Abstract
In BMI' s new Brazil Agribusiness Report for Q3 2009 we introduce the new
Soybean Outlook. The rise
of soybean production in Brazil has been rapid
over the past couple of decades. Production has grown
three fold since the
beginning of the 1990s and the area harvested has more than doubled. Brazil is
now
the world' s second largest producer after the US and production is
continuing to expand.
In the coming years, much of the expansion of
soybean production will be driven by increasing demand
for the crop from
China. Soybean consumption in China has grown more than 100% this decade and
we
see demand continuing to rise as per capita incomes grow and demand for
meat and edible oils increases.
Brazil will be key in supplying this
demand.
There are, however, problems that must be overcome for the
long-term success of Brazil' s soybean
production. Infrastructure in some
of the main producing regions is woefully lacking and farmers face
huge
expense in getting their crops to market relative to their competitors in
North America. Port capacity
is also inadequate causing major bottlenecks
for exports.
The rapid increase in soybean production has worried
environmentalists with the industry often coming
under fire for allegedly
contributing to the deforestation of the Amazon rainforest. The Brazilian
Oilseed
Processors Association (Abiove) in 2006 agreed to stop trading
soybean produced on newly deforested
areas. While the agreement will no
doubt be very hard to enforce, a report jointly produced by
Greenpeace
showed that cattle ranchers were a far larger contributor to deforestation
than soybean
producers. Even without pushing further into the rainforest,
there is still plenty of room for increasing the
area planted to soybean
in Brazil assuming demand remains strong.
Brazilian agriculture is seeing
mixed fortunes through the current economic slowdown. Tightening credit
conditions have put a halt to many projects conceived in the commodity price
boom of 2007 and 2008.
Sugar and ethanol refineries have been hit
particularly hard. Prices for some important commodities,
however,
including soybeans and sugar, have held up well on supply constraints.
Livestock producers are also feeling the pressure as demand for meat slows and
input costs remain high.
The government has stepped in to help producers
with a BRL10bn (US$4.90bn) fund to provide loans to
struggling firms at
favourable interest rates. The difficulties have also spurred a wave of
consolidation
moves as companies aim to cut costs by increasing economies
of scale. By far the biggest move is the
merger of Perdigão and
Sadia, Brazil' s two largest poultry producers, to form Brasil Foods. The
new
company will be the world' s largest poultry producer. We would not be
surprised if there were more
mergers and acquisitions in the Brazilian
livestock sector in the coming months - JBS, the world' s biggest
beef
producer, has been on the hunt for acquisitions with a recent move to takeover
the US' National
Beef blocked on competition concerns.
| 
View Cart
