MONTHLY AGRIBUSINESS BRAZIL MONTHLY AGRIBUSINESS BRAZIL January 2015 Macroeconomic Outlook The global scenario is still marked by high volatility due to commodities' price decrease - notably oil - and mainly by central banks' reaction. In fact, the way oil behaves enhances a deflationary pressure on some developed regions like Japan and the Euro Area. Therefore, in order to prevent the persistently low inflation to undermine economic recovery, the European Central Bank expanded its asset purchase programme, including sovereign bonds from member countries. In China, the 2014 GPD end result, which grew by 7.4%, confirmed its economic slowdown, and that will persist throughout the year. Finally, the fragile global growth resumption scenario contrasts with the USA, who still stands out the most among the main regions while increasing expectations regarding the start of Fed's monetary policy normalization. The first economic policy adjustment measures, mainly in regards to public accounts, begin to take shape. Other actions to be taken throughout the coming months purposing to restore the public sector primary result, which accumulated a 0.4% GDP deficit between January and November 2014. We reduced our expectation for the 4th quarter GDP, switching from a 0.3% increase to a 0.2% contraction in seasonally adjusted terms. Therefore, we foresee the Brazilian economy ended 2014 with a steady GDP in comparison with 2013; for this year, a 0.5% upturn is expected. Inflation is also to feel the effects on the economic policy adjustment, mainly due to relative price realignment, pushing IPCA consumer price index to a 6.8% high. However, while looking ahead, such adjustments are part of a favorable rebalancing so that inflation recovers its course towards the target and create conditions for GPD sustainable growth. The Central Bank kept the pace of monetary tightening in their last meeting, with a 0.50 p.p. hike in the Selic benchmark interest rate, bringing it up to 12.25%. We kept the expectation that Copom Monetary Policy Committee ends the current cycle in their next meeting, with one more 0.25 p.p. basic rate increase. Still, additional inflationary pressures in this first quarter arising from managed prices readjustments and exchange depreciation pass through may extend the adjustment. Finally, we hope that the exchange rate reaches a R$/US$ 2.75 quote by the end of this year. Executive Summary Soybeans Prices should trend upwards in the coming months, reflecting the drought effects on Brazil's productivity. But the upper limit will be given by record harvests both in Brazil and the USA. Corn Prices should continue moving up in the domestic market, reflecting concerns with potential productivity and harvest production potential decline as a result of the 1st harvest planting delay in Brazil, which may also cause a delay on the 2nd corn harvest planting. Coffee High volatility is to be observed in the coffee market in the coming months, reflecting uncertainties as to actual drought effects on the production potential for this harvest. In any case, prices keep a high trend due to the low volume produced in Brazil, the only global producer having a harvest this first half, and therefore target of international market focus. Cattle Cattle prices should accommodate in lower levels in the coming months, reflecting the offer seasonal increase during the most rainy period. But the lower limit will still be given by the restrict offer of animals ready to butchery and export increments. Sugar and Ethanol Sugar prices should record a moderate high in the coming months, reflecting a lower global surplus. Ethanol prices should remain on seasonal high supported by domestic demand for fuels. As of March, their prices will likely decrease due to the new harvest input.
90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15* SOYBEANS Soybean Prices should trend upwards in the coming months, reflecting the drought effects on Brazil's productivity. But the upper limit will be given by record harvests both in Brazil and the USA Fundamentals The USDA's monthly report recorded an upward revision for the Brazilian soy production in 1.5 million tonnes, corresponding to an 1.6% increase compared to the previous month. The 4th 2014/15 harvest survey, published by Conab, did not contain any relevant revision for soy production estimates in Brazil. Regarding the last harvest, there is an 11.4% foreseen increase, which is a record harvest. The 2014 drought in the main producing regions delayed soy planting, and this may affect farming productivity in comparison with the foreseen level for the end of last year. Soy prices may indicate surges in the coming months, reflecting potential drought effects on the Brazilian harvest productivity level. Still, 2015 average prices will remain under 2014 average prices, reflecting record harvests in Brazil and USA. em mil toneladas Produção Nacional de Soja 1990-2012 Fonte e Projeção: CONAB Elaboração: Bradesco National production of soybeans 1991 2015 in 000 tons 107.000 98.000 89.000 80.000 71.000 62.000 53.000 52.018 49.989 55.027 68.688 60.018 57.162 75.324 66.383 86.121 81.499 95.920 44.000 41.917 Source and Estimate: Conab 35.000 26.000 17.000 8.000 19.419 15.394 31.370 32.345 25.934 26.160 2
jan/00 jan/01 jan/02 jan/03 jan/04 jan/05 jan/06 jan/07 jan/08 jan/09 jan/10 jan/11 jan/12 jan/13 jan/14 jan/15 dez/15 jan/00 jan/01 jan/02 jan/03 jan/04 jan/05 jan/06 jan/07 jan/08 jan/09 jan/10 jan/11 jan/12 jan/13 jan/14 jan/15 dez/15 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15* 3.300 3.100 2.900 2.700 2.751 2.567 2.816 2.816 2.629 2.927 3.115 2.651 3.033 2.938 2.854 Soybean productivity 1991 2015 in kg per hectare 2.500 2.300 2.100 2.027 2.150 2.221 2.175 2.299 2.367 2.395 2.419 2.339 2.245 1.900 1.700 1.580 1.500 em R$ por saca de 60 kg Source and estimate: Conab SOJA EM GRÃO Production: Fonte: Deral PR BRADESCO PREÇO AO PRODUTOR - PRAÇA PR Elaboração e Projeção: Bradesco Soybean producer price Paraná 2000 2015 in R$ per 60 kg bag 80,0 70,0 60,0 73,92 61,83 58,27 50,0 43,93 48,15 44,37 45,68 50,53 53,38 40,0 39,81 40,14 30,0 26,63 32,42 28,62 27,03 30,59 20,0 18,04 19,98 22,57 Source: Deral 10,0 Production and Estimate: Projeção de preço: média BRADESCO dos preços futuros Fonte: Bloomberg em US$ cents por PREÇOS bushel INTERNACIONAIS DE SOJA - BOLSA DE CHICAGO - CBOT PREÇO FUTURO 1º VENCTO Elaboração: Bradesco 2000-2010 em US$ cents por bushel 1.800,0 1.600,0 1.400,0 1.200,0 1.000,0 989 1.515 1.211 1.674 1.525 1.486 1.287 1.178 1.143 965 984 International soybean prices (US$ cents/bushel) 2000 2015 800,0 600,0 546 491 400,0 507 436 632 567 689 526 542 757 908 Source: Bloomberg 3
90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15* CORN Corn Prices should continue moving up in the domestic market, reflecting concerns with potential productivity and harvest production potential retreat as a result of the 1st harvest planting delay in Brazil, which may also cause a delay on the 2nd corn harvest planting Fundamentals The USDA's monthly report recorded a downward revision of USA's corn production estimate in approximately 5 million tonnes, corresponding to an 1.3% decline compared with the previous month's survey, reflecting an expected reduction for productivity. The 4th 2014/15 harvest survey, published by Conab, recorded an over 1.2% upward revision of the corn production estimate in the 1st harvest, corresponding to 362,000 tonnes compared with the previous month, reflecting both the planted area and Mapitoba's productivity estimated revision. There is no prognosis for the 2nd harvest, which is now starting to be planted, but Conab kept the same area as the previous harvest. Thus, a 6.4% corn production fall for the 1st harvest and a stability for the 2nd harvest is estimated, totaling 79.0 million grain tonnes produced. The soy planting delay due to the drought should also cause a 2nd harvest corn planting delay, which creates a risk of negative impact in productivity as the planting does not occur during the ideal timeframe. Prices should remain high, driven by demand increase for food for swine and poultry farmers and the 1st em mil toneladas Fonte e Projeção: Conab harvest planting delay in Brazil which may delay the 2nd corn Produção harvest, Nacional affecting de Milho - 1991 productivity - 2012 and hence the harvest's potential. Domestic corn production of 1991 2015 in 000 tons 90.000 80.000 70.000 81.506 79.90679.052 72.980 60.000 50.000 47.411 51.370 58.652 56.018 57.407 51.004 42.290 42.129 42.515 Source and estimates: Conab 40.000 37.442 35.716 30.771 33.174 32.393 30.000 24.096 20.000 35.281 35.007 4
em kg por ha Produtividade - Milho - 1991-2012 jan/00 90/91 jan/01 91/92 92/93 jan/02 93/94 jan/03 94/95 95/96 jan/04 96/97 jan/05 97/98 jan/06 98/99 99/00 jan/07 jan/00 00/01 jan/08 01/02 jan/01 02/03 jan/09 jan/02 03/04 jan/10 04/05 jan/03 05/06 jan/11 jan/04 06/07 jan/12 07/08 jan/05 jan/13 08/09 09/10 jan/06 jan/14 10/11 jan/07 jan/15 11/12 12/13 dez/15 jan/08 13/14 jan/09 14/15* jan/10 jan/11 jan/12 jan/13 jan/14 jan/15 dez/15 5.500 5.000 4.500 4.000 3.500 3.260 3.585 3.296 3.279 3.655 3.972 3.599 4.311 4.158 4.808 5.149 5.057 5.146 Corn productivity in kg per hectare 1991 2015 3.000 2.864 2.867 2.500 2.3492.344 2.194 2.622 2.356 2.588 2.650 2.589 2.480 2.000 1.500 1.791 Em R$ por saca de 60 kg Preço pago ao produtor de milho - Paraná Source and estimate: Conab Fonte: Deral Elaboração e Projeção: Corn producer price Paraná 2000 2015 in R$ per 60 kg bag 30,0 25,0 20,0 22,28 18,96 24,94 26,92 19,96 23,29 21,36 15,0 11,95 10,0 11,40 16,26 10,44 14,14 13,07 17,26 17,84 Source: Deral 5,0 Production and Estimate: BRADESCO Milho - Bolsa de Chicago - CBOT Em US$ cents por bushel 7,05 Preço futuro 1º vencimento Fonte: Bloomberg Elaboração e Projeção: Bradesco 860 760 660 711 753 763 662 International Corn prices (US$ cents/bushel) 2000 2015 560 546 603 493 502 460 360 260 217 160 235 267 215 316 237 413 326 418 322 347 439 335 415 Source: Bloomberg 5
94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16* COFFEE Coffee High volatility is to be observed in the coffee market in the coming months, reflecting uncertainties as to actual drought effects on the production potential for this harvest. In any case, prices keep a high trend due to the low volume produced in Brazil, the only global producer having a harvest this first half, and therefore target of international market focus Fundamentals The USDA's six-monthly report, published in December, raised the estimated global coffee production for the 2014/15 harvest by 0.8% compared with June report. The 3 main global producers' harvests had an upward revision in this order: 3.4% for Brazil; 0.3% for Vietnam; and 4.2% for Colombia. In spite of the upward revision, the USDA's estimate for Brazil is a 6.1% decline in comparison with the last harvest. Conab's estimate for the 2014/15 harvest, which has been completed in Brazil, even though it has been a high two-year coffee cycle year, is 45.3 million tonnes - a 7.8% decline due to drought in the Southeastern region. In January, Conab published their 1st Survey for Brazilian coffee harvest in the 2015/16 Season which will start being harvested in May. Considering the average gap, there is an estimated 45.4 million bag harvest, virtually the same volume as the last harvest, which reached 45.3 million bags. Mainly for Arabica coffee, although the current harvest not only has a low two-year coffee cycle but also suffered the Southeastern drought impacts, there is an estimated 3.5% produced volume growth, reaching 33.4 million bags. The origin of this expansion is three-fold: (i) A 2.9% production increase in Minas Gerais as a result of the 30.5% production enlargement of Zona da Mata, whose two-year cycle is inverted in comparison with the other production regions; (ii) A production level recovery in Paraná, whose production was strongly affected by frosts last year; (iii) A productivity and area enlargement in Bahia. For São Paulo, Conab estimates a 6.4% production decrease due to the negative two-year cycle effect. There is an estimated 11.9 million bags for Conillon coffee, an 8.6% decrease compared with the last harvest, due to the 12.2% production decrease expected for Espírito Santo, affected by lower fertilization and crop handling use as well as adverse weather conditions in the end of 2014. The end-year rains favored the plant's development but uncertainties remain as to the actual drought effects on this harvest's production potential. Because Brazil is the only global producer having harvest in this first half, international market focuses in the Brazilian harvest. Thus, we are likely to observe much coffee market volatility in the coming months, reflecting how difficult it is to measure the Brazilian harvest. Produção Nacional de Café - 1994-2012 Fonte e projeção (*): Conab Elaboração: Bradesco In any case, prices remain with an uptrend, reflecting the low volume produced in Brazil. mil sacas de 60 kg 61.000 51.000 41.000 31.000 26.000 27.500 50.826 49.152 48.480 48.095 45.992 45.342 45.360 42.512 43.484 39.272 39.470 36.070 34.547 32.944 31.100 27.170 28.137 28.820 Domestic coffee production 1994 2015 in 000 60 kg bags 21.000 16.800 18.860 11.000 Source and estimate: Conab 6
jan/00 jan/01 jan/02 jan/03 jan/04 jan/05 jan/06 jan/07 jan/08 jan/09 jan/10 jan/11 jan/12 jan/13 jan/14 jan/15 dez/15 jan/00 jan/01 jan/02 jan/03 jan/04 jan/05 jan/06 jan/07 jan/08 jan/09 jan/10 jan/11 jan/12 jan/13 jan/14 jan/15 dez/15 Arabica coffee São Paulo 2000 2015 in US$ per 60 kg bag Source: BMF BOVESPA 690,0 590,0 490,0 390,0 290,0 223,6 190,0 90,0 104,4 239,8 337,0 230,4 291,4 245,8 530,8 457,8 408,6 328,0 387,5 269,8 282,2 247,5 586,4 537,6 455,2 366,3 247,7 Projeção de preço: média dos preços futuros Em US$ cents por libra peso Café em grão - Bolsa de Nova York - NYBOT 2000-2010 Fonte: Bloomberg Elaboração: 325,0 275,0 225,0 272,07 204,99 180,03 197,02 International Coffee Prices 2000-2015 In US$ cents/ Lb 175,0 125,0 115,06 75,0 63,07 65,95 99,48 127,53 152,04 131,18 96,55 142,45 108,67 150,03 165,30 117,62 175,90 67,78 25,0 Source: Bloomberg 7
BEEF Cattle Cattle prices should accommodate in lower levels in the coming months, reflecting the offer seasonal increase during the most rainy period. But the lower limit will still be given by the restrict offer of animals ready to butchery and export increments Fundamentals Beef volumes shipped grew by 4.5% in 2014 compared with the previous year, with shipments to Hong Kong, Venezuela, the Middle East, and Russia continuing to move up, authorizing slightly more than 80 Brazilian meatpacking units for export, versus only 31 previously. It is also worth noting the worsening state of the economy in Russia, which currently absorbs 22% of Brazil s beef exports, due to the strong devaluation of the ruble against the dollar and the continuing decline in oil prices. According to USDA estimates, Brazilian beef exports should continue to expand, increasing by 10% in 2015. These positive expectations are based on the downturn in exports from other countries, including the United States and Australia, which have fallen by 3% and 10%, respectively, due to reduced slaughter. It should be emphasized that these two countries together account for 30% of global exports. The supply of animals ready for slaughter has not been keeping pace with the upturn in demand due to the slaughter of females in previous years. As a consequence of the retention of females, bull-calf prices have increased substantially, climbing by 43% in the year through January, with a 3% high compared with the previous month. Since September, the wholesale beef price in São Paulo increased around 12% due to cattle price transfer. Wholesale beef prices have increased by around 23% in the same period, meaning the domestic consumer is sanctioning the price rise. In any case, in the coming months, the ready for slaughter cattle offer will grow again, due to summer rains return in the production regions. Therefore, cattle prices should reduce seasonally. But there is no sharp fall trend because the slaughters will not grow due to the continuation of the female retention Exportações movement. Brasileiras de carne bovina - 2010-2012 - Em toneladas Fonte: Secex Elaboração: Bradesco Brazilian beef exports (in tons) 2011 2014 150.000 140.000 130.000 2011 2012 2013 2014 139.110 127.236 120.000 120.133 110.000 100.000 104.974 101.746 90.000 90.893 80.000 80.613 70.893 70.000 Source: SECEX 64.794 60.000 jan fev mar abr mai jun jul ago set out nov dez 8
jan/02 jan/03 jan/04 jan/05 jan/06 jan/07 jan/08 jan/09 jan/10 jan/11 jan/12 jan/13 jan/14 jan/15 dez/15 Abates mensais de boi - 2010-2012 - Em toneladas Fonte: Secex Elaboração: Bradesco Slaughter Cattle in thousand heads 2011-2014 2.600 2.500 2.400 2.467 2011 2012 2013 2014 2.300 2.294 2.200 2.256 2.100 2.000 1.900 1.836 1.800 1.792 2.017 1.893 1.865 1.700 Source : MAPA Production : BRADESCO Em R$ por arroba (15 kg) 1.600 BOI GORDO Fonte: Cepea Esalq PREÇO AO PRODUTOR jan - PRAÇA fev SPmar Elaboração abr e Projeção: mai Bradesco jun jul ago set out nov dez 160,0 140,0 120,0 100,0 80,0 93,3 74,5 109,6 125,2 108,4 106,9 97,0 90,8 148,5 143,7 130,0 122,4 Live cattle producer price São Paulo 2002 2015 in R$ per arroba 60,0 61,8 51,7 40,0 42,2 20,0 Source: Cepea
90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15* SUGAR AND ETHANOL Sugar and Ethanol Sugar prices should record a moderate high in the coming months, reflecting a lower global surplus. Ethanol prices should remain on seasonal high supported by domestic demand for fuels. As of March, their prices will likely decrease due to the new harvest input Fundamentals At the end of November, the USDA published its six-monthly report on the 2014/15 global sugarcane crop, which reduced its production estimate by 1.8% over the previous estimate in May. As a result, the global surplus, previously assessed at 5 million tonnes, was reduced to 1.5 million tonnes and the stock to use ratio was lowered from the previous 26.1% May estimate to 24.7%. In the end of December, Conab published their 3rd 2014/15 harvest survey, revising downwards the production estimate by 2.6% compared with August's survey due to the drought. The harvest is more ethanol-focused. Thus, Conab registered a 4% ethanol growth production compared with the previous survey and a 5% sugar production fall for the same period. Única estimates a 5% sugarcane decrease in the current 2014/15 harvest whose processing is about to be completed due to the Southeastern drought. Average productivity in São Paulo decreased by 12% in the current harvest in comparison with the previous one. For the 2015/16, whose processing will start between March and April, there are many concerns about the production potential. Conab's next survey will be published in April. The provisional measure that allows the government to increase mixture limit of anhydrous alcohol and gasoline to up to 27,5% was approved by the Senate and the Presidency of the Republic. The current band is between 18% and 25%, which is the maximum level practiced. The results of the studies to assess whether or not engines would support such change favored the mixture increase. But, in any case, the effective mixture increase is not going to take place before the next harvest input. According to Única, the mixture increase demands an extra 1.2 billion ethanol, corresponding to a 4% increase on the current production and an extra 15 million sugarcane tonnes produced, meaning a 2.5% increase. Reflecting the reduction in the global surplus, sugar prices should continue to climb in the months ahead. Fonte This e projeção is because : Conab the stock to use ratio of 24.7% is higher than the mil toneladas average of 22% for the last five Elaboração. Bradesco Produção Nacional de Cana-de-Açúcar - 1990-2013 harvests. Ethanol prices should remain on their seasonal upward trajectory and should be sustained by the growing domestic demand for fuels which should start falling reflecting the new harvest input. 650.000 550.000 450.000 431.413 474.800 559.432 604.514 623.905 658.822 642.095 588.916 560.364 Sugar cane production 1991-2015 in 000 tons 350.000 250.000 222.429 223.460 240.944 314.969 287.810 257.592 320.650 359.316 150.000 Source and estimate: Conab 10
jan/00 jan/01 jan/02 jan/03 jan/04 jan/05 jan/06 jan/07 jan/08 jan/09 jan/10 jan/11 jan/12 jan/13 jan/14 jan/15 dez/15 dez/11 jan/12 fev/12 mar/12 abr/12 mai/12 jun/12 jul/12 ago/12 set/12 out/12 nov/12 dez/12 jan/13 fev/13 mar/13 abr/13 mai/13 jun/13 jul/13 ago/13 set/13 out/13 nov/13 dez/13 jan/14 fev/14 mar/14 abr/14 mai/14 jun/14 jul/14 ago/14 set/14 out/14 nov/14 dez/14 jan/15 fev/15 mar/15 abr/15 mai/15 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15* Domestic sugar and ethanol production 1993 2015 43.000 36.000 SUGAR ETHANOL 38.168 35.968 38.337 36.360 Sugar in 000 tons Ethanol in 000 liters 29.000 27.500 27.595 27.957 28.664 25.763 22.000 19.380 23.640 15.00012.692 16.020 23.007 Source and estimate: Conab 11.700 8.000 13.078 10.518 14.640 em R$ por metro cúbico 1.610 1.510 1.410 1.310 1.210 1.110 1.010 1.062 1.291 1.354 1.225 1.146 1.025 1.150 1.249 1.136 1.150 1.076 1.175 Hydrous Ethanol Prices 2011-2015 in R$ per cubic meters 910 810 710 Em US$ cents por libra peso Source: BMF BOVESPA Preços internacionais de açúcar NYBOT Preço futuro 1º Vencto 2000 2013 Fonte: Bloomberg Elaboração: Bradesco International sugar prices 2000 2015 In US$ Cents/ Lb 33,0 27,0 28,4 32,1 29,5 24,9 21,0 17,9 21,9 17,7 17,2 15,0 13,1 14,6 15,4 Source: Bloomberg 9,0 5,6 3,0 10,7 9,0 8,8 6,3 9,0 8,4 8,9 11,3 11
Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 16-jun-09 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 16-jun-09 Harvest follow-up Posições Não Comerciais e Preços Internacionais de café - 2007-2014 - Fonte: Bloomberg Elaboração: Bradesco US$ c / libra em número de contratos Non-commercial holdings and international coffee prices 2006-2015 350 300 250 200 150 Non-commercial holdings Coffe 139,70 304,9 70.000 60.000 46.478 50.224 50.000 38.20040.000 211,8 30.000 174,9 20.000 10.000 100 0-10.000 Source: Bloomberg 50 0-20.000-30.000 US$ c / bushel 2.000 Non-commercial holdings 1.800 Soybean price 1.600 1.628 1.400 1.200 1.000 800 203.215 260.845 em número de contratos 280.000 240.000 1.613 200.000 168.209 160.000 120.000 80.000 1.000 40.000 46.808 913,25 0 Non-commercial holdings and international soybean prices 2007-2015 600-16.898-28.178-40.000 400 200 0-56.797-80.000-66629 -120.000-130404 -160.000 Source: Bloomberg US$ cents por bushel Non-commercial holdings and international corn prices 2007-2015 850 750 Non-commercial holdings Corn price 413.915 764 831 704 500000 400000 300000 650 550 113.201 80.111 200000 149456 100000 450 0 350 385-100000 250 312-119.389 321-200000 Source: Bloomberg 150-300000 12
SOYBEANS Snapshot of the market Soybean Complex Of soybean grain produced in Brazil, 43% is exported and 57% is destined to milling. The milling process results in 72% bran and 18% oil. The remaining 10% are seeds and losses. Of bran produced, 50% is exported and 20% of oil is exported. Soybean is an exports culture, since the level of production exceeds consumption by around 40%. This means that any growth of domestic production results in exportable surplus. In the domestic market, soybean is used in the manufacturing of food, such as salami and sausages and nearly 80% is employed to produce animal s food. Soybean accounts for 25% to 30% of poultry and hog food. Countries of destination Grain: 75% China, 25% Europe, 10% other Asian countries. Bran: 70% Europe, 20% Asian countries. Oil: 50% China, 20% India. Seasonality Summer crop: planting occurs between October and December and harvest is concentrated between February and May. Regionalization Mid-west: 49%, south 33%, 8% northeast, 6% southeast Ranking Brazil is the world s second largest player of production with 30.8%, behind the USA with 31.5%, but it is the largest exporter with 40.7%, followed by USA with 39.3%. 13
CORN Snapshot of the market Corn is the basis of animal s food for main types of breeding. In the animal s food composition, corn accounts for: 64% in poultry raising 65% in hog raising 23% in dairy cattle Countries of destination Corn exports account for 28% of volume produced. Main markets of destination are 14% Japan, 13% South Korea, 8.5% Taiwan. Seasonal factors Corn has two crops: Summer crop: planting occurs between October and December and harvest is concentrated between February and May. It represents 40% of total harvest. It has the following regional distribution: 45% south, 26% southeast, 10% mid-west, 15% northeast. Winter crop: planting occurs between February and June and harvest is concentrated between July and November. It accounts for 60% of total crop. It has the following regional distribution: 64.3% mid-west, 23% south (only in Paraná), 6% northeast (only in Bahia), 5% southeast. Ranking Brazil is the world s third largest corn producer, with 7% market share and the second largest exporter, with 18% market share. 14
COFFEE Snapshot of the market Brazil exports 67% of coffee produced, 90% green coffee and 10% instant coffee. Coffee cultivation has high workforce costs, which account for nearly 52% of total costs, since most part of harvest is manual. Countries of destination Green coffee: 19.3% USA, 18.8% Germany, 10% Japan. Instant coffee: 16.3% USA, 13.5% Russia, 6.4% Ukraine. Regionalization Regional distribution of coffea arabica: 71.5% state of Minas Gerais 10.5% state of São Paulo 9.1% state of Espírito Santo 4.3% state of Paraná 2.8% state of Bahia Regional distribution of Robusta coffee production: 75.6% state of Espírito Santo 12.5% state of Rondônia 6.7% state of Bahia 2.6% state of Minas Gerais Seasonality Coffee flowerage occurs between September and November in Brazil. Harvest starts in May and extends until September. Ranking Brazil is the world s largest coffee player with 37% market share in production and 27% in exports. Other players, such as Vietnam and Colombia have low domestic consumption, opposite to Brazil, which accounts for 15% of global consumption. 15
BEEF Snapshot of the market Brazilian cattle is estimated in approximately 200 million heads. The commercial livestock for slaughtering is estimated at 40 million heads, i.e., this is the volume of cattle at age and weight ideal for slaughter. The remaining cattle is divided among dairy cows, male calf and unfinished cattle. Exports accounts for 20% of beef national production. Countries of destination Russia is the main market of destination of Brazilian beef exports, accounting for 22%. Hong Kong accounts for 18%. Regionalization Cattle slaughter has the following regional distribution: 36.4% mid-west, 20.4% southeast, 20.1% north, 12.3% south and 10.8% northeast. Ranking Brazil is the world s second largest beef producer with 16.9% market share, preceded by the USA, which holds 19.1%. Brazil is the world s largest exporter with 21% market share. Seasonality Cattle raising cycle is long 2.5 years since when male calf is born until slaughter with approximately 15 arrobas. Cattle breeding system in Brazil is the extensive cattle raising, i.e., bull is raised released in the pasture and eats grass. The confinement system, where bull is raised with animal s food in small areas, accounts for only 5% of total slaughter. Cattle crop occurs in the first half of the year, during rainfall period, when pasture is plentiful. With a greater cattle supply for slaughter, finished cattle prices during such period are lower. The cattle intercrop occurs in the second half of the year, during drought period, when cold and white frost dry pasture. Bull lose weight, with lower cattle supply for slaughter. However, cattle prices increase during such period, as supply is higher for confined cattle, whose production cost is higher. During intercrop peak (October) there is greater number of confined male cattle slaughter. Confinements have two shifts: 1st shift: unfinished cattle is stored between May-June and delivered in August-September. 2nd shift: unfinished cattle is stored between August-September and delivered in November-December. 16
SUGAR AND ETHANOL Snapshot of the Market Sugarcane Complex Of sugarcane produced in Brazil, 46% is destined to produce sugar and 54% to produce ethanol. Sugar has the following destination: 70% exports and 30% domestic market. Ethanol has the following destination: 10% exports and 90% domestic market. Out of total ethanol produced, 55% is hydrated (used as fuel in flex fuel vehicles) and 45% is used as anhydrous (mixed to gasoline between 20% and 26%). Sugar is an exports culture, since level of production exceeds consumption by approximately 70%. This means any growth of national production generates exportable surplus. Countries of destination Raw sugar (73% of production) : 15% China, 8% Bangladesh; Refined sugar (27% of production): Arabian and African countries; Ethanol: 60% USA, South Korea 13%. Seasonality Cane is a continual culture, since period between cane planting and harvest is 18 months, and from same plant, it is possible to make until six cuts, on average. Cane harvest period occurs between April and November. During such period, mills operate 24 hours. Between January and March, plants are disassembled for maintenance. Brazil is the single large global player with crop in the first half of the year. Other countries are: USA, Europe, India, Thailand and Australia start their crop from the second half of the year. Regionalization 65% southeast, 16.8% mid-west, 10.3% northeast, 7.3% south. Ranking Brazil is the world s largest sugar producer, with 22.2% market share. Other players are: India 15%, European Union 9.2%, China 8.5%, Thailand 6.2%. Brazil is the largest exporter, with 46% market share in the global market. Other exporters are: Thailand 15%, Australia 5.4%. World s largest ethanol producers are: 57% USA and 27% Brazil. 17
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