Jul
10
Some agricultural good news for Brazil
Behind the headline noise of an ongoing currency war, a possible credit bubble, and a slide in sugar production, one crucial part of Brazil’s economy, grain output, is plodding quietly and steadily ahead.
On Thursday, the country raised output projections for the 2010/2011 harvest to 162m tonnes, an 8.6 per cent rise on last year and an all-time record for the batch of commodities, which has been boosted by expansion of farmland in Brazil’s fertile interior and the persistence of hungry people worldwide.
Soya – Brazil’s most important agricultural export and almost half of grain production – corn, cotton, beans, and rice are all seeing bigger crops on more land, according to the most recent survey from Conab, the national food supply company.
Along with iron ore, agricultural exports have become increasingly important for the Brazilian economy, and new, sophisticated agribusinesses have been pushing quickly into the country’s heartland. The area dedicated to grains is up 4.4 per cent in the last year, to 49.5m hectares. Brazil, almost twice the size of the European Union, certainly has more room for the industry to grow.
Soya output for this year’s harvest is projected at 75m tonnes, up 9.2 per cent on last year. Corn should hit 57.1m tonnes – though recent weather concerns may bring that number back down. Cotton took the biggest jump in terms of land covered, up 66 per cent to 1.39m hectares, which should pump out 2m tonnes. Rice output is up 17.8 per cent, to 13.7m tonnes, and the 3.8m tonnes of beans harvested will be 14.3 per cent more than last year.
Soya is Brazil’s second most important export, accounting about 9 per cent of goods shipped abroad last year. In dollar terms, sales have jumped this year so far on 2010, powered by high commodity prices, but volume of exports dropped 1.6 per cent in the first half of 2011, after China, the main international consumer of Brazilian soya, cut demand by more than 10 per cent.
Though making up much smaller share of export revenues, the external market for Brazilian corn, in terms of volume, is up 36 per cent on the first half of last year, despite a rapid slowdown in the past month. At the moment, record cold temperatures and crop freezes are decreasing output. It was not only weather, but a government decision to focus on ethanol, that was behind Wednesday’s announcement that Brazilian sugar production would drop for the first time in five years.
The majority of Brazil’s rice and beans stay in the country, but exports of the former should see their best year ever, shipping abroad about 1.4m tonnes, or about 10 per cent of this year’s record output.
Despite short-term movements in prices, output, and the crucially important Chinese demand, the long-term prospects for Brazilian agriculture are clear – farm land and grain harvests expanding at a healthy clip, as long as the world is still hungry for them.