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Production
Estimates and Crop Assessment Division |
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Production
Estimates and Crop Assessment Division |
August 16, 2004
Overview
Brazilian farmers have increased soybean area over the past 5 years in an
unprecedented historical expansion, with total national acreage rising by 65
percent during the period. USDA expects this growth phase to
continue in 2004/05, though at a slightly reduced level from last year. In
2003/04 soybean area grew by nearly 3.0 million hectares, whereas USDA expects
sown area to rise by approximately 2.2 million this year. The vast majority
of the recent soybean expansion has occurred through the conversion of
existing pastures that are prevalent throughout Brazil, as well as the opening
of virgin grasslands called “Cerrado.” High relative profits from soybeans in
recent years and strong international demand for Brazil’s soybean exports have
fueled the expansion. Brazilian oilseed industry officials and traders
report that the sizable profits earned from recent harvests have
been directed toward the acquisition of new land and equipment,
allowing farmers to increase both their scale and efficiency. The hunt for
land has been especially acute in relatively affordable but remote regions in
the states of Mato Grosso, Goias, Maranhao, Tocantins, Piaui, Para, and
Roraima. Farmers from all over the country are scouting new
opportunities in the rapidly expanding Center-West and Amazonian states, where
land prices continue to be a fraction of those in more established regions
(especially the traditional farming states in southern Brazil). Land that has
been purchased and improved during the past 6-18 months is expected to come
into production in 2004/05 despite the recent fall in international soybean
prices. Soybeans continue to have the greatest liquidity compared to
competitor crops (corn and cotton), while soybean prices also remain above
year-ago levels in August. Cotton prices by comparison have fallen
approximately 20 percent below last year’s levels, while corn prices are
reportedly below the cost of production in some regions. The overall cost of
crop inputs is also up significantly this year, and this situation is expected
to increase farmers interest in soybeans, as corn and cotton both require far
greater applications of fertilizers and herbicides.
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USDA currently forecasts 2004/05 Brazilian soybean production at a record 66.0 million tons, up 26 percent from last year’s drought and Asian rust-affected crop. Harvested area is forecast at a record 23.5 million hectares, up 2.2 million or 10 percent from last year’s record level. Yields are forecast at a near-record 2.81 tons per hectare, and close to the long-term trend. The yield forecast assumes normal weather conditions and sufficient moisture. It also assumes that Brazilian farmers will better manage outbreaks of Asian rust this year, by the widespread adoption and implementation of stricter control regimens.
Area Expansion
The Brazilian soybean growing region has been steadily expanding for several decades, having its origins in the traditional southern farming states in the 1960’s. Soybeans became established as a major oilseed crop in the late 1960’s in Rio Grande do Sul when they became an integral part of a double-crop regime with wheat (which was the predominant grain crop). Since that time there has been a gradual but persistent increase in total area devoted to soybeans, as domestic and international demand for the oilseed grew and as suitable varieties and farming systems evolved in the country’s different regions and climates. Soybeans have an inherent advantage over many alternative crops, in that they do not require costly nitrogen fertilizer applications and thus have a lower cost of production. As soybean cultivation took hold in Brazil, it displaced other less profitable or labor intensive crops or agricultural enterprises. In the south, soybean farming eventually established itself alongside corn as the dominant summer cropping system. And as the nation’s agricultural frontier itself spread northward during the 1970’s and 1980’s to the remote plateau and savannah region of Mato Grosso do Sul, Mato Grosso, and Goias, soybean was in the vanguard, eventually becoming the most dominant field crop cultivated in tropical Brazil.
The expansion of Brazil’s soybean belt continues today, driven by rising global demand and the crops continuing profitability. The availability of vast acreages of relatively undeveloped or under-utilized land suitable to farming enabled Brazilian entrepreneurs to quickly take advantage of highly favorable conditions on the international soybean market by expanding their production capacity. The devaluation of the Brazilian currency in 2001 and 2002 provided a particularly stimulative effect, as it coincided with strong international demand for Brazilian soybean exports. The devaluation substantially increased the profitability of exported soybeans, which were priced in the stronger US dollar, and inflated the net financial returns of Brazilian soybean producers and exporters during the period. The repatriated profits from soybean exports fueled interest and investment in additional land for soybean production. In the last five years alone Brazilian farmers have increased cultivated soybean area by an astounding 8.4 million hectares. Historic record-breaking annual increases in sown area have occurred during the last three successive growing seasons (since the devaluation), averaging 2.5 million hectares of new soybean land each year. However, Brazil's soybean expansion can also be influenced by adverse market conditions. During 1998 through 2000, U.S. soybean prices averaged between $ 4.38 - 4.93 $/bu. and Brazil's soybean area experienced marginal or no growth. Therefore, the current growth rate may not be sustained unless soybean prices remain in a "profitable" range.
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The recent
soybean expansion has been evident all across the country, occurring to some
degree in virtually every state. The strongest growth has been registered in
the new farming regions of the Center-West and Amazonia, including the states
of Mato Grosso, Mato Grosso do Sul, Goias, Minas Gerais, Bahia, Maranhao,
Tocantins, Piaui, Para, Rondonia, and Roraima. In this collection of states,
categorized as the expansion states, soybean area has risen 97 percent or over
6.1 million hectares since 1998. By comparison, in the older and more
established farming region of the south, including the states of Rio Grande do
Sul, Parana, Santa Catarina, and Sao Paulo, growth has been more constrained.
In this collection of states categorized as the traditional states, soybean
cultivation has grown by 34 percent or 2.3 million hectares in the same
period. The slower overall growth in the southern states is attributed to an
array of issues including substantially higher land prices, comparatively
small scale of existing family farm operations, lower capitalization, and the
nearly complete regional utilization of existing arable land resources.
On a state-by-state basis the rate of soybean expansion has been varied, with the most robust increases occurring in the primary producing Center-West states of Mato Grosso (up 2.7 million hectares), Goias (up 1.3 MHa), and Mato Grosso do Sul (up 0.8 MHa). The remaining members of the expansion states that experienced significant growth rates in percentage terms, but who started from much smaller base acreage levels were Minas Gerais (up 0.5 MHa) and Bahia (up 0.2 MHa). In comparison, traditional southern producing states had lower overall growth rates but still witnessed substantial expansion. In particular, Parana (up 1.2 Mha), Rio Grande do Sul (up 0.8 MHa).
Soybean Yield
Brazilian soybean yields have shown remarkable growth in the past 15 years, increasing 78 percent since 1989. New high-yielding varieties developed for the humid tropics have greatly contributed to this growth, as have the modernization of production systems and increasing rates of fertilization. Average Brazilian crop yields eclipsed those achieved in the United States as recently as 1999, and have remained there in spite of a growing epidemic of the fungal soybean disease called Asian rust. Brazil’s continued predominance in global soybean yields, however, is currently in question as it gears up to sow a new crop in 2004/05. The United States is having a stellar growing season, and is free of the debilitating Asian rust problem.
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Brazil, by comparison, is still struggling to formulate an effective nationwide capability to combat the endemic disease and minimize its destructive effects. Asian soybean rust has rapidly spread throughout the nation’s soybean region during the past 2 years, decimating crops left unprotected by fungicides. The most significant losses have been centered in the important expansion states of Mato Grosso and Goias, which ranked first and third respectively in total soybean production in 2003/04. The government of Brazil has estimated that over 7.0 million tons of soybeans have been lost to the disease in these two states alone in the last two growing seasons, incurring a net financial loss of approximately US$ 1.95 billion. In addition to the outright crop losses, Brazilian farmers also incurred an additional US$ 1.2 billion expense to purchase agrochemicals (fungicides) to battle the disease. The reason for the massive crop losses is varied. In some cases, relentless rainfall prevented farmers from spraying effectively as the outbreaks developed, and in others growers simply gambled that rust would not affect their crops and left them unprotected. With Asian rust a permanent fixture of the soybean growing environment, Brazilian farmers will have to do a far better job of consistently managing this disease to limit unnecessary crop losses in the future.
The combined negative effects of Asian rust and a massive short-term expansion of the soybean belt are being seen on national and regional soybean productivity. As new land is brought into production, early soy crops typically yield from 2.0 to 2.5 tons per hectare. This compares to 3.6 to 4.0 tons per hectare on more established farms, where the soil has been adequately amended with lime over a period of years and where fertilization is near optimum. It generally takes 3-4 growing seasons before soybeans grown on newly cleared land begin yielding near their optimum levels. The substantial expansion in crop area seen over the past five years, therefore, has effectively had a moderating effect on national crop yield potential, with the bulk of that land yet to reach optimum baseline acidity and fertility. In addition, the heavy disease loads in recent years in high-yielding soybean regions of the Center-West has also had a dampening effect. The combination of these factors has led to a distinct break in the longer-term soybean yield growth rate, with current yields in the expansion states showing no growth or negative growth. The stagnation of soybean yields in the expansion states is also affecting the national situation, as 53 percent of Brazil’s soybean area and 62 percent of total production emanates from this region.
