MONTHLY AGRIBUSINESS BRAZIL MONTHLY AGRIBUSINESS BRAZIL August 2015 Macroeconomic Outlook Expectations regarding the handling of economic policy continue to divide the attention of the market with the ongoing decline in Brazil s economic activity. Frustration with tax revenue has made the fiscal adjustment more dependent on the political environment. As a result, the government has revised its primary surplus targets for this and the coming years. At the same time, the economic signals remain disappointing, pointing to quarterly GDP shrinkage of 1.4% in the second quarter. The slowing of domestic activity and the difficulty in adjusting the public accounts have led us to alter our end-of-year exchange rate estimate from R$/US$3.20 to R$/US$3.30. In addition, given the reduction in GDP and the accommodation of inflationary expectations, the Central Bank signaled the end of the current upward trajectory of the Selic benchmark interest rate. According to the Bank, monetary conditions will remain tight for a prolonged period in order to prevent the administered price shocks from spreading to other prices. As a result, we expect the Selic to close the year at its current level of 14.25%, sufficient to reduce inflation from 9.3% in 2015 to 5.2% next year. The latest global figures continue to support our expectation that global GDP growth in 2015 will be slightly lower than last year (3.1%, versus 3.4% in 2014). On the one hand, the Chinese economy remains weak and the country s hefty stock market collapse and the change in the foreign exchange regime announced by the government has heightened uncertainties regarding a second-half recovery. We believe there is a high risk of a slowdown and that the new stimulus measures may be insufficient to ensure a speed-up, in turn giving a downward bias to our expectations of annual GDP growth of 6.5% this year, below the 7% target established by the government. On the other hand, the domestic conditions of the U.S. economy continue to strengthen, especially in the job market. As a result, the Fed has been giving increasing indications that the monetary normalization will finally begin. Nevertheless, both current U.S. inflation and inflationary expectations are still below the 2.0% target, allowing the Fed to conduct this process in an exceptionally gradual manner. Executive Summary Soybeans The favorable outlook for the U.S. and Brazilian harvests and high global stocks, estimated at 28% of global consumption, should keep prices under downward pressure. Doubts among the meteorologists over the magnitude and duration of El Niño should also ensure continuing price volatility. Corn Domestic and international prices remain on a downward tendency, given increased supply in Brazil and the U.S. The Brazilian highlight is the 2nd crop, which has been subject to substantial upward revisions in the last three months. Coffee The USDA s global production expansion estimates should keep international prices down. Concerns regarding the nature of El Niño and its various effects on crops around the world should ensure coffee market volatility. Cattle In line with dry season volatility, prices should remain high until October, although the slowing of exports and domestic consumption should impose limits on the upturn. Sugar and Ethanol Sugar prices are expected to remain high, reflecting the improved global supply and demand balance. However, the upward trajectory will be mitigated by the devaluation of the real and the level of global stocks, which although more adjusted, are still elevated. Increased demand for ethanol to the detriment of gasoline should continue to favor the upturn in ethanol prices.
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 The favorable outlook for the U.S. and Brazilian harvests and high global stocks, estimated at 28% of global consumption, should keep prices under downward pressure. Doubts among the meteorologists over the magnitude and duration of El Niño should also ensure continuing price volatility Fundamentals The USDA s 4th 2015/16 harvest survey revised its U.S. soybean production estimate up from 105.7 to 106.6 million tonnes, reflecting higher yield. In the case of Brazil, the USDA maintained its previous estimate of 97 million tonnes, 2.6% up on the previous harvest. It also pointed to a reduction in global stocks and a consequent decline in the stocks to use ratio from 30.0%, last month, to 28.0%. Despite the reduction, this was still the highest ever ratio. Conab s 11th 2014/15 survey brought no significant change in its soybean production estimate, which was 96.2 million tonnes, 11.7% more than in the previous season and a new record. There are divergences among Brazilian meteorologists, who expect a moderate El Niño, and their U.S. counterparts, who expect it to be much stronger, pushing up prices and resulting in substantial price volatility. These divergences relate to both the intensity of the phenomenon and its duration. The latest prediction models indicate that it will strengthen and last until the beginning of 2016. High global stocks, estimated at 28% of worldwide consumption, should ensure continuing downward pressure on international soybean prices. Add to this the healthy outlook for the U.S. and Brazilian harvests. Market volatility should continue in response to meteorologists doubts over the magnitude and duration of El Niño. 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 96.204 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 jan/16 dez/16 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 3.012 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 SOJA EM GRÃO PREÇO AO PRODUTOR - PRAÇA PR Source and estimate: Conab Fonte: Deral 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 61,16 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 Source: Deral Production and Estimate: BRADESCO 20,0 18,04 10,0 Fonte: Bloomberg em US$ cents por PREÇOS bushel INTERNACIONAIS DE SOJA - BOLSA DE CHICAGO - CBOT PREÇO FUTURO 1º VENCTO Projeção de preço: média dos preços futuros Elaboração: Bradesco 2000-2010 em US$ cents por bushel 19,98 22,57 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 1.143 965 931 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 Domestic and international prices remain on a downward tendency, given increased supply in Brazil and the U.S. The Brazilian highlight is the 2nd crop, which has been subject to substantial upward revisions in the last three months Fundamentals The USDA s 4th survey of the 2015/16 harvest increased its estimate of Brazilian corn production from 77 to 79 million tonnes and also pushed up its U.S. estimate from 343.7 to 347.6 million tonnes, reflecting improved yield. The USDA also expanded its global stocks estimate, in turn pushing up the stocks to use ratio from 19.2%, last month, to 19.7%. Conab s 11th 2014/15 harvest survey substantially increased its production estimate for Brazil s 2nd corn crop, currently being harvested, for the third consecutive month, this time to a record 54 million tonnes, 11.6% up on the previous year and 4.8% more than last month s estimate. In the case of the 1st crop, already harvested, Conab maintained is production estimate at 30.3 million tonnes, 4.4% down on the harvest before. The total corn harvest is estimated at 84.3 million tonnes, 5.3% up on the previous season and a new record. International prices are expected to remain low, due to increased supply in Brazil and the U.S. In Brazil, higher output from the 2nd crop, whose estimate has been revised upwards for three months, should also help keep prices down. em mil toneladas Produção Nacional de Milho - 1991-2012 Fonte e Projeção: Conab Domestic corn production 1991 2015 in 000 tons 90.000 80.000 70.000 72.980 81.506 80.052 84.304 60.000 50.000 47.411 58.652 56.018 57.407 51.370 51.004 42.290 42.129 42.515 Source and estimates: Conab 40.000 30.771 30.000 24.096 20.000 37.442 33.174 35.716 32.393 35.281 35.007 4
em kg por ha Produtividade - Milho - 1991-2012 jan/00 90/91 91/92 jan/01 92/93 jan/02 93/94 jan/03 94/95 95/96 jan/04 96/97 jan/05 97/98 98/99 jan/06 99/00 jan/07 00/01 jan/00 jan/08 01/02 jan/01 02/03 jan/09 03/04 jan/02 jan/10 04/05 jan/03 05/06 jan/11 06/07 jan/04 jan/12 07/08 jan/13 jan/05 08/09 09/10 jan/14 jan/06 10/11 jan/15 11/12 jan/07 12/13 jan/16 jan/08 13/14 dez/16 14/15* jan/09 jan/10 jan/11 jan/12 jan/13 jan/14 jan/15 dez/15 6.000 5.500 5.000 4.500 4.311 4.158 4.808 5.149 5.057 5.367 Corn productivity in kg per hectare 1991 2015 4.000 3.500 3.260 3.585 3.296 3.972 3.655 3.599 3.279 3.000 2.500 2.622 2.588 2.650 2.589 2.480 2.194 2.3492.344 2.356 2.864 2.867 2.000 1.791 1.500 Em R$ por saca de 60 kg Preço pago ao produtor de milho - Paraná Fonte: Deral Elaboração e Projeção: Source and estimate: Conab 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 20,74 15,0 11,95 10,0 11,40 16,26 10,44 14,14 13,07 17,26 17,84 Source: Deral 7,05 Production and Estimate: 5,0 BRADESCO Milho - Bolsa de Chicago - CBOT Em US$ cents por bushel 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 560 546 603 493 502 460 360 260 217 160 235 267 215 316 237 413 326 418 322 347 439 335 359 415 406 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 The USDA s global production expansion estimates should keep international prices down. Concerns regarding the nature of El Niño and its various effects on crops around the world should ensure coffee market volatility Fundamentals At the end of June, the USDA disclosed its six-monthly survey of the 2015/16 coffee crop, which is currently being harvested in Brazil. Harvesting in the other producing countries will begin in October. Global production is estimated at 152.7 million 60 kg bags, 4.4% up on the previous season, while global consumption is estimated at 147.7 million bags, up by 1.2%. Consequently, there will be a surplus of 5 million bags, well above last season s surplus of 290,000 bags. The expected expansion will be generated by various countries, including the leaders, such as Brazil, Vietnam and Colombia, as well as Indonesia and the African producers. Stocks are expected to be lower than for the previous crop, reducing the stocks to use ratio from 23% to 21.4%. The USDA s next six-monthly survey will be published in mid-december. Certified stocks of arabica on the New York exchange have been falling since mid-2013. Also in June, Conab published its second survey of Brazil s 2015/16 coffee crop, which indicated total production of 44.25 million 60 kg bags, 2.4% down on the previous season due to the lack of rainfall in the Southeast. The next survey will be published in mid-september. The drought that affected the Southeast between the spring of 2014 and the beginning of 2015, an important period for coffee plant development, led to a reduction in the size of the beans, which could jeopardize yield, leading to a possible downward revision in Conab s next production esimates in September. The coffee harvest is behind schedule due to rainier weather at the beginning of picking. In comparison to the same period last year, around 20% less has been harvested. International prices should remain low, given the USDA s estimates of an increase in global production. They are also likely to remain volatile in response to concerns over the development and various effects of El Niño on the crops in the producing countries. mil sacas de 60 kg Produção Nacional de Café - 1994-2012 Fonte e projeção (*): Conab Elaboração: Bradesco 61.000 51.000 41.000 31.000 26.000 27.500 50.826 49.152 48.480 48.095 45.992 45.342 42.512 43.484 44.284 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 jan/16 dez/16 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 690,0 590,0 530,8 579,3 490,0 390,0 290,0 223,6 190,0 239,8 337,0 230,4 291,4 245,8 457,8 408,6 328,0 387,5 269,8 282,2 247,5 247,7 424,0 366,3 Source: BMF BOVESPA 90,0 104,4 Café em grão - Bolsa de Nova York - NYBOT 2000-2010 Projeção de preço: média dos preços futuros Em US$ cents por libra peso 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 96,55 131,18 152,04 142,45 108,67 150,03 117,62 150,40 67,78 25,0 Source: Bloomberg 7
BEEF Cattle In line with dry season volatility, prices should remain high until October, although the slowing of exports and domestic consumption should impose limits on the upturn Fundamentals First-half beef exports fell by 16% over the same period last year with major reductions in the volumes shipped to the main destinations of Russia (-33%), Venezuela (-47%) and Hong Kong (-40%), reflecting the impact of the slide in oil prices on the economies of the oil-producing countries. In addition, the devaluation of the Russian currency made beef imports more expensive in that country. The opening of the U.S. and Chinese markets to Brazilian beef exports is a positive sign, although it still depends on sanitary inspections and the granting of sanitary certificates. Consequently, the impact on Brazil s beef shipments are only likely to become clear as of next year. The deterioration in the job market should continue to jeopardize domestic beef consumption. The supply of animals ready for slaughter will remain tight, due to the slaughter of females in previous years. In fact, the slaughter rate in the first six months fell by 11% over the same period last year. Cattle prices should remain high until October, in line with the seasonal trend of low supply in the winter period. However, the combination of poor exports and the reduction in domestic consumption, which accounts for 80% of total beef demand, should limit the upturn. The prices of future contacts traded on the Brazilian Futures and Commodities Exchange (BMF) have already priced in the weaker domestic consumption. Exportações Brasileiras de carne bovina - 2010-2012 - Em toneladas Fonte: Secex Elaboração: Bradesco Brazilian beef exports (in tons) 2012 2015 150.000 140.000 130.000 2012 2013 2014 2015 139.110 127.236 120.000 120.133 110.000 104.974 100.000 101.746 90.000 80.000 70.893 70.000 Source: SECEX 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 2012-2015 2.600 2.500 2.485 2.400 2.300 2.294 2.200 2.186 2013 2014 2015 2.256 2.231 2.100 2.000 1.900 1.926 1.800 Source : MAPA Production : BRADESCO Em R$ por arroba (15 kg) 1.700 1.600 BOI GORDO Fonte: Cepea Esalq jan fev mar abr mai jun PREÇO AO PRODUTOR - PRAÇA SP Elaboração e Projeção: Bradesco 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 90,8 150,7 144,0 141,5 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 15/16* SUGAR AND ETHANOL Sugar and Ethanol Sugar prices are expected to remain high, reflecting the improved global supply and demand balance. However, the upward trajectory will be mitigated by the devaluation of the real and the level of global stocks, which although more adjusted, are still elevated. Increased demand for ethanol to the detriment of gasoline should continue to favor the upturn in ethanol prices Fundamentals Conab has published its 2nd survey of the 2015/16 sugarcane crop, which is currently in the processing phase. The production estimate was increased slightly, from 654.6 to 655.2 million tonnes, reflecting the improvement in yield due to the rainier weather. Nevertheless, Conab revised its sugar production down, also slightly, from 37.354 million tonnes, in April s survey, to 37.283 million tonnes. In the case of hydrous ethanol, used in flex fuel vehicles, the estimate moved up from 16.464 to 16.553 billion liters, while estimated output of anhydrous ethanol, which is mixed with gasoline, was revised downwards by 66% over the previous survey, from 12.735 to 11.967 billion liters. In relation to the previous harvest, sugarcane production is expected to increase by 3.2% and sugar output by 4.8%, with anhydrous ethanol production climbing by 2%, fueled by rising demand, to the detriment of gasoline. In the case of hydrous ethanol output, Conab expects a 2.2% reduction. According to Única, the volume of cane processed in the Central-South region through August was in line with processed volume in the same period last year, sugar and anhydrous ethanol production were down by 11% and 16%, respectively, and hydrous ethanol output was up by 17%. The beginning-of-year increase in gasoline prices led to a 5% year-on-year reduction in consumption in the first six months, favoring ethanol, whose consumption climbed by 38% in the same period. Despite supply being more contained in Brazil, international sugar prices are still falling, reflecting high global stocks. The strengthening of the dollar due to the domestic and international scenarios, is forcing commodity prices down, more intensely in the case of sugar, given Brazil s hefty 45% share of global supply. Continuing doubts among the meteorologists over the magnitude and duration of El Niño may lead to price volatility in the coming months. If the phenomenon is a strong one, as the U.S. NOAA believes, it could lead to drought in Asia, jeopardizing the crops in India and Thailand, which jointly account for 25% of global sugar output. The improved balance between global supply and demand is behind the upward tendency of international sugar prices. However, we are unlikely to see significant upturns, given that global stocks, although better adjusted, are still elevated. In addition, the appreciation of the dollar will continue to exert downward price pressure. Ethanol prices should remain high, reflecting the increase in consumption to Fonte e projeção : Conab Elaboração. Bradesco the detriment of gasoline. Produção Nacional de Cana-de-Açúcar - 1990-2013 mil toneladas 650.000 550.000 450.000 431.413 474.800 559.432 604.514 623.905 658.822 655.159 634.767 588.916 560.364 Sugar cane production 1991-2015 in 000 tons 350.000 314.969 287.810 250.000 222.429 223.460 240.944 257.592 320.650 359.316 150.000 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 jan/16 dez/16 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 jun/15 jul/15 ago/15 set/15 out/15 nov/15 dez/15 jan/16 fev/16 mar/16 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 15/16* Domestic sugar and ethanol production 1993 2015 43.000 36.000 AÇÚCAR ÁLCOOL 38.168 35.968 37.878 35.560 37.283 Sugar in 000 tons Ethanol in 000 liters 29.000 22.000 19.380 27.500 25.763 27.595 23.640 28.660 28.520 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 1.510 1.410 1.310 1.291 1.354 1.316 1.335 Hydrous Ethanol Prices 2011-2015 1.210 1.225 in R$ per cubic meters 1.146 1.136 1.192 1.110 1.150 1.140 1.010 1.062 1.025 1.076 910 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 Source: Bloomberg 15,0 9,0 5,6 3,0 10,7 9,0 8,8 6,3 9,0 8,4 8,9 13,1 11,3 14,6 15,4 11,9 12,9 11
ago/09 nov/09 fev/10 mai/10 ago/10 nov/10 fev/11 mai/11 ago/11 nov/11 fev/12 mai/12 ago/12 nov/12 fev/13 mai/13 ago/13 nov/13 fev/14 mai/14 ago/14 nov/14 fev/15 mai/15 ago/15 ago/09 nov/09 fev/10 mai/10 ago/10 nov/10 fev/11 mai/11 ago/11 nov/11 fev/12 mai/12 ago/12 nov/12 fev/13 mai/13 ago/13 nov/13 fev/14 mai/14 ago/14 nov/14 fev/15 mai/15 ago/15 16-jun-09 ago/09 out/09 dez/09 fev/10 abr/10 jun/10 ago/10 out/10 dez/10 fev/11 abr/11 jun/11 ago/11 out/11 dez/11 fev/12 abr/12 jun/12 ago/12 out/12 dez/12 fev/13 abr/13 jun/13 ago/13 out/13 dez/13 fev/14 abr/14 jun/14 ago/14 out/14 dez/14 fev/15 abr/15 jun/15 ago/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 380 330 280 230 Non-commercial holdings Coffe prices 281,7 46.478 208,9 50.224 38200 70.000 60.000 50.000 40.000 30.000 180 20.000 130 168,3 10.000 130,7 80 0-10.000 30-13584 -20.000 Source: Bloomberg -20-30.000 US$ c / bushel 2.000 Non-commercial holdings 1.800 Soybean prices 192117 1.600 1.400 1.200 1.000 800 600-27264 -24414 260.845 1.613 46.808 168.209 em número de contratos 280.000 240.000 200.000 160.000 120.000 80.000 53690 978,3 40.000 940,8 0-40.000 Non-commercial holdings and international soybean prices 2007-2015 400-80.000 200 0-130.404-120.000-160.000 Source: Bloomberg Non-commercial holdings and international corn prices 2007-2015 US$ cents por bushel 850 750 385009 746,8 789,5 Non-commercial holdings Corn prices 500000 400000 300000 650 550 545,3 149.456 200000 137381 100000 450 80.111 0 350 250-66274 340,5-113383 370,8-100000 -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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