene on Tuesday (September 8) in an attempt to support the currency. The effort of the Central Bank may help temporarily, but most analysts feel the currency will continue to weaken due to the overall economic problems in the country. The Brazilian currency has devalued over 40% since the first of the year and approximately 70% over the past twelve months.

The improved domestic prices are encouraging to Brazilian farmers, but a weaker currency also increases their cost of production by making imported items such as fertilizers and chemicals more expensive. The cost of producing the next soybean and corn crops in Brazil is expected to increase approximately 15% to 20%. In spite of the increased cost of production, Brazilian farmers are generally feeling more optimistic toward the upcoming growing season and they are expected to increase their soybean acreage by 3-5%.

Mato Grosso - In their first assessment of the 2015/16 soybean crop in Mato Grosso, the Mato Grosso Institute of Agricultural Economics (Imea) estimates that farmers in the state will increase their soybean acreage by 2% to 9.2 million hectares (22.7 million acres). If you wonder why I spend so much time writing about the state of Mato Grosso, let's put that acreage estimate in perspective. If verified, that would be equal to the 2015 soybean acreage of Iowa, Illinois, and about half of Indiana combined! So, yes Mato Grosso is the bellwether state in Brazil.

Most of the expansion in soybean acreage will be the result of converting degraded pastures into row crop production with the remainder coming from the clearing of new land. This pasture conversion has been occurring for many years in Mato Grosso and it shows no signs of changing. Switching full-season corn to soybean production does not occur in Mato Grosso because virtually all the corn in the state is already planted as a second crop.

Parana - The State Secretary of Agriculture for the state of Parana (Seab), is estimating that the soybean acreage in the state will increase 2% for the 2015/16 growing season. That would equate to an increase of 116,000 hectares. There is very little "new land" to clear in the state, so the soybean expansion will be the result of switching full-season corn to soybeans as well as some pasture conversion to soybeans.

Seab is estimating that the full-season corn acreage in the state will decline by 19% to 440,000 hectares. In the 1980's the corn acreage in Parana had reached 2.6 million hectares, but it has steadily declined as farmers switch their corn production to the safrinha crop. Every hectare less of full-season corn will be an additional hectare of soybean production.

Rio Grande do Sul - In their first assessment of the 2015/16 growing season, Emater/RS (the Extension Service) is estimating that farmers in the state will increase their soybean acreage by 3.1% to 5.43 million hectares (13.4 million acres). If achieved, that would represent an increase of 165,000 hectares. Half of the increase would come from the switch of full-season corn to soybeans and half would come from the conversion of pastures or rice to soybeans.

The soybean expansion is occurring in areas of the state where soybeans are traditionally not grown and yields in these areas are generally lower during the first few years of cultivation. Therefore, soybean yields in 2015/16 are expected to be lower than the record high yields achieved in 2014/15. As a result, Emater is expecting that the 2015/16 soybean production in the state will decline 3.2% in 2015/16 to 15.2 million tons compared to the 15.7 million tons produced in 2014/15.

The corn acreage in the state is expected to decline 9.7% to 779,600 hectares with all the declining corn acreage being switched to soybean production. Emater/RS is estimating that the corn production in the state will decline 21% to 4.4 million tons due to the reduced acreage and lower yields compared to the record yields achieved last year.

Brazil 2015/16 Soybean Production - During the 2014/15 growing season, Conab estimated that Brazilian farmers planted 31.94 million hectares of soybeans with a total production of 96.2 million tons. For the 2015/16 growing season, I am going to estimate that Brazilian farmers will plant 33.0 million hectares (+1.06 million hectares or +3.3%) with a total production of 99.0 million tons (+2.8 million tons or +3%).

Brazil 2015/16 Corn Production - The total corn acreage in Brazil during the 2014/15 growing season was 15.7 million hectares with a production of 84.7 million tons. Approximately 65% of Brazil's 2014/15 corn crop was produced as safrinha corn.

For the 2015/16 growing season, Brazilian farmers will reduce their full-season corn acreage by shifting most of those acres to safrinha production or soybeans. There will also be more soybeans planted this upcoming growing season, which automatically offers the opportunity to plant more second crop corn. As a result, I am going to estimate that the 2015/16 corn acreage in Brazil will either hold even at 15.7 million hectares or increase slightly compared to last year. The 2015/16 Brazilian corn production will either hold even at 84.3 million tons or decrease slightly because of lower yields compared to the record high corn yields achieved last year.