March 8, 2007

Ethanol fever to push Brazil's grains up
 

The fever for ethanol in the United States has made the profit projection in Brazilian grains output more than double in the past year.

The next harvest will surmise if the country is again to experience another "boom" in the expansion of the agricultural frontier, possibly surpassing the record of 49 million hectares planted registered in 2004/2005.

According to Fabio Turquino de Barros, an analyst from AgraFNP, the use of grain to produce ethanol will definitely influence the country's agricultural expansion and the need to expand is inevitable.

Barros added Brazil's tropical savannah 'cerrados' will again become the agricultural frontier and thus, new areas should be incorporated.

According to consultancy data, between the past and current crops, the profitability of corn jumped 160 percent and that of soybeans 60 percent in the United States, reaching US$800 and US$494 per hectare respectively.

Also on this upward trend is Brazil's profitability on these grains: 77 percent for corn (US$350 per hectare) and 316 percent for soybean (US$250 per hectare), considering Parana state. He recalled that in some places, like Mato Grosso state, the profitability moved from negative to positive between one crop and the other.

According to Barros, grain prices were buoyed by ethanol, since the demand for corn to make the fuel is greater than the supply. For the next crop, the amount of the grain destined for producing ethanol will be 50 percent greater than the previous harvest.

What should influence the trend for the next crop in Brazil, said Barros, is the planting in the United States, which begins in April. According to the latest survey of the US Department of Agriculture (USDA), corn acreage will increase by 11.4 percent, gaining space in areas previously planted to soybeans and cotton.

The trend, he said, should make soybeans more promising in Brazil as it would reverse the decline in the current soybean crop which shrank 6 percent in acreage compared to the previous crop.

This would also take advantage of the world soybean market of which US is a major exporter, said Barros.