Brazilian Soy Production Seen Expanding
- The US agricultural attache forecasts 2020/21 area growth will be 4.05%, which is above the trend of 2.8%, with yields near the 5-year average.
- Soy planted area is projected to be 38.5 million hectares (95 million acres) with production of 130 million tonnes (4,776 million bushels).
- If realized, production would be up 5.7% from last season’s record harvest of 123 million tonnes.
- The attache forecasts domestic use at 44.5 million tonnes in the 2020/21 marketing year, an increase of just 1%.
- The 32% depreciation of the Brazilian real has pushed domestic soybean prices to record levels.
- The 2019/20 soybean export forecast was revised up to 78 million tonnes, with a potential 85.5 million tonnes available for 2020/21.
FBN’s Take On What It Means: Brazilian farmers have benefited significantly from an export boom thanks to a weak currency, which means that Brazil’s agricultural commodities are in effect on sale for the rest of the world. This, combined with producers’ confidence that high prices and robust global demand for Brazilian soybeans will continue to hold, incentivizes further expansion. The US has a fairly short export window into January 2021 when its prices are the most competitive, after which Brazil is expected to take market share if there is a normal growing season.
China Books Record Corn Purchase
- Exporters reported the sale of 1.8 million tonnes of corn to China, the fourth-biggest spot deal ever for the grain.
- The purchase adds to the 1.4 million tonnes reported sold on July 10.
- There are expectations that China will also import 3 million tonnes of corn from Ukraine based on a standing trade deal.
- China is expected to meet the import quotas set by the World Trade Organization for 7.2 million tonnes of corn from any country in a year.
- China's state grain handler Sinograin finds no quality issues with stockpiled corn.
FBN’s Take On What It Means: Record corn sales to China are a positive development. The key will be whether further purchases are made beyond the WTO quota, which is nearly met. Though there has been recent flood damage to some agricultural production areas, this would likely hinge on an expansion of state stockpiles in China as private companies require a GMO certificate to import the grain. The question remains whether China will meet its trade obligations to the US, especially given the recent increase in political tensions between the two countries.
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