July 28, 2006

Brazil expects poor performance of grain markets for the next 2 years

The current scenario for grain crops, with accumulated losses in the last two harvests and an unfavorable exchange rate for the export market, may worsen for the 2006/2007 crop and the 2007/2008 crop, according to the President of the Brazilian Agribusiness Association (Abag), Carlo Lovatelli.

The outlook for the next two grain crops does not look good. Farmers are de-capitalized, the structural measures have not been implemented and the PPS (private public partnerships) proposed by the federal government have not been carried out, said Lovatelli.

Even a federal effort by the federal government to restructure farmers' debt in May may not be enough. With planting scheduled to begin soon, farmers are only beginning to receive the funds expected for the 2006/2007 plan. 

The 2006/2007 crop, to be planted October, would see a 7 to 10 percent drop in the area planted, Lovatelli said. Abag expects that fertiliser consumption would fall 10 percent to 15 percent this planting season compared to the previous period, and that pesticide consumption would be 25 percent to 30 percent less.

The combination of a smaller planted area and a drop in inputs should result in a 10 percent to 12 percent drop in production, said Lovatelli.

The greatest drop is expected in the state of Mato Grosso, plagued by serious logistics problems, as it is far from the main soy export shipment centres.

That may change if international prices climb and the Brazilian real weakens.

Where there is profit to be made, farmers would plant as much as possible, Lovatelli said.