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Brazil's Corn Production Drop Seen Reversing
Two of the most prominent Brazilian economists, José Roberto Mendonça de Barros and Luiz Carlos Mendonça de Barros, created in 1978 a consultancy called MB Associados to advise people interested in Brazil's macroeconomics. As the importance of agriculture grew rapidly in the 1990s and early 2000s, the two associates have decided to create an agricultural arm for the company in 2005 - MB Agro, which is based in São Paulo.
In an interview with Agriculture.com, José Carlos Hausknecht, director of MB Agro, said that in the coming months a likely higher U.S. dollar value might be helpful to Brazilian farmers, but he declined to predict a specific number. As of today, US$ 1 buys R$ 2.24. In 2014, the price reached over R$ 2.50.
Also predicting a bright future for grain prices, Hausknecht affirmed that Brazil would regain its corn production in 2015. About the Brazilian logistics turbulence, the economist said that the problems continue. However, port authorities were able to "hide" the problem from newspaper headlines.
Q & A:
Agriculture.com - There was a recent devaluation of the U.S. dollar compared to the Brazilian Real. Do you still think that the value of the dollar will increase and will continue to benefit farmers in Brazil?
Hausknecht - Over year, the dollar has gained value (against the Real), but there was a recent devaluation that has hurt Brazilian farmers. There is not a lot to talk about it. I cannot forecast a specific number right now. It would be a lot better for farmers if the dollar goes higher, and I do think that that's still the trend. But there are complicating factors such as this year's election and the World Cup that make it difficult to predict the number. There is also the international with the unrest in Ukraine.
Agriculture.com - Based on that, your prediction is that Brazilian farmers will continue to be capitalized and will invest more and more in order to maximize efficiency?
Hausknecht - I believe so. Yes. Future prices are another factor. If you take a look at future prices, you can see that there will be no retraction of future investments.
Agriculture.com - How do you see the situation of grain logistics? There have been losses because of this issue last year. Is there any change in 2014?
Hausknecht - The situation is quite similar. The freight costs are the same of last year and sometimes higher. The real difference is that we cannot see those truck lines in the news. The line is not visual as ports adopted a policy of electronic line. But the costs remain high.
Agriculture.com - Recently, there has been talk and research into a possible significant growth of wheat crops in the center-west of Brazil. Currently, just southern states of the country are able to grow the grain. Do you think that will be confirmed, and could that be another crop to compete with corn in the winter?
Hausknecht - I really don't believe in that. The wheat crops will not be competitive in the center-west (of Brazil). Corn tends to continue as a profitable second crop. The only thing that can compete with corn as second crop, as it is happening this year, is soybeans, but even so, it has a lot of restrictions. In the next season, we might see increases of corn production again.
Agriculture.com - What's your perspective on domestic soybean and corn prices in Brazil?
Hausknecht - There will not be a fall of prices until July. Soybean prices can plummet just in the second semester as the American harvest starts.