October 13, 2006

Brazil to see decline in crop production area for 2007

The planting intention for the 2006/2007 crop harvest stood low, according to the first survey of the National Supply Company (Conab) report.

An indicator of a fall in Brazil's total crop production area, the report estimated the total planted area approximately between 44.7 and 45.6 million hectares against 47.2 million hectares in the prior harvest, a reduction of 4.5 percent.

Still, favourable climatic conditions could bring some respite.

Soy harvest in Brazil could have two distinct scenarios, one for the South and another for other regions. The acquitisition of non-certified, GM seeds from Argentina could lead to a growth in area set aside for this crop in states like Parana, Santa Catarina and Rio Grande do Sul. The seeds would considerably reduce the cost of harvest, the survey said.

However, it might not be the same for the rest of the country with expected planted soy area retreating due to debt and low liquidity of the 2005/2006 harvest. Therefore, even with an increase in the south, the total area for soy production would decline between 5.1 percent and 7.6 percent.

Despite government efforts to improve its liquidity through auction sales, a requisite for corn plantation, it would record a reduced planted area between 0.8 percent and 2.5 percent.

Cotton would do well in exports, especially in the shipments to China, the largest global producer of the commodity. Factors contributing to this would be contracts for the next two years which guarantee the product's demand in the medium term (giving producers confidence) and a fall in US production of the crop fearing hurricanes.

Thus, Brazil's main crops excluding cotton would register a fall in their production area, confirming the upward cycle of prices for next year. Increased prices would push the agricultural income in relation to the current year.