SOUTH AMERICAN SOYBEANS PRODUCTION AND EXPORT SITUATION AND IT IMPACT ON GLOBAL MARKET Seneri Kernbeis Paludo Mato Grosso Agriculture Economic Institute
Agenda Brazil & Argentina Overview Short term production and export vision Medium to Long term production and export vision Remarks
Brazil & Argentina General Overview China Equator Brazil Argentina
Brazil & Argentina General Overview Brazil Argentina Area: 8,5 Million Sq Km (5 th ) Population: 199 Million (6 th ) GPD: US$ 1.9 trillion (10 th ) GDP Growth: 5,2% (2008) Exports: 1 st in Coffee, Sugar, Ethanol, Beef, Poultry Meet, Tobacco, Orange Juice; 2 nd in Soybean; 3 rd in Corn; 4 th Pork and Cotton. Area: 2,7 Million Sq Km (9 th ) Population: 40,9 Million (32 h ) GPD: US$ 5,7 billion (24 th ) GDP Growth: 6,97% (2008) Exports: 1 st in Soy Meal, Soy Oil, Peanut Oil; 2 nd in Sunflower seed Oil and Meal, Peanut; 3rd in Soybean, Sorghum, Corn. Source: CIA factbook
Brazil & Argentina General Overview Major Grain producers in the world 315 498 99 465 245 132 81 Source: USDA
Brazil & Argentina General Overview Major Soybean producers in the world 80 60 9 15 43 Source: USDA
Brazil & Argentina General Overview 120 hundred 40% tons 15% 200 hundred tons 25 hundred tons 45% 105 hundred tons 1. Production in every 6 month = JUST IN TIME OFFER 2. Concentration + Inelastic Demand = VOLATILITY
BR & ARG -Short term production and exports
BR & ARG -Short term production and exports + 5 million tons Brazil Production (million tons) 35 40 44 52 51 53 57 59 61 57 62 65,2 + 20,5 million tons + 25,5 million tons 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 Argentina Production (million tons) 21 28 30 36 33 39 41 49 46 32 53 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 54,5 Source: USDA
BR & ARG -Short term production and exports Argentina Agroconsult projections Planted Area (million tons) USDA 18,5 Production (million tons) USDA 52,5 54,5 11,4 12,6 14,0 14,4 15,2 16,3 17,0 17,8 19,3 30,0 35,5 33,0 39,0 40,5 48,8 46,2 32,0 Source: Agroconsult
BR & ARG -Short term production and exports Brazil Agroconsult projections Planted Area (million tons) 16,3 18,5 Conab 22,5 21,4 22,9 22,1 20,6 21,3 21,7 22,9 22,5 41,9 Production (million tons) 52,0 49,8 51,1 56,9 58,1 60,0 56,9 Conab 62,5 65,2 Source: Agroconsult
BR & ARG -Short term production and exports Underestimated Brazil Dom. Cons. (million tons) 21 23 25 27 29 29 28 31 32,1 31,4 31,6 Real 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 Argentina Dom. Cons (million tons) 18 18 22 25 26 29 33 35 36 33 36,6 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 Source: USDA
BR & ARG -Short term production and exports Brazil Exports (millions tons) Underestimated 15 15 20 20 20 26 23 25 30 23,7 11 Underestimated 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 Argentina Exports (millions Tons) 4,1 7,3 6,0 8,6 6,7 9,6 7,2 9,6 13,8 5,9 9,7 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 Source: USDA
BR & ARG -Short term production and exports How will this big production in South America affect prices? 0,8 Brazilian Soy Premiums Exports (cents US$ per bushel) 0,6 0,4 0,2 0,0-0,2-0,4 mai-09 jun-09 jul-09??? ago-09 set-09 out-09 nov-09 dez-09 jan-10 fev-10 mar-10 abr-10 March May Source: IMEA
BR & ARG -Short term production and exports Argentina Profit Margin 39 45 44 50 47 32 50 Yields(bags/ha) 981 Peso os/ha 808 475 143 264 327-154 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10* Source: Agroconsult
BR & ARG -Short term production and exports Paraná (South) Profit Margin 51 48 50 43 38 40 49 50 39 49 1.121 Yields (bags/ha) 1.001 R$/ha 528 754 851 384 265 207-73 -80 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 Source: Agroconsult
BR & ARG -Short term production and exports Paraná (South) Cost of Production -18% R$ 1.180,00/ha or US$ 678,00/ha Paraná (South) Profit Simulation (BRL/USD) CBOT (US$/bu) 7 7,5 8 8,5 9 9,5 10 10,5 11 1,50-158 -77 5 87 169 250 332 414 496 1,60-77 10 97 184 272 359 446 533 621 1,70 4 97 189 282 375 467 560 653 745 1,80 85 183 281 380 478 576 674 772 870 1,90 166 270 374 477 581 684 788 891 995 2,00 248 357 466 575 684 793 902 1.011 1.120 2,10 329 443 558 672 787 901 1.016 1.130 1.245 2,20 410 530 650 770 890 1.010 1.130 1.250 1.370 2,30 491 617 742 867 993 1.118 1.244 1.369 1.494 2,40 573 703 834 965 1.096 1.227 1.358 1.488 1.619 2,50 654 790 926 1.063 1.199 1.335 1.471 1.608 1.744 Source: Agroconsult
BR & ARG -Short term production and exports Mato Grosso (Midwest) Profit Margin 52 50 49 48 48 41 50 52 51 51 Yields(bags/ha) Source: Agroconsult
BR & ARG -Short term production and exports Mato Grosso (Midwest) Cost of Production -15% R$ 1.290,00/ha or US$ 709,00 /ha Mato Grosso (Midwest) Profit Simulation (BRL/USD) CBOT (US /bu) 7 7,5 8 8,5 9 9,5 10 10,5 11 1,50-471 -387-303 -220-136 -52 32 115 199 1,60-388 -298-209 -120-30 59 148 237 327 1,70-304 -210-115 -20 75 170 265 360 454 1,80-221 -121-20 80 181 281 381 482 582 1,90-138 -32 74 180 286 392 498 604 710 2,00-55 57 168 280 391 503 615 726 838 2,10 28 145 263 380 497 614 731 848 966 2,20 111 234 357 480 602 725 848 971 1.093 2,30 194 323 451 579 708 836 965 1.093 1.221 2,40 278 412 545 679 813 947 1.081 1.215 1.349 2,50 361 500 640 779 919 1.058 1.198 1.337 1.477 Source: Agroconsult
BR & ARG -Medium and Long term production and export
BR & ARG -Medium and Long term production and Export Competitiveness between South America and ROW How to solve this equation? South America: Items 1990 2009 Var. % Area 15,8 41,7 164% Production 29,3 95,5 266% Exports 8,1 39,3 386% Rest of the world: Items 1990 2009 Var. % Area 38,4 54,5 41% Production 75 115,1 53% Exports 17,3 37,6 117% It s South America able to keep increasing the production and export at the same tax rate from the past years? Source: USDA
Argentina -Medium and Long term production and Export Argentina Harvested Area (million hectares) 20 15 10 5-00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 Corn Soybean Wheat Sunflower From the total of 7,2 million hectares increased in the past 8 years, 64% occurred over Corn, Wheat and Sunflower areas. Source: USDA
Argentina -Medium and Long term production and Export Major soybean areas in Argentina: Consideration: 18,5 million hectares in 2009/10 season Some experts says that the maximum area will be 19 million hectares There are no more area to expand in Argentina Next target : Midwest Brazil Argentinean Group will harvest more than 200 thousand hectares in Mato Grosso in 2009/10 season. Source: Sagypia
Brazil -Medium and long term production and exports Brazil: From South to North 2008/09 57,1 MM tonnes MIDWEST 56% 1990 s 1980 s 1995/96 15,5 MM tonnes MIDWEST 48% 1960 s 1980/81 15,5 MM tonnes Source: Conab
Brazil -Medium and long term production and exports South Brazil Characteristics: 36% Soybean production 18,4 MM tonnes(2009), 36% of total Small scale producers (average < 500 hectares) High/Medium production risk (weather) High share of RR soybeans ( 71%) Official Farm Credit System is the main source of credit Strong Cooperative System Good soil quality low fertilizer use Low transportation costs -strong basis Source: Conab
Brazil -Medium and long term production and exports Midwest Brazil 56% Characteristics: Soybean production stated 33,1 MM tonnes(56%) Large scale producers (average > 500 hectares) Low production risk (weather) Medium share of RR soybeans (50%) Trading companies and input suppliers are the main source of short term credit Low soil quality High fertilizer use High transportation costs -weak basis Cotton, Sunflower and Corn as 2 nd Crops Source: Conab
Brazil -Medium and long term production and exports Large Midwest Farm Sapezal MT Soybean Harvesting No tillage (environmental friendly) Corn Seeding Scale mechanization Two crops in the same year without irrigation Harvesting(soybeans) and sowing (corn) in the same day
Brazil -Medium and long term production and exports North-East Brazil Characteristics: 8% Soybean production 5,2 MM tons (8% of total) Large scale producers (average > 500 hectares) Medium production risk (weather) Low share of RR soybeans (37%) Trading companies and input suppliers are the main source of short term credit Poor soil quality High fertilizer use Medium transportation costs -Good medium term perspective Source: Conab
Brazil -Medium and long term production and exports Soybean Expansion Projections: 2008/09 2019/20 Northeast 2.327 10.777 Midwest 13.096 18.618 South 9.610 9.530 0 5.000 10.000 15.000 20.000 Source: Celeres/WWF
Average Yields and Production Risk Brazil -Medium and long term production and exports Average Yields of Soybeans (2007/08) Standard Deviation of Yields of Soybeans AvaregeYield: Source: KleffmannGroup / Standard Deviation: Source: Burgo, Marcelo Nery Caracterização Espacial de riscos na agricultura e implicações para o desenvolvimento de instrumentos para seu gerenciamento ESALQ/USP Piracicaba, 2005
Brazil -Medium and long term production and exports Land Use in Brazil Specification Area (million hectares) Brazil 851 100% Pastures 173 20% Grain and Oilseeds(ex Soy) 25 3% Soybean 22,5 3% Sugarcane 7,5 1% Planted forestry 6 1% Park and Conservation Unit 128 15% Indigenous reserves 112 13% Legal and others reserves 378 44% % Sources: Embrapa, IBGE, Conab
Brazil -Medium and Long term production and Export Mato Grosso State has the higher transportation cost Source: Celeres
Brazil -Medium and Long term production and Export Main Route to China Transportation Cost MT (BR) x IA (US): Davenport - IA Sorriso - MT 2007 115,4 180,5 2006 76,9 136,8 Source: Celeres/WWF
Brazil -Medium and Long term production and Export Brazilian next railroads Source: Aprosoja
Brazil -Medium and Long term production and Export Brazilian next roads Source: Aprosoja
Brazil -Medium and Long term production and Export Brazilian next waterways Source: Aprosoja
Brazil -Medium and Long term production and Export Brazilian Ports North 5% 2% 5% 31% 12% 3% / Salvador 7% 17% 25% 8% 14% 36% South Source: Secex/Conab 16%
Soybeans are NOT in the Amazon Brazil -Medium and Long term production and Export ENVIRONMENTAL SITUATION AMAZON BIOME In 2007, only in 0,2% of total Amazon Biome area was planted with soybean SOYBEAN AREA Consensus Soy is not an important factor in the deforestation of the Amazon Biome, declared Greenpeace, WWF-Brazil and the Minister of the Environment Source: Embrapa
Brazil -Medium and Long term production and Export Environmental Issues In Brazil there is No Environmental Problem, in fact there is a Legislation Enforcement Problem. Amazon: Three different concepts Amazon RainForest Amazon Biome Amazon Rain Forest Legal Framework Environmental legislation Federal Law; State Law; Legal MT; Forestry Law (discussion in Brazilian congress); Environmental Law (discussion in Brazilian congress);
Remarks Short term If SA record production becomes a reality there will be a bear market Short term Concentration of production must have a good management risk for consumer countries Medium term SA must find a way to keeping increasing production to meet global consumption Medium term Argentina is growing at full capacity (most increase in yielding investments) Long term Insufficient logistics in Brazil (needs investments) and Legal Environmental Issues are lowering production rates
THANKS! Seneri Kernbeis Paludo Mato Grosso Agricultural Economics Institute IMEA In Memorian of Dario M. Hiromoto