September 29, 2000

PROSPECTS FOR THE 2000/01 BRAZILIAN SOYBEAN CROP

Prospects for the 2000/01 soybean crop in Brazil are very favorable. Rainfall conditions during September have been normal to above normal in many parts of Brazil. Soybean crop production is forecast at the trend value of 32.8 million metric tons, or about 4 percent above last year. Soybean production could go higher if rainfall conditions during planting remain favorable. Harvested area is currently forecast at 13.4 million hectares, or about 1 percent over last year, with a yield of 2.45 metric tons per hectare. Prior to planting, farmers in Brazil pay close attention to soybean prices on the Chicago Board of Trade (CBOT). Relatively higher soybean prices during August and early September 2000 encouraged many farmers to execute forward contracts in an effort to finance their planting operations. Since then soybean prices have declined through September 18th, but are once again beginning to rally. On the other hand, domestic corn prices in Brazil are currently extremely favorable due to last year’s drought, and the adverse impact of the freeze on the Safriha or second corn crop. The Brazilian government’s decision to restrict the import of GM corn helped boost the domestic price. Consequently, any soybean area increases in the Center-West states of Mato Grosso, Mato Grosso do Sul and Goias during the 2000/01 growing season are likely to be moderated by a shift from soybeans to corn by some farmers in the Southern states of Parana, Santa Catarina and Rio Grande do Sul.

BACKGROUND:

Brazil, after the United States, is the world’s second largest producer of soybeans. In 1999/00, Brazil produced an estimated 31.4 million metric tons of soybeans from a harvested area of 13.3 million hectares with a yield of 2.4 metric tons per hectare. The main soybean producing states (Fig. 1), based on a five-year (1995/96-1999/00) average, include: Parana (23% of national production), Mato Grosso (22%), Rio Grande do Sul (18%), Goias (11%), Mato Grosso do Sul (8%), Sao Paulo (5%), Minas Gerais (5%), and Bahia (4%) (Fig. 2). Together, these states account for about 96 percent of the crop. During the 1999/00 growing season, Mato Grosso surpassed Parana to became Brazil’s leading producer of soybeans. Soybeans are generally planted during October through December, and harvested between March through May.

Soybean yields in Brazil have been steadily increasing since the mid-eighties, the linear trend accounts for about 84 percent of the variation in crop yield (Fig. 3). High yielding varieties, improved cultural practices, increased fertilizer usage, combined with the advent of large-scale corporate farms with access to credit are some of the key contributing factors burgeoning Brazilian soybean production. The Brazilian Agricultural Research Corporation (EMBRAPA) has developed and introduced several high yielding soybean varieties, such as BRS-66, BRS-137, BRS-138, BRS-153, and BRS-154, that are well suited for local growing conditions. The importation of genetically modified (GM) soybean seed varieties is currently banned by the Brazilian government. The recent leveling-off in yields (Fig. 3) is partly due to the reduced application of technological inputs induced by stagnant global soybean prices. Rio Grande do Sul suffered yield reductions due to back-to-back droughts during the 1998/99 and 1999/00 growing seasons. The La Niña driven drought of 1999/00 adversely impacted yields in Parana, Mato Grosso do Sul, Santa Catarina, and Sao Paulo, while crop conditions elsewhere remained very favorable.

Time-series of harvested area for soybeans, corn and cotton are shown in Figure 4. Cotton acreage has been steadily declining primarily due to a shift away from cotton in states such as Parana and Sao Paulo. Corn acreage has also been declining, but at a significantly lower rate than cotton. On the other hand, soybean acreage has been rapidly increasing since the mid-eighties. This increase in soybean area can be attributed to: (1) market factors such as a favorable soy-corn price spread, forward contracting and ease of marketing favor soybean production over both corn and cotton; (2) continued expansion into the Cerrado region within states such as Mato Grosso, Mato Gross do Sul, Minas Gerais, and Bahia; and (3) large-scale deforestation taking place in Rondonia, parts of Mato Grosso and Mato Grosso do Sul as shown in Landsat imagery (Fig. 5). The proximity to shipping channels along the Amazon is also encouraging deforestation in the northern states of Maranhao, Para, and Amapa. The inter-annual fluctuations in harvested area around the trend line (Fig. 6.) are driven by agricultural policies, market factors, and weather.

Time-series of soybean production and its trend are shown in Figure 7. The linear trend explains about 82 percent of the production variation. The bumper crop of 1997/98 is attributed to extremely favorable rainfall during the El Niño event, while the reduction in output in 1999/00 is attributed to the drought which hit the southern states.

For more information, contact Rao Achutuni with the Production Estimates and Crop Assessment Division on (202) 690-0140.