“…low early sales without static storage capacity represented a strategic mistake…”
Carlos Cogo is the director of the consulting firm Cogo Inteligência em Agronegócio, member of the Interministerial Steering Committee of the National Program for the Conversion of Degraded Pastures into Sustainable Agricultural and Forestry Production Systems of the Ministry of Agriculture in Brazil, guest professor at the Dom Cabral Foundation and at the Atitus Education Business School.
Cogo has a degree in veterinary medicine from the Federal University of Rio Grande do Sul, with a postgraduate degree in agribusiness from the Federal University of Paraná.
Carlos Cogo, director of Cogo Inteligência em Agronegócio
AgriBrasilis – Is Brazilian agribusiness going through a crisis?
Carlos Cogo – Although the country faces challenges, there is not a widespread crisis in agribusiness in Brazil. Brazilian agriculture is highly productive. Even with a smaller planting area than the total production, the intensive use of technology, such as pesticides, fertilizers and artificial intelligence, allows Brazil to achieve high yields.
Brazil plants 78 million hectares of grains, but uses only 52 million hectares. This is because many areas are used two to three times in the same year (off-season corn crop, third crop beans, second crop cotton, etc). As a result, the sector recorded annual increases of 5%.
“Brazil plants 78 million hectares of grains, but uses only 52 million hectares”
In 2023, there was a record harvest of more than 320 million tonnes. However, farmers’ lack of planning to sell this production has led to challenges. International prices of agricultural commodities fell, and the appreciation of the Real against the Dollar also impacted the sector. In 2024, the strategy was repeated: low early sales without static storage capacity represented a strategic mistake, which culminated in downward pressure on prices and a decline in margins. This was eventually amplified by the soybean crop failures.
AgriBrasilis – Why is there so much disagreement about the crisis in the sector and in relation to crop failure?
Carlos Cogo – Farmers did not understand how the soybean crop failure did not cause prices to increase. The methodology of the government and the country’s major consultancies has not changed: it is the same today as the one used when soybeans were worth more than US$ 40 per bag. There is no reason for suspicion and accusations of manipulation. Despite the weather breakdowns, Brazil is still expected to have the second-largest soybean harvest in history in 2024, between 145 million and 147 million tonnes, second only to the 154.6 million tonnes harvested in 2023.
The Brazilian farmer expected future prices to rise due to the likely reduction in the domestic supply of grains. However, Argentine production is an important factor in this scenario, with a forecast to reach 52 million tonnes, 30 million tonnes more than the previous season. And South America’s harvest is expected to reach a record 218 million tonnes. This more than compensates for the declines in Brazil.
AgriBrasilis – The net margin of soybean in the Cerrado biome “is the worst in history.” What will be the consequences? Will the soybean farmer have a hard time paying the bills?
Carlos Cogo – The current margin is the worst in our time series, which started in 2009/2010. Farmer profitability has fallen a lot this year, but has been very good in previous years. Now, if the positive results (and a lot) of the previous harvests have disappeared and there is no stock of capital and assets to enable the passage through a cycle with negative results, there is a management error. Difficulties in paying bills should be negotiated in a consensual manner with creditors and financial agents.
AgriBrasilis – What is your assessment of the increase in judicial reorganizations?
Carlos Cogo – There are no economic reasons to justify requests for judicial reorganization of farmers. Soybean market agents can find solutions for farmers who had crop failures due to weather issues, enabling recovery in future crops, without the need for judicialization.
Farmers who are opting for judicial reorganization have no economic, patrimonial and accounting justifications to justify this decision. It is worth remembering that Congress improved the RPC [Rural Producer Certificate] law. If the production is financed, the harvest is sold in advance and this transaction is executed through a physical RPC, that is, representing the production, such production is excluded from the judicial reorganization of the farmer. Even with a request for judicial reorganization (JR) accepted, the law defines that the production sold via RPC needs to be delivered to the buyer. This legal change helped reduce the insecurities associated with JR by giving transparency to the negotiation between parties. In many cases, JR is being offered as a renegotiation mechanism. The total judicial reorganization, pointed out in Serasa Experian’s March/2024 report, represents 0.00032% of the total of farmers. That number is negligible. What’s being highlighted is that JRs have grown by 535%. From a near-zero baseline, any increase becomes statistically huge.
AgriBrasilis – What is the impact of the 2023/24 soybean and corn crop failures?
Carlos Cogo – The impacts are: loss of foreign exchange for Brazil, reduction of exports, drop in profitability, sharp reduction of new investments in machinery, silos and irrigation.
AgriBrasilis – “There was a 30% loss in the price of soybeans last season due to a strategic error.” Why? Are soybean prices expected to worsen in the near term?
Carlos Cogo – Premiums at Brazilian ports are negative due to low anticipated sales of the current harvest. Without sufficient static storage capacity in Brazil, the farmer needs to move the soybeans to the port, putting pressure on the Basis [difference between the physical price practiced in a given local region and the price in the futures market of the same commodity].
Despite the weather breakdowns, Brazil is still expected to have the second-largest soybean harvest in history in 2024, between 145 million and 147 million tonnes, second only to the 154.6 million tonnes harvested in 2023. The Brazilian farmer expected future prices to rise due to the likely reduction in the domestic supply of grains. However, Argentine production is an important factor in the current scenario, with a forecast to reach 52 million tonnes, 30 million tonnes more than the previous season. And South America’s harvest is expected to reach a record 218 million tonnes. This more than compensates for the declines in Brazil. Soybean prices are expected to rise in the coming months, with premiums gradually improving at ports.
AgriBrasilis – What can we expect for the 2024/25 harvest?
Carlos Cogo – Stable production costs compared to the current harvest, recovery of yield and production. The pricing of La Niña risk should generate interesting moments for the balance of the current harvest and for fixations and early sales of the 2024/2025 harvest. It will be a year to recover the crop and leave the current crop behind.
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