Did Brazil really expand 1.7 million hectares last year?
This question has been bugging me for two months.
We knew about 400,000 hectares were switched from 1st crop
corn last season. That still left us with 1.3 million new hectares.
Given the dollar exchange rate last year at this time and the tight
cashflows, it made no sense for Brazil to keep the pedal to the metal.
I think about 300,000 hectares that Conab found in remote areas of
Para and Rondonia were actually "catch up" hectares. These were areas
being prepped back in 2013 for 2014. They may or maynot have been
planted. Maybe the 1st crop out of pasture was so-so at best. But those
hectares came on line with robusta in 2014/15.
This leaves us with about 1 million new hectares on a year over year basis.
This is slower than the previous 2.5 million hectare increase year over year,
but still respectable none the less.
An article was published June 25th at the 7th Congress of Brazilian soy.
Here they were discussing the continuing agronomic problem of planting
soybeans on soybeans in Brazil. In Mato Grosso they have extended the
no plant window. Yet, many producers squeezed in a 2nd crop and planted
their own seed again.
In Parana state, the increase of soybeans on soybeans was up 21% year over year.
Crop scientists are concerned about the ineffectiveness of fungicides in the future
if we continue to push the limits on soybean rust resistance. In a few years, we might
not have the tools to control rust effectively and within a reasonable cost parameters.
The datapoint that stood out for me was that 680,000 hectares were planted to
a 2nd crop soybean this past year. With a yeild of ~2.8 tons/ha, this is about
2 million tons of bonus soybeans this past crop cycle.
With the June Conab report showing production of 96 million tons of
soybeans this past season, we can now see that the 1st crop or main crop
was circa 94 million tons. This makes sense now.
I wish Conab would give a 2nd crop soybean designation so we could all get
a better grasp as to what hectares are coming from crop switching, pasture conversion,
and double crop of soy.
There is talk of widening the no plant window even further for 2016.
If so, we may have see the peak of soy/soy area.
But with cheap corn prices, the ability to replant your own seed, and the
profitability of soy/soy, one cannot blame the farmer for trying.
The increase in Brazil soy area basis is first crop was more like 3% YoY
and not 5% as previously thought.
The pace of expansion is slowing.
With the recent rally in soybeans, this puts many areas back in the black for
2016 in the interior of Brazil.
80 cents X 2.2 X 3.10 = R$ 5.50/sac of soybeans X 50 sacs = R$ 275 direct
to the bottom line. This has happened in two weeks.
This helps firm up the 2016 planting intentions for Brazil.
Will we expand again? stay tuned- monitoring