November 4, 2005

 

Brazil's 2005-06 grain production to grow 7-10 percent
 

 

The National Commodities Supply Corp. of Brazil's Agriculture Ministry, known as Conab, said total planted area for the 2005-06 grain crop will be between 46 million hectares and 47.2 million hectares, down from 48.878 million in the 2004-05 harvest.

 

The government report said price increases in fertilisers, pesticides, herbicides and seeds and a less favourable exchange rate between the US dollar and Brazilian real were responsible for a reduction in planting area.

 

Although farmers are using less area, production is expected to increase 7-10 percent overall, or 121.5-124.9 million tonnes, thanks to good weather conditions early in the planting season.

 

The 2005-06 soybean crop is expected to bring in 56.7-58.6 million tonnes of soy, compared to 51 million tonnes in the 2004-05 harvest. Soy was adversely affected last year by drought in the south, in Mato Grosso do Sul in the centre-west, and heavy rains during the harvest.

 

As a result of last year's loss of an estimated 10 million tonnes of soybean, farmers will plant between 21.4 million and 22.2 million hectares, compared to 23.3 million during the 2004-05 crop.

 

Southern states like Rio Grande do Sul have pushed the soy production totals upward. Production there is expected to increase by 192 percent to an estimated 7.6 million tonnes for the 2005-06 harvest from 2.6 million tonnes produced last year. Parana and Santa Catarina states are also expected to increase production by 18.5 percent and 33.5 percent, respectively.

 

The report said large soy harvests in the US have caused international soy prices to drop, but prices should increase in the first quarter of 2006 once the US crop is totally harvested and international soy stocks shrink.

 

Brazil is the world's no. 2 producer and exporter of soybeans after the US

 

Corn is also expected to recuperate from last year's poor weather in the south, where 67 percent of the 2004-05 corn crop was lost in Rio Grande do Sul state. Yet, even with unfavourable prices for corn, production estimates for the combined first and second crops of the 2005-06 harvest are up 17 percent over last year for an estimated 40.5 million to 41.3 million tonnes, compared to 35 million tonnes last year.

 

The main reason for the increase in corn output is farmers who rotate between corn and soy crops have decided to plant more corn instead. Moreover, southern states will recuperate from last year's disastrous drought.

 

The report was expected to show the impact of Brazilian farmers'credit crunch on the 2005-06 harvest, but production increases suggest otherwise. Analysts at agriculture research firms warned that farmers were investing less in fertilizers and agro-toxins, which could have impacted production.

 

"All of this talk about cost-cutting on Brazilian farms is true," said Flavio Franco, an analyst at Safras e Mercados. "The important thing is the soil, and the soil here still has plenty of nutrients in it."

 

For 2005-06 soy crop, Franco said only weather or Asian soybean rust would prevent a harvest of 58 million tonnes of soybeans.