Soybean Harvest Reduction in Brazil and Its Consequences for the Grain Market

“…the estimate for the national harvest fell to 153 million tonnes, a reduction of 6% compared to potential…”

Francisco Queiroz is a grain analyst at Itaú BBA‘s Agribusiness Consulting, with a degree in agronomy from São Paulo State University, a postgraduate degree in business administration from FGV and an M.Sc. from the Federal University of ABC.

Francisco Queiroz, analyst at Itaú BBA’s Agribusiness Consulting

AgriBrasilis – Why should there be a 20% yield reduction in the State of Mato Grosso?

Francisco Queiroz – Given the whole context of irregular rainfall in the State of Mato Grosso since the beginning of the harvest, with episodes of excessive heat and rainfall in December that, once again, were below expectations and below the averages for the period, we made a new revision for the state’s harvest, with an impact on Brazil’s total soybean harvest.

In addition, after several consecutive months with above-average temperatures, December behaved in the same way, including the occurrence of another heat wave, which brought temperatures above 40°C in several areas of the country.

For this reason, the yield estimate for the crops of the State was reduced, with an estimated drop of around 20% in relation to the potential and a projected harvest below 40 million tonnes. The biggest drop ever in the State of Mato Grosso, according to the National Supply Company – Conab’s time series, was of around 11% (1989/90 season), which means that, if our estimate is correct, this should be the worst year in the history of soybeans in the State.

AgriBrasilis – How much should the drop in grain production in Brazil be?

Francisco Queiroz – We estimated the potential of the Brazilian soybean crop at 163 million tonnes. With the irregular weather, which significantly affected the State of Mato Grosso, that is the country’s main grain producer, the estimate for the national harvest fell to 153 million tonnes, a reduction of 6% compared to the potential production.

AgriBrasilis – What is the production forecast for the States of Paraná and Rio Grande do Sul?

Francisco Queiroz – For the State of Paraná, Conab estimates a production of 21.8 million tonnes, which represents a drop of 3% compared to the last harvest, despite a slight increase in the planted area in 2023/24. However, the intense heat and lack of rainfall have negatively impacted the State’s soybean crops since late December, which can result in yield losses. The Department of Rural Economy of the State of Paraná estimates that, if the rains do not return to the state in the coming days, the harvest could reach less than 21 million tonnes.

The State of Rio Grande do Sul, on the other hand, should have an important resumption of soybean production numbers, after two consecutive harvests that were frustrated due to the action of La Niña, which caused below-average rainfall in the state. This year, with the action of El Niño and good weather conditions, Conab projects a production of 21.9 million tonnes for the state, 68% above that produced in 2022/23.

“For this reason, the yield for the crops of the State was reduced, with an estimated drop of around 20% in relation to the potential…”

AgriBrasilis – To what extent has El Niño contributed to these results?

Francisco Queiroz – El Niño is characterized by the warming of the Pacific Ocean, and usually El Niño years are favorable for rainfall in southern South America. This year, due to the action of the phenomenon, the southern region of Brazil, as well as Argentina, has benefited from good rains during the harvest, which should favor the harvest in these regions.

On the other hand, El Niño years are usually drier in the North and Northeast of Brazil. We are observing exactly that, with below-average rainfall for a few months in this part of Brazil and a delay in the arrival of good volumes of precipitation for the MATOPIBA [States of Maranhão, Tocantins, Piauí and Bahia] area.

Despite the influence of the phenomenon, the rains began to occur in greater volumes and to be better distributed over MATOPIBA since the beginning of the year, which will favor the completion of planting and the initial development of crops in the region. Projections from the National Oceanic and Atmospheric Administration show that the phenomenon should begin to weaken from now on and this tends to favor the formation of rainfall in the North and Northeast of Brazil.

AgriBrasilis – Is the scenario for national agribusiness still positive?

Francisco Queiroz – The scenario for the main agribusiness chains in Brazil, in general, should remain positive in 2024, with good volumes of agricultural and livestock production. Exports should also remain at high levels, considering Brazil’s good competitiveness in the international market and external demand that tends to remain firm, with global macro conditions that suggest improvements throughout the year.

Considering soybean and corn production for 2023/24, the expectation is for better margins, mainly due to the low inputs.

The point of attention is for animal proteins, in a scenario that should probably have lower corn production. If corn does indeed become more expensive in Brazil, as everything indicates it will, the pressure on the profitability of poultry and pork production should return.

AgriBrasilis – What exactly can we expect for corn?

Francisco Queiroz – The delay in sowing Brazil’s summer crop takes part of the off-season corn area out of the ideal planting window and this imposes greater weather risk for the crop.

We should see a drop in the planted area and a reduction in Brazilian cereal production in the 2023/24 harvest. Conab’s latest update (December) projects a 5.3% drop in total area and a 10.2% reduction in production, to 118.5 million tonnes.

Corn prices have continued to rise since September, in view of this scenario of lower projected production, and following the appreciation for the cereal futures contracts on B3, which also continue to appreciate. There is still a lot to happen before the panorama of the second harvest is consolidated. We may even see some upward correction in the expected planted area, given the rise in prices, but the climate scenario will be decisive for the definition of the production number.

If the weather is not favorable during the development of the second crop, we cannot rule out even higher prices for corn in Brazil. The Brazilian corn market will return to the condition of domestic prices with a premium in relation to the export parity, detaching itself from the international market.

Given this, it will be a more challenging year for animal proteins, which have corn as one of the main inputs for production. The scenario for the cereal should bring a bullish reflection for the rations and a bearish one for the profitability of livestock.

AgriBrasilis – Why should Argentina soybean production be essential to define the market?

Francisco Queiroz – The expectation is for a resumption in Argentine production this season, with a harvest close to 50 million tonnes. This will be important to increase the world’s supply of the grain. When we look at the global balance of soybean supply and demand, it is important that a resumption of Argentine production happens, especially in view of the signal of a reduction in Brazil’s harvest. The global balance may not show a gap in the 2023/24 harvest compared to 2022/23 as expected, depending on the size of the South American harvest. Considering an American harvest of 112 million tonnes, Brazil with 153 million tonnes and Argentina with 48 million tonnes, the global soybean stock/consumption ratio would remain at 28% in the 2023/24 harvest, the same as in 2022/23.

The market is currently considering the increase in supply from South America for the current harvest year compared to last year. Considering the figures cited above, Brazil and Argentina may place 16 million tonnes more of soybeans on the global market this year compared to 2022/23, when Brazil harvested a record crop and Argentina had the largest crop failure in its history.



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