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Commodity Intelligence Report
March 30, 2007

Record 2006/07 Soybean Crop in Brazil

Soybeans are currently being harvested in Brazil’s Center-West including the major soybean producing state of Mato Grosso.  Soybean harvest peaks in late March to early April and continues into May in the southern states, particularly in Rio Grande do Sul. In its March 2007 estimate the USDA forecast a record soybean crop for Brazil of 57 million tons, which is 4 percent larger than last year’s crop, despite a 5 percent decrease in area.  A yield of 2.7 tons per hectare is expected, which is the highest yield since 2002/03 due the serious problems with Asian soybean Graph of Brazil's increasing soybean production.rust and drought over the last three years.

While wet conditions during the middle of February threatened quality and yield in the number-one producing state of Mato Grosso, and in the secondary regions of the Northeast, sunny and dry weather arrived at the end of February allowing beans to dry and harvest to resume. According to the March 2007 report of Companhia Nacional de Abastecimento (CONAB) of Brazil's Ministry of Agriculture, yields have been revised upward in Parana, Mato Grosso do Sul, Santa Catarina, and Rio Grande do Sul.  These state yield increases have more than offset localized yield losses in Mato Grosso due to wetness.

As of mid-March, Mato Grosso was 42 percent harvested, compared to 31 percent harvested this time last year. Parana was 19 percent harvested compared to 16 percent a year ago. Rio Grande do Sul is the last state to be harvested; approximately 1 percent of its crop has been collected.  Mato Grosso, Parana, and Rio Grande do Sul account for approximately 29, 18, and 13 percent of the total production, respectively. As of mid-March total harvest progress was 18 percent complete, compared to 13 percent on average. 

Soybeans in the South

Piechart of soybean production by state.During the last two weeks of January, FAS personnel traveled to the soybean regions of southern Brazil, specifically Rio Grande do Sul and Parana. Both Rio Grande do Sul and Parana produce 12% of the total soy crop, respectively. In southern Brazil, February 8 through 23 is the critical period for soybean development, during which rain is critical for fluorescence and pod setting.  In Parana the precipitation distribution has been very favorable, thus soy development was very good.  Some fields were expecting yields as high as 4 tons/ha in this area.  The state soy yield average for Parana is expected to be about 3 tons/ha. While weather has been nearly ideal in southern Brazil this year, the main reason yields may be less than ideal is because of Asian soybean rust.  Most farmers usually apply two preventative applications per year, but rains have been abundant this year making it difficult to get spraying done at optimal times.

As of early February, farmers in southern Brazil appeared hopeful because prices have risen since late 2006, and weather has been optimal.  Farmers are continually watching prices at the Chicago Board of Trade, as indicative of prices they receive.  As of February 2007, Batavo Cooperative in south-central Parana has already sold 60,000 tons of this year’s crop at US$14-15/60kg bag. With these prices farmers will be able to make large payments on their debt.  Soy and corn contracts have been at a record high at several of the cooperatives FAS personnel visited in central Parana.  Cost of production is US$12/60-kg bag in Parana.  On January 16 the price for soy was US$15/60-kg at farm gate (the elevator/cooperative pays for transport and freight). Farmers in the South sell about 80% of their soybean crop through cooperatives, and consequently rely much less on multinationals for selling/export, compared to farmers in the Center-West and Northeast.

Close up photo of two high-yielding soybean plants in Parana.Photo of healthy soybean field in Parana.

Above Left: Two high-yielding plants in Coffeelandia, Parana. Above right: healthy soybean field in western Parana.

Soybeans in the Center-West

In February 2007 FAS personnel visited important soy areas in Mato Grosso, specifically in the area spanning Sorriso, Campo Verde, Primavera do Leste, and Rondonopolis. Soy yields near Sorriso were expected to be 3.3 tons/ha and the breakeven price, was about US$8.50 – 9.00/60-kg bag.  February wetness was a problem for some areas in Mato Grosso, particularly in the northern part of the state, which reduced quality and some yield prospects.  Many areas of Mato Grosso, however, received very good rainfall, helping to offset yield losses due to wetness.

Soybeans near harvest in Mato GrossoAsian soybean rust is less of an issue this year because farmers have been preventively spraying, usually two times per season, thus yields are expected to be higher this year than the previous two years due to better rust management, greater availiability of fungicide and generally good weather.  Yield in Mato Grosso is expected to be around 3 tons/ha.

Infrastructure, by far, is the most challenging issue to producers and agribusiness in the Center-West.  Today there are not many transportation options and 75% of the soybeans from Mato Grosso going to Santos or Paranagua ports by train or truck, with train being much less expensive (yet less common). The building of the road to Santarem has big obstacles such as the money to build the road as well as environmental issues, so reaction to this prospect was skepticism.

Above: Soybeans near harvest in Mato Grosso.

Soybeans in the Northeast

The new expansion of soy in the northeast abruptly halted last year because of the low price of soy and the unfavorable exchange rate. This area was traditionally in cattle production, which is very developed.  One farmer near Araguaiana, Tocantins said that the early planted soy in his area was in very good condition; the later planted soy, however, suffered from a bout of dryness and is in a slightly poorer condition. He was anticipating yields to be around 3.3 tons/ha.  Julio Camilo, of Fazenda Campos Dumont, the largest farm in northeastern Brazil, said the average soy yield for his area was around 3.0 tons/ha but they were expecting 3.6 tons/ha this year.  Roberto Ullman of Farm Horizontina Norte said his average soy yield would be around 3.3 tons/ha, and his best fields (those that are older) will yield around 3.6 tons/ha. He added that they were having new problems with rust; it arrived in late January for the first time in this region. They didn’t do preventative spraying but only sprayed when the rust showed up. He didn’t plant any genetically modified (GM) soybean varieties but plans to next year.

While weather has been generally quite favorable this year, yields may be tempered by lower application rates of fertilizer. Some farmers had difficulty obtaining credit due to the dire economic conditions of the last three years.


FAS personnel visited the facility of Empresa Brasileira de Pesquisa Agropecuari (EMBRAPA), the agricultural research company of Brazil's Ministry of Agriculture, near Londrina, Parana.  EMBRAPA has developed a very good rust detection system in Parana that includes a website constantly updated with new detections. Southern Brazil is better at detecting rust (and thus has more cases of rust) than the newer soy areas of the Center-West and North because their farm size is smaller, such that they are more able to scout for rust. EMBRAPA is currently working on new varieties of soybeans resistant to rust but estimate it is about 8 years before such varieties will be fully developed and able to be commercially used – this is simply because of the time it takes to develop new varieties and do the necessary testing.

The majority of the soy grown in Brazil is Round-up Ready (RR); however, the actual percentage of genetically modified (GM) versus conventional soybeans seems to vary from region to region.  In some areas in southern Brazil the adoption rate of GM varieties was as little as 10% and in others it was estimated at 70% or higher.  

Biotechnology arrived about two years ago to the Center-West of Brazil.  Because the first Round-up Ready soy varieties that arrived were not especially suited to the climate of the cerrado (and local climates within the cerrado region), and the Brazilian government only approved GM technology for soybeans 2 years ago, the current adoption rate of RR soy is only about 30 – 35% in Mato Grosso.  With the advance of GM varieties developed by Fundação Mato Grosso (FMT), a research organization privately funded by 27 seed companies, adoption rate of RR soybean is expected to increase next year to 75% of all Experiment soybean fields maintained by FMT.soybeans grown in Mato Grosso.  The cost difference between planting GM and non-GM seeds is not large, but the use of RR technology can equate to better yields and thus higher net returns (especially given newly developed RR varieties better suited to Mato Grosso). 

Approximately 70% of the soy varieties used in Mato Grosso have been developed by FMT.  FMT has also performed much research on rust and are anticipating releasing a rust resistant soy variety (or varieties) as early as 2008/09.  Additionally FMT is working on varieties that will reduce the number of spraying applications to once per year; currently farmers are spraying about three times per year for all diseases including rust and soybean cyst nematode.

Above: Soybean research plots on FMT's experimental farm near Rondonopolis, Mato Grosso.

Future Prospects

If the current good economic situation (i.e. high world soybean and corn prices) is maintained and the futures market is viable for Brazilian producers, many believe they will plant more soy next year but it will take a few years to reach the record level of 2004/05 area, which was almost 23 million hectares.  If high prices for soy continue, and assuming a favorable exchange rate, fertilizer use is also likely to increase next year (they fertilize soy in the Center-West and Northeast albeit because the cerrado soil is poorer than the more fertile areas in southern Brazil; soy isn’t generally fertilized in the South).   An important consideration, however, to optimistic forecasts of increased soy area in 2007/08 and increased input use is the exchange rate, Exchange rate graph showing the dollar becoming weaker to the Brazilian Real.which has become more unfavorable throughout this growing season. Additionally, it is still expensive for transportation and inputs given the current exchange rate (see graph on left), and farmers are only now starting to dig themselves out of a difficult financial situation that has been created over the last three years due to drought and devastating rust outbreaks.  Some sources believed that farmers will be planting more winter ("safrinha") corn before considering planting much more soy.

Panaroamic of soybeans drying in the field in Parana.

In the long-term, assuming favorable conditions for increased soybean area, increases are likely to take place on land that is currently in pasture, while maintaining beef production. Deforestation is a very important and controversial environmental issue so land already in agricultural production is being considered.  Cattle farmers are increasingly adopting technology, particularly advanced genetics and pasture fertilization, increasing the amount of meat produced per unit of land, thus freeing area for soybean production.

Current USDA area and production estimates for grains and other agricultural commodities are available on PECAD's Agricultural Production page or at PSD Online.

For more information contact Nicole Wagner | | (202) 720-0882

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