Latest / Closing Market Report / 2025 ADAO | South America Production Update

Transcript

2025 ADAO | South America Production Update · Closing Market Report

• 0:00
  Todd Gleason: The following presentation by farmdoc member from the University of Illinois Department of Agriculture and Consumer Economics in the College of ACES, Joanna Colucci, was recorded on the March at the Beef House in Covington, Indiana during the annual all day ag outlook.
• 0:17
  Joana Colussi: Today, I'm gonna talk about, crop, prospects in South America, with focus in Brazil, Argentina, and, Paraguay. I was in Brazil last month. During my stay there, I visit some, soybean farms and corn, fields in the state of Rio Grande do Sul, the southernmost state, in Brazil. So we have completely different situations when you compare the South Of Brazil and the Center West Of Brazil. I'm talk a little bit more about that.
• 0:56
  So you can follow me, in the handouts, that you have on the tables if you want. So what's going on so far in soybean season? So as March 2, actually last Sunday, half percent of soybeans were harvested in Brazil. Like I said, we have yield reductions in the South Of Brazil, especially in Rio Grande do Sul due to the drought, again. In four years.
• 1:26
  This is the third time that there is a drought in the South Of Brazil and also in Argentina because of La Nina. But there are excellent yields in the Central West States. So even though this drought in the South Of Brazil, soybean crop is forecast to hit a record over 6,000,000,000, bushels. This is 12% increase from last year. You can see in the slide four, we can see the numbers regarding the last decade.
• 1:59
  As you can see, the acreage 117,000,000 acres this year in Brazil. Last year was 114,000,000 acres. So if you look in the slide five, private private consultancies have higher projections for Brazil Twenty Four, Twenty Five crop season. Some private consultancies are very optimist with projections between 6,200,000,000 bushels and 6,400,000,000 bushels. Some adjustments may be made in the March reports.
• 2:43
  For example, Kona will release its report next Thursday, March 13. Maybe we'll have some adjustments, especially related to the soybean crop in the South Of Brazil. But in Mato Grosso state, do you know that Mato Grosso produces over a quarter of Brazil soybean crop? Mato Grosso reached a record harvest, up 20% compared, to the previous season that was hit by a drought. Like I said, in Rio Grande do Sul, the situation is very different.
• 3:24
  The state are suffering again with droughts. The lack of the rain has started in the January. Until December, the December, the situation was good. There was very similar than, Argentina. As you can see in the slide eight, the yields are very inconsistent across the country, Which most of the areas with excellent and good yields, as you can see in the green areas, and also in the orange areas.
• 3:54
  So in the green areas, we have some states with 60, bushels per acre, like, Matogrosso, Goyas with 61, bushels per acre. We also have good yields in the Matopiba region. Matopiba region is considered the new agriculture frontier in Brazil. It's format by four states, Mariel, Toquincinz, Piaui, and Bahia. They are having good yields there.
• 4:26
  And the exceptions are in Rio Grande do Sul and Mato Grosso do Sul. By the way, I forgot to mention, we have two more Brazilians here on the stage. That they are specialists in soybean production in Brazil. So I'm sure they will help me to answer the questions you may have. Vito, Vareto, and Marley, thank you so much for coming this morning.
• 4:51
  So, if you go back, look at the slide nine, please. Over the past five decades, Brazil soybean yield growth has been faster than United States. And yield levels in the two countries have been about the same in recent years. You can see the national average soybean yield for The United States and Brazil. It's, trained since 1974 until 2020, '3.
• 5:24
  But in spite of the overall linear trend that you can see, in the last five decades, soybean yield trend in Brazil has shown significant variation as you can see on the map. With some regions increasing yields faster than others. We can see the difference in four regions. So South Of Brazil, you can see the variation. Center West Of Brazil, Southeast and Mapo Piba.
• 5:54
  So we'll not have so much time to touch on that, to try to analyze the difference between the states and the regions. But in summary, in the Center West states, the weather there, the climate is much more stable than in the South Of Brazil. So in the South, South Of Brazil, we never know how the weather will be. So it's different than in the Center West, where there is the wet season and the dry season. So it's easier for farmers to know how the how the weather, will be.
• 6:32
  And also in that region, there are much more big farmers that they are capable to invest, much more, sometimes in machinery, technology, so more investments as a whole. So, anyway, let's focus on the current projections. Look the slide 11, where we show the soybean exports in the last decade, and also a projection from this year. Soybean exports could reach a new record this year. The projections are based on record harvests, and also in a high favorable exchange rate.
• 7:15
  Brazilian currency depreciation against the US dollar, often benefits farmers by making exports more competitive. Although raises the cost of the inputs, like a fertilizer, seeds, not so much seeds, more fertilizers and pest sites. But overall it's good for Brazilian farmers when we have Brazilian currency depreciation. So Mark indicates that the Brazilian real will continue trading at around 6 rials to $1 in 2025. Just for you have one idea about the depreciation of the Brazilian currents, two, three years ago, $1 was equal for 4.5 rials.
• 8:09
  Nowadays it's almost 6. And, also if you look at slide 12, you can see the China's share of The United States and Brazil soybean exports. I'm not talk so much about that international market, Joe talk about that. I'm sure that Jonathan Kops will touch this afternoon in the possible implications around the tariffs. But in this graph, you can see, you can have one idea about the effect from the trade war that have started in 2018.
• 8:49
  When Brazil, when the China's share of Brazil soybean exports was over 80%. And that time, that year, the American share was 18%. So in the last year, 2024, the China's share of Brazil exports was, soybean exports 73%. Meanwhile, the share from America was 52%. So I guess we are done with soybeans so far, at least in Brazil.
• 9:24
  So let's move on to corn production. We are on the slide 13. If you'd like to follow me, look in the handouts. So as March 2, 70% of the second crop corn that we call saffrona. Saffrona is little harvest in Portuguese, but nowadays it's responsible for almost 80% of the total corn production in Brazil.
• 9:48
  But 70% of the second crop corn was planted. The planting season, it's a little delayed compared to last year due to excessive rail fall in the Center West. Remember that I said that there is drought in the South Of Brazil. So La Nina year drought in the South Of Brazil and Argentina. And rail falls in the Center West Of Brazil.
• 10:14
  When you have a year, it's the opposite. Last year, do you remember that faced a drought? So and Argentina and South Of Brazil, they have good amounts of rainfall. So even though, there's a little bit delay in planting season, when I say saffronia, I'm talking about the second crop that is planted right after the soybean, harvest. Let's say that I'm a farmer in Maputo Grosso, the day that I'm harvesting my soybeans in January.
• 10:53
  In February is the same day that I will plant my corn. Sometimes in the day after, but not more than that. The window is very short to plant a second crop in Brazil. But even though this challenge, the total corn is expected to reach 4,800,000,000 bushels, a 5% increase compared to last year. Take a look at the numbers regarding corn production in slide 14.
• 11:24
  As you can see, the acreage is pretty stable. 52,000,000 acres, almost the same compared to last year. But the production last year, 4,500,000,000 bushels. This year, the expectation is 4,800,000,000 bushels. Again, the second crop is just starting in Brazil.
• 11:46
  There are a lot of stuff to happen from now until June, July when the corn will be harvested in Brazil. Look at slide 15 and you can see the total corn production in Brazil in three crops per year. So as you can see, the second crop, the safrinha, is responsible for almost 80% of the total corn production in Brazil. Followed by the first crop that's concentrated in the South Of Brazil. And the third crop that have started, few years ago and is concentrated in the Northeast Of Brazil.
• 12:26
  And the safrinha, I'm not a specialist in biofuels, but I'm touch a little bit in this topic because the safrinha is very important for the Brazil's ethanol boom. Corn ethanol plants have begun a appearing in the in the last decade in the Central West states. When I say that sounds a little bit weird for Americans, but for Brazilians, do you know sugarcane is the man's source to produce, ethanol. It's not corn. So, nowadays there are 20 ethanol plants in Brazil using corn as a feedstock.
• 13:07
  These ethanol mills are capable of producing ethanol either using corn or sugarcane or corn only. We call full corn plants or flax plants. When the units, they can use either corn or sugarcane. And in two years, the corn ethanol production, could double in Brazil reaching 12,000,000,000, liters. We can see in the slide 17, the corn ethanol production growing in Brazil.
• 13:43
  And if you go back in 2017, the corn ethanol production in Brazil was zero. Nowadays represent almost 20% of the total corn production, sorry, the total ethanol production in Brazil. It's still 82% of the total ethanol in Brazil is produced from sugar cane. And the remaining 18% is produced with corn. There is forecast that the corn could reach a share of 30% in five years, seven years.
• 14:25
  So moving on in the slide 18, we can see the total corn exports, by The United States and Brazil. So I don't know if you remember, but in November 2022, China opened its market to Brazilian corn for the first time. So in 2023, not by a coincidence, Brazil became the number one in corn exports. Just this year, we know that America is much bigger in corn exports and production, as well. But the situation changed in 2024.
• 15:02
  The recovery of supply in major producing countries like in Argentina, in The United States, in Europe, in Ukraine. So and the decline in Chinese demand have contribute to a slowdown in Brazil's corn exports in 2024. If you compare 2023, Brazil exported 2,200,000,000 bushels. And in 2024, Brazil exports 1,500,000,000 bushels. So there was a decline, almost 30%.
• 15:40
  And the two factors that explained that were the decline in Chinese demand, like I said, and the recovery of the supply in major producing areas. When you think about the decline in Chinese demand, you can see in the slide 19, that China's share of The United States and Brazil, corn exports. As you can see in the graph, Brazil's corn exports to China sharply declined, dropping China's share of Brazil's corn exports from 29% in 2023 to 6% in 2024. So The United States also reduced its, share to China. So there are a lot of factors that explain that.
• 16:29
  We know that China is trying to reduce its dependence of the international market. When you think about soybeans, China imports by year around 100,000,000 metric tons. And regarding corn, China imports around 20,000,000 metric tons. So the dependence related to China is much lower compared to, related to corn, sorry, is much lower compared to the dependence related to soybeans. But even though they are trying to approve some new varieties in China, GMO varieties, to be able to increase its production and, reduce its dependence from Brazil and also United States.
• 17:16
  I don't know how much time I have, Taj. Just for a because Oh, that's perfect. So let's move on to crop prospects in Argentina. I need ten minutes to talk about Argentina. That's enough.
• 17:32
  Twenty minutes for Brazil and ten for Argentina. You agree? I'm just doing this calculation, look at the number of the acres that Brazil plant and Argentina. And also two minutes for Paraguay. So what's going on so far in soybean season in Argentina?
• 17:52
  So I don't know if you are reading the recent news, but rains relieved much of Argentina's agriculture land in the last, two weeks. Since February 1920, the situation completely changed in Argentina. Precipitation over many regions has prevent any new cuts to the Argentinian soybean harvest and corn harvest, as well. And the rate of fall is likely to continue over the next few days, in Argentina, helping even more. Remember, Center West Of Brazil, the calendar is a little bit different than the calendar in Argentina and in South Of Brazil.
• 18:38
  The harvest season in the Center West Of Brazil is in January, February. The harvest season in the South Of Brazil and Argentina is in March and April. In Argentina, in some regions, even in May. So it's a little bit, different compared with, Central West Of Brazil. So, take a look at the numbers regarding soybean production in the slide '22.
• 19:08
  The the projection that Argentina will reach 1,800,000,000 bushels, a bit higher than last year. And like I said, the harvest will start in the end of this month. We can see in on the map, in the slide '23, the soybean crop conditions, it was in February 20. Favorable conditions that are the green areas in most part of the country. We have some concerns in the yellow, parts that you have regular, conditions.
• 19:42
  So if you look the in slide 24, we can see some pictures that were taken in different regions in Argentina. In Argentina, they have the early soybeans and the late soybeans. 80% of the production is early soybeans. The and the late soybeans is around 20%. So we have different situations.
• 20:09
  See, these pictures were, taken in the La Pampa in Buenos Aires, province. And you have completely different situations. We also have this variation regarding corn. The early corn and the late corn. So the early corn and the early soybeans suffered less than the late corn and late soybeans.
• 20:34
  Because of the weather variation. The drought in Argentina with very high temperatures, started in the January. Very similar than in the South Of Brazil. I was there, it was very hot. With the temperatures close to 100 Fahrenheit.
• 20:54
  And almost no rain. But the situation changed, significantly after February 20. Of course, there are some fields that is not possible to recover, but there are others that it is possible. So a little bit about what's going on in corn season in Argentina. The recent rail falls have also slowed down early corn harvest, even though it was very helpful for soybeans and for some late corn.
• 21:25
  As well, it caused a little bit delay in the harvest. Early corn harvest is underway in Argentina right now. It's about 10% of the corn crop harvested. Like I said, there were drought conditions and hot temperatures until the February. So let's move on, to and see the numbers regarding the total corn acreage and production in Argentina.
• 21:55
  Last season, as you can see, there was a drop in the planted area in Argentina for corn from 25,000,000 acres to 19, million acres. A decrease over 25%. Last season corn faced significant losses, in Argentina in the very end of the season. Because of bacteria which stuns crop growth. And because of that, many farmers have decided to reduce the corn planted area.
• 22:31
  Because they were afraid that this challenge could happen again. And they decreased the corn area and they increased the soybean area. Argentina is like Illinois, Indiana. They don't have double cropping between corn and soybeans. They have corn and soybeans in the first season, and they have wheat as a second crop during the winter time.
• 22:59
  So farmers, they must to decide between corn and soybeans. Different than in the Center West States, in Brazil that farmers can do soybeans in the first season and corn in the second season. So we can see the numbers regarding corn production in Argentina, One Point Eight Billion bushels. That's the last forecast from the Rosario Board of Trade. We have also some numbers regarding the, Bolsa de Cereales de Buenos Aires, the, ex stock exchange from Buenos Aires.
• 23:33
  The numbers are a little bit down than that. But we'll see. We still have some time for Argentina, in March. So, and on the map in the slide 27, we can see the corn crop conditions after the recent rail falls. I'm almost done, Todd.
• 23:51
  I'd like to talk a little bit about the economy in Argentina. You may remember last year that I mentioned about the inflation in Argentina, about the poverty in Argentina. So overall, we can say that Argentina economy has started to show, some signs of a recovery. And Argentina Producers have recently received some good news, at least for them, related to the reduction of the tariffs on exports. So Argentina is going a different direction than The United States reducing the, tariffs.
• 24:28
  So the Javier Millet government has cut tariffs on exports. The famous retinciennes of soybean meal and oil from 31% to 24%. The tax on soybean grain was reduced from 33% to 26%. And also they reduced the tax on corn. This was announced in the January, and will take place until June.
• 25:00
  There is expectation that the Argentinian government could reduce even more the tariffs in the second semester of the year. One minute for, Paraguay. Is that okay? Yeah. So crop prospects in Paraguay.
• 25:18
  Let's take a look on Paraguayan projections, what's going on so far. As February 28, around 85 of the soybeans were harvested in Paraguay. We have different situations, across the country. Yield reductions in the North regions due to drought and good yields levels in the South regions. The soybean crop is forecast at 320,000,000 tons in Paraguay, a 20% decrease from last year's record harvest.
• 25:52
  My last slide, thirty first. Look the South American soybean production as a whole, considering Brazil, Argentina, Paraguay, and Uruguay. While the next few days, I would say, or few weeks is still important for the crop season in Argentina and in the South Of Brazil. It's hard to imagine a shift that would change completely the outlook for a record harvest in South America. As, I mean we have some reductions in Paraguay, but we have increase in Argentina and a huge increase in Brazil with a record harvest.
• 26:35
  So in this scenario, we're likely to keep the global prices under, pressure. So there are a lot of soybeans coming from the South America in the next few, months. Thank you so much for your attention. I'm very happy to take any questions you may have.
• 26:55
  Todd Gleason: Thank you. Who's got it? Oh, yeah. We've got more than one question. Let's start over here.
• 26:58
  Yes, sir? In in slide four, has Brazil actually increased acreage by 35,000,000 in the last ten years? Yeah.
• 27:09
  Joana Colussi: Yeah. That's correct.
• 27:10
  Todd Gleason: That's probably correct. Yeah. Is that a trend line?
• 27:13
  Joana Colussi: Yeah. And
• 27:14
  Todd Gleason: Does the trend continue?
• 27:15
  Joana Colussi: Yeah. And if you think about the future expansion, there is a potential that Brazil could add Of course, there is land available. I'm not saying that it will happen. But when you think about land available, there are 70,000,000 acres that could be converted from degraded pasture land into cropland in Brazil. What is degraded pasture land?
• 27:43
  It's the areas, it's not Amazon. It's not native vegetation. It's areas that nowadays are occupied by livestock. Cattle production. And this area are not productive, so for the ranchers, it's better to sell this land or to rent this land into crop land.
• 28:04
  So there is a forecast that Brazil, it's not a forecast, it's a stud that shows that there is around 70,000,000 acres that could be added to agriculture production in Brazil. That's, the land available is one factor we know. There are a lot of factors at play, like international markets, Chinese demand, Brazilian currency. But yes, these numbers are correct. Even though very impressive.
• 28:33
  Todd Gleason: Yeah, and recall that it's it may not be new lands either. It it may just be that it's the second or the third crop that is being planted on the same same land. So here in The United States, we have second crop, soybeans or beans after wheat, and they have which is nominal in The United States, not nominal. I can't remember what that number is. I read it in the CONAB number, I think in the CONAB report last month.
• 29:00
  25% or 20%. I don't quote me on that one. But it is a it's a big figure by comparison. It's enough to make a huge difference in the number of total acres and production
• 29:11
  Joana Colussi: that we have. Yeah. Thank you for this complex. This 70,000,000 acres is just degraded pasture land. But also there are 40,000,000 acres that could be occupied as a double cropping.
• 29:25
  Because nowadays less than 50% of the soybean area in Brazil is occupied by corn as a second crop. We can say that the corn production in Brazil could at least double if they just occupy the same area that they use nowadays for soybeans. So I am talking about 100,000,000 acres that could be add to Brazilian agriculture.
• 29:50
  Todd Gleason: Yes, sir. Acres. So he has the same question about adding acreage. Is there a price level at which soybean producers simply won't do that?
• 30:03
  Joana Colussi: I would say the current, price is the limit. Less than that could be very difficult, tough, but there is another factor in Brazil. Here in The U. S. Dollar is dollar.
• 30:16
  So $10 per bushel is $10 today, next year. But in Brazil, we have the depreciation we have the Brazilian currency. So farmers, they sell the soybeans in dollar, but sometimes they sometimes not. They calculate that as real. So if you have a very, high dollar in the Brazilian market, they can offset the low price of soybeans.
• 30:41
  And that happens in the last two or three years. Two years at least.
• 30:46
  Todd Gleason: Yes?
• 30:48
  Joana Colussi: Yeah.
• 30:49
  Todd Gleason: Does Brazil face the same issue with China related to its population coming down?
• 30:56
  Joana Colussi: Yes. And I would say that the Brazilian risk is much higher than the American risk because Brazil the Brazilian dependence of the Chinese imports is huge. If you think about soybeans, it's over 70%. But Brazil also sell a lot of beef to China, chicken, so the if the Chinese demand decrease, Brazil must find some alternatives. And it's hard to find out alternative to replace China.
• 31:29
  Right? There is this huge concern in Brazil.
• 31:32
  Todd Gleason: Paul Cooley in the back and then you. So it's a policy question about a tear an incoming tariff on US exports of ethanol to, Brazil and whether that will be addressed or not.
• 31:48
  Joana Colussi: Yeah. This is a controversial topic. Maybe Scott O'Ree could be the best person to answer that Or Jonathan Cox. This afternoon.
• 31:58
  Todd Gleason: So we can we can wait.
• 31:59
  Joana Colussi: Yeah. I mean, yeah. Regarding sugar also, it's a controversial topic because there is this, tariffs to protect the the domestic market. Brazil has increased a lot, the internal production made by corn, like I said. But to be honest, I don't know if the situation will change, at least in the short term.
• 32:23
  I don't know. Maybe we need to.
• 32:26
  Todd Gleason: Yeah. Why did Brazil begin to produce ethanol? What what happened that caused 21 new plants to be put up?
• 32:37
  Joana Colussi: Yeah. There is 20 there are 21 right now and plus nine that we will start the operation, I would say, in the next two years. The answer is, simple. The availability of the corn in the Center West. So when you think about the ethanol plants, with sugarcane, they are concentrated, in the Southeast Of Brazil, in Sao Paulo, region, as well because of the sugarcane, availability there.
• 33:15
  But in the during the I mean, this history is a little bit longer. But during the many years, the soybeans were the priority in Brazil. I know that in US sometimes corn is the priority, soybeans is the second priority. In Brazil soybeans is still the priority. Farmers make much more money with soybeans than corn.
• 33:37
  Because they produce less corn on average in terms of yields. But the availability of a lot of corn, the safrinha, the second season in the Center West Of Brazil, Mato Grosso, Mato Grosso Do Sul, Goya created this opportunity to use, corn as a source to produce ethanol. And also these plants, they are flax, so they can use sugarcane because we know that we cannot storage sugarcane. So, now they can use the sugarcane during the season of the sugarcane and they can use corn during the season of the corn. Or they can storage corn and use corn, any time of the year.
• 34:22
  So answer your question, what created this opportunity was the amount, the availability of the corn production in the Center West. And that's helping to increase the value of the corn in Brazil.