Analysis: Brazil

S American Soybean Production

Feb 4, 4:44 pm | Brazil, Soybeans, Argentina

The February WASDE report will prove to be one of the most anticipated reports in history. Along with updates on US grain stocks and 2018 crop production, the trade is anxious to see the USDA’s assessment of S American soy crop production and world trade. The December WASDE had estimated record large S American soybean production of 193 MMTs. But the outlook has changed since the last USDA estimates were compiled in early December. Based on heat/dryness through Dec/January, ARC has lowered estimate for the Brazilian soybean crop to 116 MMTs (USDA 122 MMTs). Argentine soybean production is seen recovering from last year’s drought; though, the extremely wet spring has likely trimmed yield potential. ARC estimates an Argentine crop of 53 MMTs versus the USDA’s 55 MMT estimate. Paraguay is expected to produce a crop near 9 MMTs, with other S America countries to harvest another 5 MMTs. Total South American production of 183 MMTs is 10 MMTs under the Dec WASDE estimate, but it is an 11 MMT increase over last year, the 2nd largest on record.

With a smaller S American crop size, exportable S American supplies will logically tighten. Assuming our crop estimates are correct, ARC forecasts exportable S American soybean supplies (total supply – domestic crush) at 156 MMTs – 10 MMTs under the Dec WASDE, but 3 MMTs more than a year ago. The chart plots the relationship between exportable S American soybean supplies, and actual exports. Assuming exportable supplies of 156 MMTs, AgResource estimates total S American soybean exports of 85-87 MMTs (Oct-Sep marketing year), versus 86 MMTs in 2017/18 and the Dec WASDE estimate of 94 MMTs for 2018/19.  

  However, S American exports and global trade estimates will remain a constantly shifting puzzle until a US/China trade deal is confirmed. The Feb WASDE will assume that China trade tariffs will stay in place to year end, but WASDE analysts will now need to adjust trade estimates to account for the 10 MMT’s of US soybeans that China has bought in the last 2 months.

World cash markets are not reflecting either a world soybean shortage or fears that the US/China trade war will continue into the summer. US and Brazilian soybeans on a fob basis have been trading near parity for the last several weeks at $.35-.40 over the CBOT, while Brazilian offers for Mar-May are quoted 18-30 cents over the US and are similar to where the spot market was a year ago – before the US/China trade conflict escalated.

   Current freight quotes indicate that the landed costs of Brazilian soybeans into China are about $.35-.40/bu cheaper than from the Gulf. Ultimately, we see the world soybean market as well supplied. S American crops no longer hold the potential that the USDA saw back in December, but the total S American crop will still be the one of the largest on record.

  US soybean stocks remain large, and the world will stay awash in soy, with Chinese demand slowing. This keeps our price outlook for soybeans bearish on rallies with seaonal lows due next summer.  


World Soymeal Consumption and Trade

Jan 29, 4:57 pm | Brazil, Soybeans, China, Argentina

While the CBOT Ag Trade has been intently focused on world soybean production and trade over the last 6-8 months, world soymeal demand has continued to expand. The chart reflects the USDA’s December estimates that called for total world soymeal demand to increase by nearly 10 MMTs in 2018/19. Chinese meal consumption is expected to rise by 2.2 MMTs (3%) this year, while the rest of the world consumption is seen increasing by 7.8 MMTs (5%). If correct, this will be the 10th consecutive year that world meal demand has increased!

  At this time, there is enough import and crush data available from China to justify lowering estimates for China. Feed demand appears reduced amid the African Swine Fever outbreak. But all indications from world trade look to be supporting the USDA’s forecast for higher meal consumption for other non-Chinese consumers.    




Argentine meal exports have been slow all season due to last year’s drought-reduced crop. However, meal production and export totals have recently improved as US soybeans have been imported and crushed. Oct-Dec meal exports of 5.8 MMTs were down 5% from last year and the slowest quarterly figure in 4 years.  

  Brazil was able to capture some of the lost Argentine export business, and quarterly exports of 3.8 MMTs were up 27% year over year – record large.

  Official US export data for November has been withheld, as has weekly data for the last half of December, due to gov’t shutdown. However, there was enough weekly export data released to estimate Nov and Dec exports. We estimate a quarterly US export total of 3.4 MMTs, which if confirmed would also be a record.

  We estimate combined US/BR/AR quarterly meal exports were up 37% year over year, at a record 4.6 MMTs. Note that this would be the 2nd consecutive year that the US was able to capture a larger share of the combined world meal trade.

The USDA has long held a forecast for increased world soymeal trade, which up until recently seemed somewhat optimistic. The December WASDE report estimated total world soymeal imports at a record large 62.5 MMTs – up 4% from last year. But with a full quarter of export data available from the principle soybean meal exporting countries, the USDA’s long-held 62+ MMT trade figure  appears to be reasonable.

  The US, Brazil, and Argentina, collectively account for 85-86% of total world soymeal trade. The chart plots the relationship between 1st quarter exports and annual world imports. USDA forecasts call for an increase in soymeal demand in every region of the world in the year ahead. The largest increase of 1.4 MMTs is forecast for South Asia, followed by a 1.3 MMT increase in N America. EU meal consumption is seen growing by 1.3 MMTs.

  US/world soy markets remain focused on the US/China trade. But world feed demand (outside of China) is expanding which will  support global soy crush rates.

CONAB January Crop Estimates

Jan 10, 4:49 pm | Brazil, Corn, Soybeans

Brazil’s national crop forecasting agency CONAB released their January crop report on Thursday, which lowered the agency’s estimate of the soybean crop to 118.8 MMTs, down from the Dec estimate of 120 MMTs. Most of the decline was due to a lower crop yield, but CONAB also made a rare cut to the total cropped area. As seen in the chart, CONAB estimated a total crop yield of 3,248 Kg/Ha or 49.4 BPA. If realized, the crop yield would be 1 BPA under last year’s record, but just above the 30-year trend forecast.

  CONAB estimated total soybean area at 35.8 Mil Ha, a 1% decline from the December estimate but still a 2% increase over last year. The lower yield more than offset the higher area, and total soybean production of 118.8 MMTs, is just under last year’s record of 119.3 and would still be the 2nd largest crop on record. However, weather over the next month is crucial for determining final soybean yields for much of the country. Unfortunately, the forecast remains drier and warmer than desired.   


A review of CONAB’s track record of forecasting crops in January does not offer much guidance for this year. In the last 12 years, CONAB has underestimated total soybean area every single year by an average of 1.2%. So lowering their estimate for total soybean area is a little surprising. In 7 of the last 12 years, CONAB has underestimated the total crop size by an average of 5.7%. Most recently, the 2018 estimate was too small by more than 7%, and in 2017 CONAB’s Jan crop forecast 9% too low. As is seen in the chart, differences between the Jan crop estimate and the actual crop size are very closely related to CONAB’s yield estimate. Their near trend yield estimate is reasonable for today, but if rains do not soon fall across key crop regions, crops will continue to roll back.




CONAB altered its Brazilian corn production estimate only fractionally, from 91.1 MMTS in Dec to 91.2 MMTs. First-crop corn area declined very slightly, while a very modest boost in the first-crop yield more than offset this. Safrinha production is expected to account for a record 70% of Brazil’s total production. This implies that weather in Mar-May heavily outweighs Dec-Jan weather in terms of importance.

However, we do expect a modest first-crop yield reduction in CONAB’s Feb report amid recent and upcoming dryness – this AM’s updates only accounted for weather up till January 1st.

We also mention that CONAB’s total corn area is a full 800,000 HA below USDA’s. CONAB’s production estimate is down 3.3 MMTs from USDA. Near perfect weather is needed in Brazil throughout spring to push major exporter stocks higher, and so Brazil’s wet season must be extended this year well into April and May.

Brazilian Corn Production

Dec 5, 5:50 pm | Brazil, Corn

After finishing their soybean seeding 2 weeks early (well ahead of the 5-year average), Brazilian farmers are celebrating that the safrinha crop, nowadays responsible for 2/3 of the total corn production in Brazil, will be planted within ideal window for yield. The biggest producing states should be ready to sow starting in the beginning of February, instead of the last week of the month. According to IMEA, Mato Grosso farmers will have almost 100% of the safrinha area available by the first week of February. Last year, seeding started in January 26th and ended in April 6th. The early window for Brazil’s winter corn crop should expand seeding and yield offering the potential for a record large combined Brazilian corn crop.

Precipitation over the main Brazilian producing areas coupled with moderate temperatures favors the first corn crop. The attached graphic shows total Brazilian corn production over the past decade. Notice the sharp rise in Brazil’s corn production capabilities following the rise in world corn prices based on the 2011\12 US drought. Brazilian farmers now plant a 2nd corn crop with regularity – a production trend that low prices have not curtailed. This year due to the declining value of the real and an early soy harvest, Brazilian farmers are encouraged to expand winter corn seeded area.

 Brazilian corn exports are likely to reach a record high amid a crop that is 16-17 MMTs larger than 2018. In combination with a normal Argentine crop, South America will sharply reduce Northern Hemisphere corn exports amid their aggressive sales pace during the last half of 2019.

The average of trade’s guess for the total Brazilian corn crop is 95 MMTs, but so far, several private companies have raised their crop estimates to as high as 104 MMT (and as low as 89MMTs). ARC’s Latin American division pegs the crop at 99 MMT, up 8 MMTs from CONAB`s last estimate in November. The main reason why farmers in Brazil will hit the gas to plant corn is obvious: higher prices in the market and available of land following the (“early”) soybean harvest. Both are a perfect match for record production. One 60-kilo bag of corn is costing R$36 reais in Brazil today against R$30 reais in the same week of 2017. Amid normal weather, Brazil will be a potent export force in world feedgrain exports throughout the last half of the 2019 calendar year.




Brazilian Soybean Production by State

Dec 4, 6:42 pm | Brazil, Soybeans

 With seeding completed much earlier than last year, and amid mostly favorable weather, there’s a growing sentiment that this year’s Brazilian soybean crop  will score a new record. The average of trade’s guess in Brazil is 120 MMTs, but so far several private companies have raised their crop estimates to as high as 129 MMT. ARC’s Latin American division pegs the crop at 121.8 MMT, up 2 MMTs from CONAB. The main producing areas such as Mato Grosso and Goiás have seen favorable vegeation health in spite of recent excessive rain. The main worry  is Asian rust in the far north  and developing dryness in the far south. 

  The graphic reflects rainfall accumulation since October 15th in the largest soy producing areas of Brazil. Rainfall has been mostly at or above last year, though we do highlight some of dryness in Mato Grosso do Sul.


 When analyzing production potential by state, it’s pretty clear that gains in the center and north of Brazil will offset the chance of trend yields in the south. While the North, Northeast and Midwest had a combine production of 53 MMTs in 2015/16, the same areas are responsible for almost 70 MMTs in 2019.


 If the southern half of Brazil receives favorable weather into mid-January which allows a above trend yield, it’s likely that Brazil could produce a soy crop of 126-130 MMTs! This crop size would be enough for Brazil to export 81-83 MMTs of soybeans or just over 3,000 Mil Bu. Such exports are 1.1 Bil Bu more than what is forecast by WASDE for the US. The US/China trade war has allowed Brazil to charge ahead in world soybean trade with their exports now 37% larger than the US.

Changing Brazilian Politics

Oct 31, 2:26 pm | Brazil

Brazilians over the weekend elected Jair Bolsonaro as the country’s 38th president. Since this wasn’t a normal election (recall Bolsonaro was stabbed at a campaign event), no one is expecting a normal presidency. Bolsonaro looks to be tough on crime and corruption.

  On the other hand, little is known about his ideas for the economy. As of now, Bolsonaro’s right-hand man will be Paulo Guedes. Guedes is an economist from the University of Chicago and will be the “Minister of Economy”. This will put industry, revenue and exterior commerce all under his belt. Guedes is keen to reduce taxes, although Brazil will reach a deficit of $45 billion this year and needs to approve pension reform to reduce the government spending (roughly 60% of Brazil’s annual deficit is due to pension payments). Otherwise, not much is known about future economic policy. 

  However, the market expects the Brazilian economy to grow by 2.5% next year (against 1% in 2018), with inflation to stay around 4% and unemployment to drop from 11% to somewhere closer to 8.5% next year.

  With respect to agriculture, Bolsonaro announced yesterday that he will merge the Ministry of Agriculture with the Ministry of the Environment, a decision widely criticized. Rural departments dislike the idea of having to take care of sewers in big cities along with other duties typically cared for by environmental officials. Also of note is what the international trade will think of an increase in Brazil’s deforestation rate, and how that will affect longer term ag production Brazil? On the margin, Bolsonaro looks to allow acreage to expand further, and will make ag exports a priority.

** Brazil Signals a Major Political Shift With New President: The Brazilian Real had been falling against the US Dollar since the start of the year, amid various political scandals and ongoing economic concerns across S America. A thriving US economy and rising US interest rates also added to weakness in the BRL/USD exchange. However, the Real forged a low for the year in early September and rallied into the election as the market anticipated a political shift. There was a brief rally on Monday following the election, but the market has since settled back to the pre-election price range. The major Brazilian stock index, the BOVESPA, also began to rally in mid-September, and has so far held onto gains this week. The index briefly traded at an all-time high with hopes that cutting taxes and reducing government spending will be a path towards economic growth.  

** Traders Bearish, Investors Bullish The Real: The currency rally was already reflecting expectations of a major political change for Brazil. The chart shows the latest Traders in Financial Futures data from the CFTC in Brazilian Real Futures. Note that Asset Managers (defined as pension funds, endowments, and mutual funds by the CFTC) had been quite bearish on the Brazilian currency into September but began covering that position with the currency rally. Last week’s CFTC data showed Asset Managers were net long 51 contracts versus a net short position of 30,000 contracts just 7 weeks prior. Note that Leveraged Funds (CTA’s and CPO’s) were heavy sellers on the rally. In early October, they held a light net long position of nearly 1,700 contracts and were net short a record large 27,000 contracts as of last week. It’s been a swift change in positions, and yet both sides seemed to have gotten the election results they expected. World capital markets now await for the new president to take office, and begin implementing his new economic plan.   


Brazil’s Crop Estimates in October

Oct 12, 3:29 pm | Brazil, Corn, Soybeans

Brazil’s crop forecasting agency CONAB released their October crop report on Thursday, which featured their initial estimates for new crop corn and soybean production. For the October and November crop reports, CONAB offers ranges for area and production estimates, and then become more specific with their published forecast in December.

  The October estimate projected soybean area in a range of 35.5-36.2 Mil Ha. The midpoint of the range is 35.8 Mil Ha, and if realized would be an expansion of 4% from last year and the largest ever for Brazil.

  CONAB conservatively estimated a national yield of 3,302 Kg/Ha (49.1 BPA), down 3% (1.4 BPA) from last year’s record yield, and just above the 30 yr trend. CONAB’s area and yield estimates offer a soy production forecast of 117-119.4 MMTs. The figure was below industry expectations and also under the USDA’s estimate of 121 MMTs.

Historically, CONAB has done a good job estimating total cropped area. In the last 12 years the October estimate has on average been within 1.6% of their final figure. Its worth noting that final area has been above the the October midpoint in for the last 9 consecutive years, but changes to area have not typically had a significant impact on changes to crop size. Rather it’s changes in yields that have caused the largest changes in total production. In the last 2 years CONAB has conservatively used near trend yields estimates, which have ultimately proven to be far too low. Both the 2016/17 and 2017/18 crops ended up 10% larger than CONAB’s October forecast. Following back to back years of low ball estimates, the trade is conditioned and discussing the potential of a 125+ MMT crop. We agree that there is potential for a larger crop. But with just 20% of the crop planted and the entire growing season ahead, we do not see a reason to strongly disagree with CONAB’s trend yield/production forecast.

CONAB in its first estimate of the season pegged corn production at 90.4 MMTs. This compares to record production of 98 MMTs in 2016/17 and compares to the USDA’s new crop forecast of 94.5 MMTs. This discrepancy isn’t yet relevant, as more and more of Brazil’s corn crop is planted in winter. However, we do mention that amid flat first-crop corn area, safrinha production will account for a record 70% of Brazil’s total crop. Weather can be rather volatile in Central Brazil beyond April (safrinha corn pollinates in Apr, May and early June), and safrinha corn isn’t fully harvested until mid/late summer. Elevated export competition won’t appear from South America until mid-2019. In the near term, logistical issue will keep Brazilian corn exports well below recent years.

Brazilian Politics and Currency

Jan 24, 2:41 pm | Brazil, Soybeans, Currency

4** A Different Year, Same Brazilian Politics: With protests recently erupting across Brazil, the country stopped today to watch the appeal trial of former leftist president Lula da Silva. Lula was convicted last July of corruption and money laundering, and is now appealing the conviction to a 3 judge panel. Only 2 of the 3 needed to vote to uphold the conviction, but if the vote is not unanimous, it opens the case up to more appeal options. However, today’s  unanimous vote leaves only 1 appeal option, which is to the country’s supreme court. The trial has increased volatility in the currency market in recent days, with the Brazilian Real dropping on Tuesday, and the rallying to a 3 month high today, on ideas that the conviction will be upheld. Note in the chart that after reaching an all time low against the dollar in early 2016, the real has held in a narrow range over the last 2 years, while the Brazilian stock market has rallied non stop to a new all-time high this week.

5** Traders Bearish, Investors Bullish The Real: This week’s trial has been scheduled for many weeks, and investors and traders have been busy positioning in the early weeks of the year. The chart shows the latest Traders in Financial Futures data from the CFTC. Note that Leveraged Funds (CTA’s and CPO’s) began buying the Real futures back in August and continued to buy into mid-October, when they held the 2nd largest position on record. But that position was unwound rather quickly and funds were net short by early December. Funds continued to sell into a near record position through the 1st week of 2018, but ahead of the upcoming trial, began to cover last week.  

  Asset managers (pension funds, endowments, and mutual funds) on the other hand have been significant buyers of Real futures in early 2018, with last week’s report showing a net position worth nearly 15,000 contracts, up more than 13,000 in just 5 weeks.

6** Currency Strength Keeps Works Against Brazilian Farmers: Regardless of which hemisphere one is farming in, the chart below shows that prices this year have generally held below last year. But for the Brazilian farmer, the currency has added to volatility in both hedging and cash market sales. Brazilian producers are thought to have been slow new crop sellers through last summer, in hopes that a US weather problem would give them a chance to hedge better prices, and sales are thought to have remained slow through planting. But early harvest is now underway and will gain momentum in the upcoming weeks. Brazilian farmers this week have anxiously hoped that this week’s trial would produce a drop in the Real, and the chance to hedge new crop prices at new highs (in Reais) for the year. One only has to look back to last May, when an overnight 8-9% drop in the real took CBOT soybean futures down more than $.30 in a day and another $.40 lower in the following week Brazilian farmer hedging. Note that while CBOT soybean prices closed up today, the stronger currency took prices lower for the Brazilian farmer.

Brazilian Safrinha Corn Estimates

Jan 19, 4:46 pm | Brazil, Corn


The Brazilian fertilizer association, ANDA, reported total fertilizer sales for the month of December at 2.4 MMTs. This is down slightly from last year’s 2.7 MMTs. As the soybean crop has been largely planted, sales at this time of year are typically for the 2nd Brazilian corn crop that will be planted following the soybean harvest. Combined Nov-Dec sales totaled 5.7 MMTs, slightly less than a year ago, but still the 2nd largest in the last decade. The attached chart plots the relationship between Nov-Dec fertilizer sales and Brazil’s safrinha corn crop. Note that CONAB’s estimate for safrinha corn acres is identical to a year ago, at 12.1 Mil Ha, while the fertilizer data does not offer a compelling reason to strongly disagree.


The safrinha corn crop is typically low yielding (relative to US yields) but has become increasingly important for both the Brazilian farmers and the world corn market in recent years. In 2004/05 the safrinha crop amounted to just 7 MMTs, while last year’s crop totaled a massive 67.4 MMTs! The record yield of 5,495 Kg/Ha (95 BPA) was set in 2014/15 crop, while record production was reached last year on expanding area. But note that while yields are considerably less than the US, they have followed a similar trend higher over time. CONAB’s January yield forecast of 5,806 Kg/Ha (92.5 BPA) was near unchanged from a year ago, and 5% over trend. However, weather in the upcoming weeks will be key in determining both total area and yield. 


While area and yield forecasts are basically unchanged from a year ago, the chart shows that CONAB has a consistent history of underestimating area, yield, and crop size in their January estimate. In 10 of the last 11 years, the January report has underestimated total safrinha corn area by an average of 12%. Ultimately it’s changes in yield that have had the greatest impact on production changes. In 9 of the last 11 years, CONAB has underestimated yield. The most notable miss occurred in the 2015/16 crop year, when extreme drought put the final safrinha corn yield 48% under the January forecast, which cut the final crop size by nearly 14 MMTs.

  This miss, is a reminder of the importance of weather (in a La Nina year) for a crop that has yet to be planted. The CBOT will closely watch rainfall across key states of Mato Grosso do Sul, Mato Grosso, and Goias in the coming months. Moreover, Mato Grosso farmers are also looking at planting cotton, a far more profitable crop than corn. This could help limit any future winter corn seeding expansion.


Brazilian Soybean Crush In October

Dec 19, 3:04 pm | Brazil, Soybeans

4  The Brazilian veg oil association ABIOVE, last week reported that it’s membership crushed 2.8 MMTs of soybeans during the month of October. ABIOVE estimated that it’s reporting membership has represented 74-78% of the total Brazilian soybean crushing industry this year, which implies a total October crush rate of 3.7 MMTs during the month, a 19% increase over last year and the largest October crush on record. Estimated spot crushing margins are well under a year ago, but still thought to be positive. While Brazilian soybean supplies remain more than adequate following last year’s record crop. The latest USDA forecast calls for an annual crush total of 41.5 MMTs, and the chart shows monthly estimates Nov-Jan estimates needed to reach the USDA forecast.

5  Brazil’s late season export pace has been far better than expected, which is quickly whittling away at stocks. Brazilian soy processors told ABIOVE that at the end of October they had 4.8 MMTs of soybeans on hand, similar to a year ago, and slightly less than the 5 year average. This leaves another another 4-6 MMTs of soybeans that either need to be purchased and/or delivered within the next 3 months to meet the USDA’s annual crush forecast. Note that early harvested soybeans should become available to the market sometime in January. The bottom line is that even with the increased larger export program, Brazilian processors should have the supply, and large crush rates are expected to continue into 2018.    

6  Brazilian soymeal exports were behind a year ago through the 1st 6 months of the crop marketing year, but have been above last year since August. The cumulative export total for the year through November (per government trade data) totals 12.3 MMTs and was slightly ahead of last year. The latest ship lineup update for this week shows 1.2 MMTs of meal (hipro, lowpro, and pellets), that have either sailed or are expected to sail during by January 1st. If realized, this leaves just 1 MMTs to ship in January to reach the USDA’s annual forecast, which should be easily reached. The current USDA forecast has world soymeal trade increasing 2-3 MMTs, while Brazil is expected to pick up close to half of the additional global business. This of course all largely hinges on whether all of the Argentine crops get planted, and whether a La Nina type growing season unfolds.