Will Brazil import U.S. soybeans?
PORTO ALEGRE, Brazil (Agriculture.com)--It's been over a decade since Brazil, the world's #2 soybean producer, has had to import the country's "King" commodity from the United States. That streak could end as early as this year because of South America's worsening crop shortages.
Due to a drought in the first months of the year, southern farmers in Brazil rushed to sell their soybean stock to China to compensate for their losses by taking advantage of excellent international prices.
Nearly 80% of the country's soybean crop has already been exported this season, according to independent estimates. The percentage is 20% higher than the same month of 2011. The Brazilian government denies any type of “rationing," but says that in the future – perhaps next year - the nation could import soybeans from other sources, including the U.S.
“Currently, we don't have scarcities of soybeans in Brazil because the last crop was very good. We have at least 1.5 million tons saved from last year. Next year, if the weather does not help much again, we would be forced to import," says Leonardo Amazonas, a soybean expert from the National Supply Company, a division of Brazil's Ministry of Agriculture.
The statement, however, is challenged by several private consultancies who doubt that the country has more than 10 million tons to sell until the end of the 2012. Safras e Mercado (Crops and Markets), a consultancy based in Porto Alegre, Rio Grande do Sul, says that Brazil will end this harvest season with just 421,000 tons. For Aedson Pereira, an analyst from Informa Economics FNP, the issue now is who is going to sell soybeans to Brazil.
“US soybean stocks are already under pressure exporting to China. Our neighbors (Argentina and Paraguay) also did not have a good crop," Pereira told Gazeta do Povo.
Marcos Rubin, an analyst from Agroconsult, says that the current “rationing” is very focused in Rio Grande do Sul, the state which lost approximately 43% (four million tons) of its crops earlier this year. With those losses, the state is unable to supply the Brazilian crushing industry. Therefore Rio Grande do Sul, which has a large number of livestock, will have to import soybean meal to feed it.
“For logistical reasons, it will be imported from Argentina. They also had a drought, but they can supply their market and export the meal,” Rubin says.
The crushing industry in the South American country has decreased its amount of production. It fell from 35.7 million tons of soybeans in 2010/11 to 28.9 million in 2011/12, according to the Brazilian Association of Vegetable Oil.
Historically, Brazil has been able to grow necessary soybean supplies to handle domestic and export demand.
In times of overselling, Brazil has turned to the United States to backfill orders they couldn't cover for soybean crushing purposes. That last happened in the late 1990s when the U.S. exported 607,000 metric tons to Brazil in 1997. Not since then has Brazil imported any more than 34,000 mt of U.S. soybeans in 2006, according to USDA statistics.
Moving from soybeans to corn
A study released by the Brazilian consultancy Céleres indicates that the use of biotechnology is making the crops more profitable in the country. The big surprise is the corn earnings are much higher in Brazil than are soybeans. For each Real (US$ 0.52) spent on corn, the earnings are R$ 2.61 (US$ 1.36), while in soybeans it is R$ 1.59 (US$ 0.83).
These profits may result in a very dramatic change in the total share of the earnings with crops. From today to the 2013 harvest, the amount of corn planted, compared to other crops in Brazil, will jump from 32% to 39% of the total crop production. The share for soybean will decline from 65% to 47%.
The study says that this is happening for a variety of reasons. The first is the technology itself; the corn varieties allow more productivity and involve less expense. The second is that the U.S. government has encouraged the production of ethanol through corn, so there is more market for corn as food. Also, prices are improving.
“There are enough reasons to increase corn planting in Brazil," says Narcison Barison Neto, president of the Brazilian Association of Seeds and Seedling, the organization that requested the survey.
This story was written exclusively for Agriculture.com by Luis Vieira. Mike McGinnis contributed to the story.