January 31, 2007

Brazil's grain, soy expansion expected to come slowly

Brazil's grain and soy farmers will be slow to expand crop land next year even as international prices for corn and soybeans remain favourable, Geraldo Camargo Barros, chief scientist at Brazil's respected Cepea institute at the University of Sao Paulo, told the local Estado newswire Tuesday (Jan 30).

"We have the potential to expand soy and grain supply, but only the potential," he said. "You can double area planted here, but to do that you need labour, credit and time. Right now it is too soon to say how these prices are playing out inside the farmgate," Barros said, adding that income rises were likely due to commodity demand from both the food and energy markets. Despite that, farmers still have roughly two years' worth of back payments to public and private banks. In May, the government extended public farm loan payments to roughly four years instead of the usual 12 months for most soy farmers.

"This move in the US to agro-energy is not a marginal move, it's a substantial one, and this is just the beginning. Brazil will have a fundamental role in world farm supplies because of US agro-energy," he said.

Brazil's agribusiness consultants suspect soy growers will replace some of the land they left fallow in the 2006/07 season due to a two-year liquidity crisis in rural Brazil.

"It's still too early to say if Brazil will recuperate that land for soybeans. A lot can still happen between now and next planting season," Seneri Paludo, a soy market analyst for consulting group, AgRural, told Dow Jones Newswires Tuesday.

Brazil is the world's no. 2 soy producer behind the US and is expected to become the main world supplier once the US replaces soy with corn to feed its ethanol needs.