MONTHLY AGRIBUSINESS BRAZIL MONTHLY AGRIBUSINESS BRAZIL March 2016 Macroeconomic Outlook The main message brought by the activity indicators disclosed this year is the continuation of the recession. In the fourth quarter of 2015, for example, GDP fell by almost 6% in annualized terms. However, the pace of the reduction was less intense than in the second and third quarters (respective annualized declines of 9% and 7%) and we should see an additional improvement in the first quarter of 2016 we expect a 1% reduction over 4Q15 (4% in annualized terms). The latest available activity indicators are also painting an exceptionally gloomy picture of the speed of the recession. On the other hand, there is increasing evidence, especially in regard to the job creation numbers, that the pace will begin to fall off. More recently, we have also perceived a slight improvement in confidence and there are signs of success in the adjustment of industrial and retail inventories. In any event, GDP is still likely to shrink by 3.5% this year. At the same time, we have adjusted our expectations regarding the next steps in monetary policy, with the Selic benchmark interest rate closing the year at 12.25%. But this will occur some months from now, when the signs of an inflationary decompression become clearer. In fact, we are maintaining our belief that the global economy will remain deflationary and that, in Brazil, the anchorage of expectations will come from the brutality of the ongoing recessive adjustment, ensuring that the IPCA consumer price index closes the year at 6.9%. Finally, we believe the behavior of the real will still be mainly determined by the uncertainties regarding the fiscal adjustment and the political situation, as well as the trajectory of the dollar in the global markets. Even though market volatility has fallen somewhat more recently, the uncertainties over China s performance and its possible impacts on the global economy, especially in the emerging nations and commodity production chains. As a result, the tendency of the central banks around the world, given their concerns with the risks still present in the international scenario, is one of monetary expansion if there is any threat to the economic recovery of their countries. This is also the case with the Federal Reserve, which may suspend the continuation of the monetary normalization process begun at the end of last year (or make it even more gradual). Executive Summary Soybeans - High global stocks should keep international prices down. However, there may be some volatility, with the possibility of an upturn, in response to concerns over the occurrence of La Niña during the planting seasons in the USA, between May and June, and in Brazil, between September and October. Domestic prices should remain high, benefiting from the depreciation of the real. Cornn International prices are under no upward pressure, given still elevated global stocks. As with soybean, there may be some volatility, with the possibility of an upturn, resulting from the advance of La Niña during the planting seasons in the USA (between April and May) and Brazil (between September and November). Domestic prices are being sustained by the exchange variation, robust domestic demand and exports. Prices may fall as of the second half, with the entry of the 2nd crop. Coffee International prices should remain low, given the healthy Brazilian harvest and the strong dollar, limiting dollar price hikes. As a result, domestic prices in reais should remain high. Price volatility may become more intense as of May, when harvesting begins in Brazil. Cattle Despite the downturn in domestic consumption, cattle prices will remain high in the coming months, due to robust demand for exports and the limited supply of animals ready for slaughter. Sugar and Ethanol Despite the global sugar deficit, there is no upward pressure on international prices, given expectations of a good harvest in Brazil, still high global stocks, and the strengthening of the dollar, limiting any upturn in dollar prices. Ethanol prices should begin to fall as of April, with the entry of the Brazilian harvest.
Soybean High global stocks should keep international prices down. However, there may be some volatility, with the possibility of an upturn, in response to concerns over the occurrence of La Niña during the planting seasons in the USA, between May and June, and in Brazil, between September and October. Domestic prices should remain high, benefiting from the depreciation of the real SOYBEANS Fundamentals The USDA s 12th monthly survey of the 2015/16 harvest year maintained its previous month s soybean production estimates for the United States, Argentina and Brazil. In the U.S., where the harvest has been concluded, production is estimated at 320.2 million tonnes, while the estimate for Brazil is 100 million tonnes, very close to Conab s forecast of 101 million tonnes, but above that of the specialized consulting firms, who are pointing to a Brazilian harvest of 95 million tonnes. Although the global stocks estimate was revised downwards, the expected stocks to use ratio remained high at 25%, slightly below the 26.2% recorded at the close of the previous harvest. Confounding expectations, Conab s 6th survey of the 2015/16 harvest revised its soybean production estimates upwards from 100.9 to 101.2 million tonnes. However, some specialized consulting firms are estimating only 95 million tonnes, due to adverse weather conditions in certain cities in the country s Midwest region. El Niño is beginning to dissipate and the meteorological models are pointing to the arrival of La Niña in the second half. For the time being, however, La Niña is only on the radar, as its intensity, duration and period of occurrence are still unclear. The phenomenon should result in upward price pressure, given that its most expected effects are drier weather in the United States and Midwest of Brazil, jeopardizing grain crops in the 2016/17 harvest and, consequently, raising prices as of the second half. International prices should remain at their current low levels, reflecting high global stocks. However, there may be some volatility, with a tendency towards an upturn, in the coming months, with attention focused on the development of La Niña during the planting season in the United States, between May and June, and in Brazil, between September and October. On the other hand, domestic prices should remain high, benefiting from the depreciation of the real. 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 81.499 101.180 96.228 National production of soybeans 1991 2016 in 000 tons 44.000 41.917 35.000 26.000 17.000 19.419 15.394 31.370 32.345 25.934 26.160 8.000 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* Source and Estimate: Conab 2
3.300 3.100 2.900 2.700 2.751 2.567 2.816 2.816 2.629 2.927 3.115 2.651 2.998 3.044 2.938 2.854 Soybean productivity 1991 2016 in kg per hectare 2.500 2.300 2.100 2.027 2.150 2.367 2.395 2.299 2.221 2.175 2.419 2.339 2.245 1.900 1.700 1.580 1.500 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* Source and estimate: Conab Soybean producer price Paraná 2000 2016 in R$ per 60 kg bag 80,0 70,0 60,0 73,92 61,83 68,68 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 jan/00 jan/01 19,98 jan/02 jan/03 jan/04 jan/05 22,57 jan/06 jan/07 jan/08 jan/09 jan/10 jan/11 jan/12 jan/13 jan/14 jan/15 jan/16 dez/16 1.800,0 1.600,0 1.400,0 1.200,0 1.000,0 800,0 600,0 546 491 400,0 jan/00 507 436 jan/01 jan/02 989 689 632 567 526 jan/03 jan/04 jan/05 757 542 jan/06 jan/07 1.515 1.211 908 jan/08 jan/09 jan/10 1.674 1.525 1.486 1.287 1.178 1.143 965 jan/11 jan/12 jan/13 jan/14 jan/15 jan/16 dez/16 883 International soybean prices (US$ cents/bushel) 2000 2016 Source: Bloomberg 3
Corn International prices are under no upward pressure, given still elevated global stocks. As with soybean, there may be some volatility, with the possibility of an upturn, resulting from the advance of La Niña. Domestic prices are being sustained by the exchange variation, robust domestic demand and exports, although they may fall as of the second half, with the entry of the 2nd crop CORN Fundamentals The USDA s 12th survey of the 2015/16 harvest year, published this month, recorded no important change in its production forecasts, with the estimate for the United States, where the harvest has been concluded, being maintained at 345.5 million tonnes. The Argentinian and Brazilian estimates were also maintained at 27 million and 84 million tonnes, respectively. Although there was a downward revision of estimated global stocks, the stocks to use ratio of 21.4% is still above the figure for the previous harvest, which closed at 19.8%. Conab s 6th 2015/16 harvest survey increased its estimate for the 2nd corn crop, currently being planted, for the second consecutive month, this time from 54.9 to 55.3 million tonnes, due to the higher-thanpreviously-expected expansion of planted area. This will be a 2nd crop record. Nevertheless, domestic prices are still high, sustained by strong demand for exports and (internally) for animal feed by poultry and hog breeders. The domestic corn stocks to use ratio is 12.3%, substantially lower than the 21.7% recorded three harvests ago. International corn prices should remain without upward pressure in the coming months, given the still elevated stocks to use ratio. However, there may be some volatility, with the possibility of an upturn, resulting from the advance of La Niña, especially during the planting periods in the United States, between April and May, and Brazil, between September and November. Domestic prices are still being favored by the devaluation of the real, robust domestic demand, and exports. However, we may see a more accentuated downturn in the second half, with the entry of the 2nd crop, which is expected to reach record levels. 90.000 80.000 70.000 84.673 83.519 81.506 80.052 72.980 Domestic corn production 1991 2016 in 000 tons 60.000 50.000 47.411 58.652 56.018 57.407 51.370 51.004 42.290 42.129 42.515 40.000 30.771 30.000 24.096 37.442 33.174 35.716 32.393 35.281 35.007 20.000 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* Source and estimates: Conab 4
6.000 5.500 5.000 4.500 5.396 5.400 5.149 5.057 4.808 4.311 4.158 Corn productivity in kg per hectare 1991 2016 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 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* Source and estimate: Conab Corn producer price Paraná 2000 2016 in R$ per 60 kg bag 35,0 30,0 25,0 22,28 24,94 26,92 23,29 32,43 24,34 20,0 15,0 11,95 10,0 11,40 18,96 16,26 10,44 14,14 13,07 19,96 17,26 17,84 19,17 Source: Deral Production and Estimate: BRADESCO 5,0 jan/00 jan/01 7,05 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/16 860 760 660 711 750 766 661 International Corn prices (US$ cents/bushel) 2000 2016 560 546 598 493 502 460 360 260 235 217 160 jan/00 jan/01 316 267 215 jan/02 jan/03 jan/04 jan/05 237 jan/06 413 326 jan/07 jan/08 418 322 jan/09 jan/10 347 jan/11 jan/12 jan/13 440 jan/14 337 jan/15 367 jan/16 dez/16 391 Source: Bloomberg 5
Coffee International prices should remain low, given the healthy Brazilian harvest and the strong dollar, limiting dollar price hikes. As a result, domestic prices in reais should remain high. Price volatility may become more intense as of May, when harvesting begins in Brazil COFFEE Fundamentals The USDA s next six-monthly report will be published in mid-june, when we will have a clearer picture of the estimates for the global 2016/17 harvest. Although there is a great deal of divergence in the various estimates for Brazilian output, everyone agrees that we will have a healthy crop, with harvesting beginning in May, thanks to higher rainfall in the coffee-growing regions as a result of El Niño. There are still doubts concerning the robusta crop in Espírito Santo, following two consecutive harvest declines as a result of low rainfall in the region. Conab estimates the current harvest in the state at 7,697 thousand bags, just 0.8% down on the season before. However, some estimates are pointing to a reduction of up to 20% over the previous harvest, given the persistent lack of rainfall. Among the global producers, Brazil and Colombia are among those countries that have experienced the biggest currency devaluations against the dollar in the last 12 months, fueling their exports. In any event, the recent appreciation of the real against the dollar led to an upturn in international prices this month, but the fundamentals are still in place and the low level of these prices is likely to be maintained given that the Brazilian harvest is expected to be a substantial one. Domestic prices in reais should remain high, favored by the strong dollar. Prices may become more volatile as news emerges on the development of Brazil s harvest, which begins in May. 61.000 51.000 41.000 31.000 26.000 27.500 34.547 27.170 31.100 28.137 48.480 28.820 39.272 32.944 42.512 36.070 45.992 39.470 48.095 43.484 50.826 49.152 50.535 45.342 43.235 Domestic coffee production 1994 2016 in 000 60 kg bags 21.000 16.800 18.860 11.000 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 16/17* Source and estimate: Conab 6
Arabica coffee São Paulo 2000 2016 in US$ per 60 kg bag 590,0 490,0 530,8 480,1 551,5 390,0 290,0 223,6 190,0 239,8 337,0 230,4 291,4 269,8 247,5 328,0 408,6 424,0 366,3 247,7 Source: BMF BOVESPA 90,0 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/16 325,0 275,0 272,07 International Coffee Prices 2000-2016 In US$ cents/ Lb 225,0 175,0 125,0 115,06 75,0 99,48 127,53 204,99 152,04 142,45 131,18 108,67 96,55 197,02 180,03 150,03 117,62 118,14 117,85 25,0 jan/00 jan/01 63,07 65,95 67,78 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 Source: Bloomberg 7
Cattle Despite the downturn in domestic consumption, cattle prices will remain high in the coming months, due to robust demand for exports and the limited supply of animals ready for slaughter BEEF Fundamentals In response to the opening of several markets to Brazilian meat (United States, China, Japan, South Africa, Iraq, Iran and Saudi Arabia) and the more depreciated exchange rate, beef export volume began moving up as of the second half of last year and should continue to do so in 2016. The USDA s sixmonthly report, published in October 2015, expects Brazilian beef export volume to increase by 9.2% this year, while Abiec (the meat exporters association) estimates an upturn of 21%. Although we have no precise measure of domestic beef consumption, the behavior of wholesale prices indicate that consumption is falling, given the deterioration of the job market and the slowing of income gains. Since mid-2015, the wholesale price of lower quality beef cuts has remained relatively stable, but with no upward pressure despite the increase in cattle prices. The supply of animals ready for slaughter should remain tight this year, reflecting the slaughter of females in previous years. Confinements are also unlikely to lead to an increase in supply given that corn-based animal feed costs remain high. Slowing domestic demand should bring cattle prices down, but strong demand for exports and the limited supply of animals ready for slaughter should ensure their continuing upward trajectory in the coming months. 150.000 140.000 130.000 2013 2014 2015 2016 Brazilian beef exports (in tons) 2013 2016 120.000 120.133 110.000 100.000 104.974 90.000 80.000 jan fev mar abr mai jun jul ago set out nov dez Source: SECEX 8
Slaughter Cattle in thousand heads 2013-2016 2.600 2.400 2.485 2013 2014 2015 2016 2.294 2.200 2.208 2.256 2.000 1.962 Source : MAPA Production : BRADESCO 1.800 jan fev mar abr mai jun jul ago set out nov dez 180,0 160,0 140,0 120,0 100,0 80,0 60,0 40,0 42,2 51,7 61,8 93,3 125,2 109,6 106,9 108,4 97,0 90,8 74,5 150,7 155,3 164,0 Live cattle producer price São Paulo 2002 2016 in R$ per arroba 20,0 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 Source: Cepea
Sugar and Ethanol Despite the global sugar deficit, there is no upward pressure on international prices, given expectations of a good harvest in Brazil, still high global stocks, and the strengthening of the dollar. Ethanol prices should begin to fall as of April, with the entry of the Brazilian harvest SUGAR AND ETHANOL Fundamentals According to Unica, crushed volume in the Center-South in the final phase of sugarcane processing from the 2015/16 crop, was 5.8% higher than in the same period last year, while production of sugar and anhydrous ethanol (mixed with gasoline) were down by 3.8% and 2.0%, respectively. On the other hand, output of hydrous ethanol, used directly in flex-fuel vehicles, was up by 11.6% in order to meet the strong increase in consumption following the gasoline price hike. The International Sugar Organization (ISO) has disclosed a new estimate for the global sugar deficit from the 2015/16 harvest, which is still in the processing phase in Asia, Europe and Australia, of 5 million tonnes, versus the 3.5 million tonnes estimated in November, primarily due to lower expected output in India, Thailand and Brazil. Conab s next survey will be published in mid-april and will contain the first estimate for the 2016/17 harvest. Specialized consulting firms are estimating sugar cane production from the 2016/17 harvest in Brazil s Center-South region of between 620 and 635 million tonnes, versus the previous harvest s figure of 603 million tonnes, according to Conab, thanks to improved weather conditions, favoring yields, and the volume of repeated cane from the previous crop. This should boost sugar output, encouraged by the more depreciated exchange rate. Despite estimates of a global deficit from the 2015/16 harvest, still in the processing phase in the northern hemisphere, international sugar prices are unlikely to move up, chiefly due to the fact that: (i) attention is shifting to the development of the 2016/17 harvest, which will begin to be processed in Brazil in April and which should be higher than the previous harvest; (ii) global stocks are still high, despite the recent decline; (iii) the strong dollar will prevent a bigger upturn in dollar prices. Ethanol prices should begin to fall as of April, with the entry of the Brazilian harvest. 650.000 550.000 450.000 431.413 474.800 559.432 604.514 623.905 658.822 658.702 634.767 588.916 560.364 Sugar cane production 1991-2016 in 000 tons 350.000 314.969 287.810 250.000222.429 223.460 240.944 257.592 320.650 359.316 150.000 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* Source and estimate: Conab 10
Domestic sugar and ethanol production 1993 2016 43.000 36.000 SUGAR ETHANOL 38.168 35.968 37.878 35.560 34.613 Sugar in 000 tons Ethanol in 000 liters 29.000 27.500 25.763 27.595 28.660 29.215 22.000 19.380 23.640 15.00012.692 16.020 23.007 Source and estimate: Conab 11.700 8.000 93/94 94/95 95/96 96/97 13.078 97/98 98/99 10.518 99/00 00/01 01/02 14.640 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* 1.920 1.820 1.720 1.620 1.520 1.420 1.320 1.220 1.120 1.020 920 1.062 1.291 1.025 1.146 1.225 1.354 1.150 1.136 1.076 1.316 1.192 1.590 1.708 1.353 1.148 1.842 1.405 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 abr/16 mai/16 jun/16 jul/16 ago/16 set/16 out/16 nov/16 1.475 Hydrous Ethanol Prices 2012-2016 in R$ per cubic meters Source: BMF BOVESPA International sugar prices 2000 2016 In US$ Cents/ Lb 33,0 27,0 28,4 32,1 29,5 24,9 21,0 17,9 21,9 17,7 15,0 13,1 14,6 15,4 14,9 13,89 9,0 10,7 9,0 8,8 9,0 8,4 8,9 11,3 10,7 Source: Bloomberg 5,6 3,0 jan/00 jan/01 jan/02 jan/03 6,3 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 11
Harvest follow-up Non-commercial positions and international coffee prices 2009-2016 380 330 280 230 Non-commercial positions Coffee 281,7 46.478 208,9 50.224 38.200 70.000 60.000 50.000 40.000 30.000 180 20.000 130 168,3 10.000 131,85 80-2147 0-10.000 30-20.000 Source: Bloomberg -20 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16-30.000 16-jun-09 2.000 1.800 1.600 1.400 1.200 1.000 800 600-27264 Non-commercial positions Soybean prices 192117-24414 260.845 1.613 46.808 168.209 940,8-20775 280.000 240.000 200.000 160.000 120.000 80.000 937,75 40.000 0-40.000 Non-commercial positions and international soybean prices 2009-2016 400-80.000 200 0-130.404 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16-120.000-160.000 16-jun- Source: Bloomberg Non-commercial positions and international corn prices 2009-2016 850 750 Non-commercial positions Corn prices 413915 746,8 789,5 500000 400000 300000 650 149.456 200000 550 545,3 100000 450 350 250-66.274 80.111 340,5-113.383-15328 0 360,5-100000 -200000 Source: Bloomberg 150 Mar-10 Nov-10 Jul-11 Mar-12 Nov-12 Jul-13 Mar-14 Nov-14 Jul-15 Mar-16-300000 12
Snapshot of the market SOYBEANS 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
Snapshot of the market CORN 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
Snapshot of the market COFFEE 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
Snapshot of the market BEEF 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
Snapshot of the Market SUGAR AND ETHANOL 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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