Brazilian Soybean and Corn Update

Brazilian Soybean and Corn Update

Walter Kunisch Jr.

Feb 18, 2020

A combination of ideal growing conditions and expanded planted acres have helped propel Brazilian soybean harvest projections to near record levels. And Brazilian corn is expected to match the record crop set last year. Brazil’s position as the largest soybean exporter and second largest corn exporter represents a structural threat to the U.S. export programs. 

Brazilian Soybean Overview

  • This year, Brazil will become the world’s largest soybean producer. The USDA estimates that Brazilian soybean production is at 4.6 billion bushels. The U.S. produced 3.5 billion bushels of soybeans this year.  

  • This is the first year that Brazil will be the largest soybean producer.  

  • Brazil is the largest exporter of soybeans and China is the primary destination.  

  • This year, the USDA estimates that Brazil will export 2.8 billion bushels of soybeans, while it estimates that the U.S. will export 1.775 BBU of soybeans.   

  • Unlike the U.S., Brazil is not a major exporter of soybean meal and oil. Most of the soybean derivatives are consumed domestically.  

  • Brazilian president Jair Bolsonaro’s agricultural policies have encouraged the country’s farmers to expand land for agricultural use, which comes from deforestation of the Amazon region.     

  • Brazil’s planted soybean acres and exports have grown alongside China’s import needs.  

  • China has been a major investor in Brazil’s agricultural transport infrastructure. Starting in 2010, China has been a significant investor in Brazil. Some of these projects have included modernizing key Brazilian ports, rail and highway projects.  

  • This year, the major highway BR-163 will be fully paved and will offer reliable trucking from key soybean growing regions to Brazil’s river terminals.       

  • Brazil is adding a rail line along highway BR-130 to enhance corn and soybean volume at the river terminals.

Brazilian Corn Overview

  • After the U.S., Brazil is the world’s second largest producer and exporter of corn. 

  • Brazil produces about twice the amount of corn as Argentina, the world’s third largest producer, and 2.5 times more corn than Ukraine.  

  • This year, the USDA estimates that Brazil will produce a record-tying 4 billion bushels of corn. This year, the U.S produced 13.69 BBU of corn.  

  • Brazil produces two corn crops. The second crop, known as the safrinha crop, is the larger of the two and the key export crop. Ironically safrinha is Portugese for “little crop.” 

  • The first corn crop is the smaller of the two and is primarily used for domestic feed needs. Brazil has a vibrant livestock business sector and is a key global exporter of beef, pork and chicken.  

  • The safrinha corn crop represents approximately 70% of Brazil’s crop production and a majority of the country’s corn exports.    

  • Brazil’s second corn crop is planted after the soybean crop has been harvested.  

  • Production of Brazil’s second corn crop is the result of seed R&D that has produced enhanced seed varieties.   

  • This year, Brazilian agricultural statistics agency CONAB estimates that Brazilian planted corn acres will rise to a record 17.991 million hectares (MH). Second corn acres are expected to rise to a record 18 MH.

  • The USDA is estimating that Brazilian corn exports will fall this year to 1.4 BBU from 1.6 BBU last year.

What this means for the U.S. farmer

We believe that Brazil’s record-breaking soybean production figure has the ability to suppress U.S. soybean exports this year. We also believe that increasing soybean and corn acres, along with a modernized infrastructure that is designed to create a more efficient supply chain, has the ability to pressure U.S. agricultural commodity prices. Add to the mixture a strong U.S. dollar, and we foresee structural headwinds for the U.S. soybean and corn export programs.                      

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Walter Kunisch Jr.

Feb 18, 2020