Brazilian agricultural analysts are forecasting that farmers in the booming tropical country will scale back their investments after a couple of years of drought, rising costs and poor profits.
The director of Brazil’s Agribusiness Association last week forecast smaller soybean acreage when farmers head to the fields later in the year.
Analysts Agroconsult stuck its neck out with an estimate of a nine percent drop in soy acres, or about five million acres.
We’ve heard lots in recent years about the enormous expansion of Brazil’s agricultural economy, particularly soy area, which grew to 56.4 million acres last year from 34.4 million in 2000.
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But the last two years have seen big problems, first with Asian soybean rust and then with drought. Also, soybean prices have been weaker this year and the Brazilian currency has appreciated against the American dollar, leading to net losses on many Brazilian farms.
The field of agricultural financing is not as sophisticated in Brazil as it is here and that could cause significant problems for farmers buying seed and inputs.
If the forecast for reduced soy acreage proves true, it will be a welcome relief.
You could say that the oilseed markets have dodged the bullet the last two years. At this time in 2003, Brazil’s soy crop was forecast at 56 million tonnes. It harvested 52.6 million tonnes.
Last year, the estimate was for 66 million tonnes. It harvested only 53 million.
If the forecasts had been true, today’s world oilseed stocks would have been much higher and oilseed prices, including canola, would have been lower.
Let’s hope that the early forecasts of reduced acreage come true, allowing world demand to catch up to Brazil’s productive capacity.
