MONTHLY AGRIBUSINESS BRAZILMONTHLY AGRIBUSINESS …³cio... · The direction of economic policies has been a key factor in increasing the chances for economic stabilization and GDP

The direction of economic policies has been a key factor in increasing the chances for economic stabilization and GDP recovery. Before recent political events, growth drivers were a on a solid path towards positive terrain. That path wasn’t necessarily smooth, and first-half data available so far does not suggest that a strong economic recovery is already in place. For instance, first-quarter GDP is likely to be positive – but will receive a significant boost from one-offs, whose effect will be reversed or no longer affect the economy over the remainder of the year. These include: (i) a sharp growth of agricultural GDP; (ii) a change in the seasonal-adjustment model for the GDP; (iii) a decrease in the use of thermal power plants (which increases the sector’s added value); (iv) a 50-60% increase in automobile exports. Combined, we estimate that these one-offs contributed with 1.1 percentage points to headline first quarter GDP growth. In other words, without these one-offs, we estimate that GDP would have fallen by 0.2%. Meanwhile, second-quarter GDP data suggest a contraction, but will also be affected by recent volatility. Leaving aside the one-offs mentioned above (which this quarter will have a negative effect on GDP), a negative reading for 2Q GDP should be interpreted as evidence that the economy is moving sideways during 1H17, rather than a stop-and-go growth pattern. Recent political events could have a negative effect on the outlook, but it is still too early to assess the impact of the latest news on the economy or asset prices.

We maintain our positive assessment of global economic growth unchanged. Geopolitical risk appears to have diminished, despite some signs of softness in the U.S. and Chinese economies during 1Q17. U.S. Treasury bond yields have fallen, reflecting expectations that the pace of normalization by the Federal Reserve will likely remain moderate, resulting in some dollar weakness and softer commodity prices.

May 2017

Macroeconomic Research Department

Macroeconomic Outlook

MONTHLY AGRIBUSINESS BRAZIL MONTHLY AGRIBUSINESS BRAZIL

Executive Summary Soybeans - The Brazilian harvest is now over, and attention will turn to the North American crop, which is

expected to decline relative to last harvest. This and growing global consumption may exert some pressure on prices, but this will likely be limited by comfortable international stocks.

Corn – The expected retraction for the North American crop will be reflected in international prices, which should stay on a moderate upward trend. This increase will also be contained by stock levels, which also remain at comfortable levels, although lower than soy. Domestic prices may drop as the second harvest’s record crop makes its way to the market.

Coffee – International prices are expected to rise moderately over the next few months due to tighter global supply, as Brazilian production enters a cyclical “off” production year. Domestic prices will remain high, due to a weaker Brazilian harvest.

Cattle – Cattle price is expected to drop due to weak domestic consumption, no-growth forecasts for exports and an increased supply of animals ready for slaughter, resulting from an oversupply of calves.

Sugar and Ethanol – Although sugar production in the current harvest has been stable, it is set to be the second highest ever for Brazil. That, combined with expected production surpluses around the globe, has caused the supply outlook to surge, which should keep prices at low levels. Ethanol prices are expected to fall as the harvest moves to market.


15.39419.419

25.934 26.16031.370 32.345

41.917

52.018 49.98955.027

60.01857.162

68.688

75.324

66.383

81.49986.121

95.435

113.013

8.000

28.000

48.000

68.000

88.000

108.000

90/9

1

91/9

2

92/9

3

93/9

4

94/9

5

95/9

6

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

06/0

7

07/0

8

08/0

9

09/1

0

10/1

1

11/1

2

12/1

3

13/1

4

14/1

5

15/1

6

16/1

7*

2

SO

YB

EA

NS

Soybean – The Brazilian harvest is now over, and attention will turn to the North American crop, which is expected to decline relative to last harvest. This and growing global consumption may exert some pressure on prices, but this will likely be limited by comfortable international stocks

Fundamentals

The USDA released the 1st report for the 2017/18 grain harvest, which is currently being planted in the U.S. and will start being planted in Brazil and in Argentina in September. U.S. soy production is estimated at 115.8 million tons, or 1% lower than the previous harvest (117.2 million tons). Planted acreage is expected to be up 7.1%, but productivity is forecasted to drop 7.9%. Global consumption is expected to grow 3.9%. The global stock-to-consumption ratio is estimated at 25.8%, down from 27.2% in the last harvest. Despite the declining production, the output of the last four crops has allowed global stocks to rebound to comfortable, albeit still lower levels. Argentina is expected to produce 57 million tons, same volume of the crop currently being harvested in the country. For Brazil, the USDA forecasts 107 million tons, or 4.1% lower than the current harvest (111.6 million tons).

Conab disclosed the eighth estimate for the 2016/17 harvest, which is in its final stages in Brazil. Production is expected to reach a record high of 113.0 million tons, up 18.4% (or 17.6 million tons) from the previous harvest. Compared to last month’s report, Conab revised its estimate upwards for the fifth consecutive month, this time from 110.2 to 113.0 million tons, which reflects the improved yield estimates.

The probability of an El Niño event taking place this year has become less likely, as the a neutral weather pattern seems to be taking shape for 2017, with more rain than in 2016. Most of that rain is expected to take fall over the winter, but the winter months should not be drier than average.

Crop forecasts for Brazil have become increasingly bullish over the past few months, which implies a sharp drop in prices ahead. Soy forecasts in the months ahead will be more reliable, as much of the crop has already been harvested, which will keep prices from dropping even more. Another positive is the fact that, over the next few months, attention will be focused more on the development of the U.S. crop, which will be smaller compared to the last harvest. The combination of a smaller crop in the U.S. and constant rise in consumption is expected to lead to higher prices, but which will be limited by stock levels, which remain very comfortable.

Source and Estimate: Conab Production: BRADESCO

National production of soybeans – in ´000 tons


18,04

26,63

19,98

43,93

32,42

48,15

22,57

28,62

44,37

39,81

30,59

45,68

40,14

73,92

50,53

61,83

53,38

80,96

55,99

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

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

jan/

17

dez/

17

3

Source: Deral Production and Estimate:

BRADESCO

Soybean producer price – Paraná

in R$ per 60 kg bag

Source: Bloomberg Production: BRADESCO

International soybean prices (US$ cents/bushel)

491

546 507

436

632

567

989

526

689

542

757

1.515

908

1.211

1.143

1.674

1.525

1.287

1.486

1.178

965871

1.146

976

400,0

600,0

800,0

1.000,0

1.200,0

1.400,0

1.600,0

1.800,0

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

jan/

17

dez/

17

Soybean productivity – in kg per hectare

Source and estimate: Conab Production: BRADESCO

1.580

2.0272.150

2.221 2.1752.299

2.367 2.395

2.751

2.567

2.816

2.3392.245

2.419

2.816

2.629

2.927

3.115

2.651

2.9382.854

2.998

3.338

1.500

1.700

1.900

2.100

2.300

2.500

2.700

2.900

3.100

3.300

3.500

90/9

1

91/9

2

92/9

3

93/9

4

94/9

5

95/9

6

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

06/0

7

07/0

8

08/0

9

09/1

0

10/1

1

11/1

2

12/1

3

13/1

4

14/1

5

15/1

6

16/1

7*


Fundamentals The USDA released the 1st report for the 2017/18 grain harvest, which is currently being planted in the

U.S. and will start being planted in Brazil and in Argentina in September. U.S. production is estimated at 357.3 million tons, or 7.1% lower than the previous harvest. Planted acreage, most of which is reserved for soy production, will be 4.3% smaller. Expect yield is 2.2% lower. Global consumption is set to grow 0.8%. The stock-to-use ratio is estimated at 18.4%, below the 21.3% recorded in the previous harvest. Despite a drop in U.S. production, the positive output of the last four crops has allowed global stocks to rebound to comfortable, albeit still lower levels. Argentina is expected to produce 40 million tons, same volume of the crop currently being harvested in the country. For Brazil, the USDA forecasts 95 million tons, or 1.0% lower than the current harvest (96 million tons).

Conab published the eighth estimate for the 2016/17 grain crop for Brazil, which is already being harvested. Total corn production should reach 92.8 million tons, 39.5% above last year’s harvest, the equivalent of 26.3 million tons. The first harvest is expected to yield 30.2 million tons, or a 17.1% increase. Meanwhile, the second harvest – which last year saw a considerable drop in production due to drought conditions – should recover its yield potential. The current forecast is 53.7% above last year’s total, at 62.7 million tons. Compared to last month’s report, Conab revised the first harvest forecast from 29.9 upwards to 30.2 million tons, which is due mostly to the improved yield estimates. For the second harvest, expected to begin in June, estimates vary between 61.7 and 62.7 million tons. Given the robust growth of Brazilian corn output in 2017, producers may look at exports as an outlet for surplus production. In the last harvest, 18.9 million tons were exported. For this year, Conab expects exports to rise by 7.1 million tons, for a total of 26 million tons. Still, domestic corn stocks should go from 8 to 20 million tons, which amounts to 34% of consumption, up from 15% in 2016.

The probability of an El Niño event taking place this year has diminished, and current weather forecasts point to average rainfall for the second harvest’s development stage, with chances of frost over the winter.

Domestic prices have declined sharply in the past few months, due to the first-harvest crop being 17.1% larger than the past harvest, and the expectations for the record harvest (53.7% larger) to hit the market in June. Prices could drop further in the next few months, as the second harvest gets underway.

International prices are expected to remain high, due to a smaller U.S. crop. This increase will also be limited by stock levels, which remain at comfortable, albeit still lower levels. Domestic prices could drop further, as a record Brazilian harvest moves into full swing and the second harvest gets underway in June.

24.096

30.77133.174

37.442 35.71632.393

42.290

35.281

47.41142.129

35.007

42.515

51.370

58.652

51.00456.01857.407

72.980

81.50680.05284.673

66.531

92.832

20.000

30.000

40.000

50.000

60.000

70.000

80.000

90.000

100.000

90/9

1

91/9

2

92/9

3

93/9

4

94/9

5

95/9

6

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

06/0

7

07/0

8

08/0

9

09/1

0

10/1

1

11/1

2

12/1

3

13/1

4

14/1

5

15/1

6

16/1

7*

4

CO

RN

Corn – The expected retraction for the North American crop will be reflected in international prices, which should stay on a moderate upward trend. This increase will also be contained by stock levels, which also remain at comfortable levels, although lower than soy. Domestic prices may drop as the second harvest’s record crop makes its way to the market

Source and estimates: Conab Production: BRADESCO

Domestic corn production in ´000 tons

Macroeconomic Research Department 5

Corn productivity – in kg per hectare


Source: Deral Production and Estimate:

BRADESCO

Corn producer price – Paraná

in R$ per 60 kg bag


International Corn prices (US$ cents/bushel)

217235

267

215

316

237

413

326

493

711

418

322347

546

753

603

763

662

439

502

335

410

323

385

160

260

360

460

560

660

760

860

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

jan/

17

dez/

1711,95

7,05

11,40

22,28

18,9616,26

10,44

14,14

24,94

13,07

26,92

17,26

23,29

19,17

24,34

39,98

20,77

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

45,0

jan/

00

jan/

01

jan/

02

jan/

03

jan/

04

jan/

05

jan/

06

jan/

07

jan/

08

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09

jan/

10

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11

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12

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13

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14

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15

jan/

16

jan/

17

1.791

2.1942.3492.344

2.6222.356

2.5882.6502.5892.480

3.260

2.864

3.585

3.296

2.867

3.279

3.655

3.972

3.599

4.3114.158

4.808

5.149 5.057

5.396

4.178

5.383

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

5.500

6.000

90/9

1

91/9

2

92/9

3

93/9

4

94/9

5

95/9

6

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

06/0

7

07/0

8

08/0

9

09/1

0

10/1

1

11/1

2

12/1

3

13/1

4

14/1

5

15/1

6

16/1

7*


Fundamentals

The latest USDA biannual report for the 2016/17 harvest, which has already been completed in Brazil and is currently underway in other producing countries, showed a global stock-to-consumption ratio of 21.7%, which is lower than the last two harvests (22.9% and 28.8%). Stocks have been tight due to limited production growth, which has been unable to meet a more robust rise in consumption. The next USDA report will be released in June 2017.

Conab released the second report for the 2017/18 coffee harvest, which is currently underway. Total coffee production was revised downwards slightly (from 45.58 to 45.56 million bags). Arabica forecast dropped from 36.5 million bags to 35.4 million, 2.8% lower than the January estimate and 18.3% below last harvest, as it enters an “off” year in the biennial production cycle. Robusta production is expected to grow from 9.1 to 10.1 million bags, 11% higher than the January forecast and 26.9% above last harvest (which suffered from drought conditions). Despite the improved forecasts, the robusta harvest remains below its potential for 13 million bags, which was last seen before the crop failure of the past two years.

The probability of an El Niño event taking place this year has become less likely, and the current weather forecasts call for average rainfall during the harvest period, with chances of frost over the winter.

International coffee prices fell between February and mid-May, due to the variations in currency market and investment funds selling their positions amid tightening supply concerns.

International prices are expected to rise moderately in the months ahead, due to tighter global supply, as Brazilian production enters a cyclical “off” production year. Domestic prices will remain high due to a smaller Brazilian crop.

6

CO

FFE

E

Domestic coffee production in ´000 60 kg bags


26.000

16.800

27.500

18.860

34.547

27.170

31.10028.137

48.480

28.820

39.272

32.944

42.512

36.070

45.992

39.470

48.095

43.484

50.82649.152

45.34243.235

51.369

45.563

11.000

21.000

31.000

41.000

51.000

61.000

94/9

5

95/9

6

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

06/0

7

07/0

8

08/0

9

09/1

0

10/1

1

11/1

2

12/1

3

13/1

4

14/1

5

15/1

6

16/1

7

17/1

8*

Coffee – International prices are expected to rise moderately over the next few months due to tighter global supply, as Brazilian production enters a cyclical “off” production year. Domestic prices will remain high, due to a weaker Brazilian harvest



International Coffee Prices in US$ cents/ Lb

Source: BMF BOVESPA Production: BRADESCO

Arabica coffee – São Paulo in US$ per 60

kg bag

115,06

63,07 65,9567,78

99,48

127,53

96,55

131,18

152,04

108,67

142,45

272,07

180,03

150,03

117,62

197,02

118,14

160,47

138,62137,50

25,0

75,0

125,0

175,0

225,0

275,0

325,0

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

jan/

17

dez/

17

223,6 239,8

337,0

230,4

291,4269,8

247,5

328,0

530,8

408,6

247,7

366,3

480,1

424,0

556,7

467,6

535,2

50,0

150,0

250,0

350,0

450,0

550,0

650,0

750,0

jan/

00

jan/

01

jan/

02

jan/

03

jan/

04

jan/

05

jan/

06

jan/

07

jan/

08

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09

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14

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15

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16

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17

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17


BE

EF

Brazilian beef exports (in tons)

Source: SECEX Production: BRADESCO

129.482

97.221

108.879107.175

120.765

88.796

80.000

90.000

100.000

110.000

120.000

130.000

140.000

jan fev mar abr mai jun jul ago set out nov dez

201520162017

Cattle – Cattle price is expected to drop due to weak domestic consumption, no-growth forecasts for exports and an increased supply of animals ready for slaughter, resulting from an oversupply of calves

Fundamentals In mid-March, the Federal Police launched the operation “Carne Fraca” (“Weak Meat”), which uncovered

illegal practices in the inspection of a small number of Brazilian meatpackers. The main buyers, including China, Hong Kong, Egypt, Saudi Arabia, South Africa and the European Union – which together account for more than 50% of exports –, immediately announced an embargo on Brazilian meat pending further investigations. Two weeks later, these countries lifted the temporary embargoes, but vowed to impose stricter control of shipments. As a result, the volume of beef exports fell 26.5% in April, with a similar drop in value.

Domestic calf supply has risen due to the retention of cows in the last few years, leading to lower cattle prices. Calf prices have already dropped 18% since April last year. As a result, the ratio between cattle for slaughtering and calves improved, despite the recent drop in cattle prices. This uptrend will cause the supply of cattle for slaughtering to rise in the short and medium terms.

In April, the price of cattle dropped 4% on the heels of the Weak Meat scandal. However, prices returned to previous levels in May. Good weather allowed producers to keep the cattle on the pasture, while they waited for prices to improve.

Fundamentals should keep cattle prices at low levels in the next few months, led by: (i) weak domestic consumption, reflecting the still ongoing adjustments in the labor market; (ii) the growing supply of animals ready for slaughter, in response to an increase in the supply of calves; (iii) a downshift in exports, which account for 20.0% of total demand and should grow less than originally expected, due to the fallout from the Weak Meat operation.


Live cattle – producer price – São Paulo in R$ per arroba

Source: Cepea Production: BRADESCO

Slaughter Cattle in thousand heads

Source : MAPA Production : BRADESCO

2.253

2.058

1.998

2.081

2.047

2.120

1.840

1.890

1.940

1.990

2.040

2.090

2.140

2.190

2.240

2.290

jan fev mar abr mai jun jul ago set out nov dez

2015

2016

2017

61,8

93,3

74,5

109,6 106,9

90,897,0

108,4

125,2

150,7157,7

148,1

136,9139,47

20,0

40,0

60,0

80,0

100,0

120,0

140,0

160,0

jan/

06

jan/

07

jan/

08

jan/

09

jan/

10

jan/

11

jan/

12

jan/

13

jan/

14

jan/

15

jan/

16

jan/

17

dez/

17


222.429240.944

287.810314.969

257.592

320.650359.316

431.413

474.800

559.432

604.514623.905

560.364588.916

658.822634.767

657.184647.626

150.000

250.000

350.000

450.000

550.000

650.000

90/9

191

/92

92/9

393

/94

94/9

595

/96

96/9

797

/98

98/9

999

/00

00/0

101

/02

02/0

303

/04

04/0

505

/06

06/0

707

/08

08/0

909

/10

10/1

111

/12

12/1

313

/14

14/1

515

/16

16/1

717

/18*

Sugar cane production in ´000 tons


10

SU

GA

R

AN

D

ET

HA

NO

L

Sugar and Ethanol – Although sugar production in the current harvest has been stable, it is set to be the second highest ever for Brazil. That, combined with expected production surpluses around the globe, has caused the supply outlook to surge, which should keep prices at low levels. Ethanol prices are expected to fall as the harvest moves to market

Fundamentals

The USDA released its biannual report with the first forecast for the 2017/18 sugar harvest. The report forecasts stable consumption and a 5.2% rise in production. The biggest output increases will come from the following producers: India (17.7%), European Union (12.7), Thailand (12.3%) and Brazil (1.3%). After four consecutive harvests of production deficits, the current harvest is expected to create a surplus of 8 million tons of sugar.

In April, Conab released its first forecast for the 2017/18 harvest, which is just now getting underway. The report calls for a 2.3% decline in planted acreage. In São Paulo, the largest producing state, the area is expected to shrink by 4.5%, as several companies face financial hardship, despite the recent improvement in market conditions. Sugar cane production is estimated at 647.6 million tons, or 1.5% lower than the previous harvest. Yields are expected to rise 0.9% as the weather improves in the Northeast. Reflecting the high returns for sugar, the harvest will once again be used primarily for sugar production, and should total 38.7 million tons, the same volume as the previous harvest. Meanwhile, ethanol production is expected to drop 4.9%. Production of anhydrous ethanol (mixed with gasoline) is expected to rise 2.8%, while hydrated ethanol should drop 10%.

Unica released its first estimate for the 2017/18 harvest. Sugar cane production in the Center-South region is expected to reach 585 million tons, down 3.7% from the previous harvest, which came in at 607 million tons. Sugar production is forecast at 35.2 million tons (1.2% lower), while ethanol is at 24.7 million tons (a 3.7% drop).

Gasoline sales grew 6.6% in the first quarter of 2017, after rising 4.6% in 2016. In the same comparison, hydrated ethanol sales have fallen 20.0% year-to-date, after an 18.3% drop in 2016. Ethanol prices fell 20% until April 2017, reflecting lower demand and higher exports. Ethanol imports reached 722 million liters in the first quarter, nearly matching the total volume imported in 2017 (818 million tons).

International sugar prices are on a downward trend since February, reflecting the sale of long positions by investment funds and the news that global production is likely to improve from the last harvest, contributing to a decline in global production deficits.

The probability of an El Niño event taking place this year has become less likely, as the a neutral weather pattern seems to be taking shape for 2017, with more rain than in 2016. This forecast reduces the chances for weaker-than-expected harvests in Asia and Australia, which in turn will keep sugar prices at low levels.

Despite the decline in production forecast by Unica and the stability expected by Conab, the current crop will be the second largest in the country’s history. In addition, the USDA has forecast production surpluses around the globe. With an improved supply outlook, prices should stay at low levels. Ethanol prices are expected to remain on a downward trend, as the harvest moves into full swing in the Center-South of Brazil.


1.291

1.025

1.354

1.076

1.316

1.148

1.842

1.285

1.840

1.925

1.505

1.626

920

1.020

1.120

1.220

1.320

1.420

1.520

1.620

1.720

1.820

1.920

2.020

jan/

13fe

v/13

mar

/13

abr/1

3m

ai/1

3ju

n/13

jul/1

3ag

o/13

set/1

3ou

t/13

nov/

13de

z/13

jan/

14fe

v/14

mar

/14

abr/1

4m

ai/1

4ju

n/14

jul/1

4ag

o/14

set/1

4ou

t/14

nov/

14de

z/14

jan/

15fe

v/15

mar

/15

abr/1

5m

ai/1

5ju

n/15

jul/1

5ag

o/15

set/1

5ou

t/15

nov/

15de

z/15

jan/

16fe

v/16

mar

/16

abr/1

6m

ai/1

6ju

n/16

jul/1

6ag

o/16

set/1

6ou

t/16

nov/

16de

z/16

jan/

17fe

v/17

mar

/17

abr/1

7m

ai/1

7ju

n/17

jul/1

7ag

o/17

11

Source: BMF BOVESPA Production: BRADESCO

International sugar prices 20 in US$

Cents/ Lb


Hydrous Ethanol Prices in R$ per cubic meters

5,6

10,79,0 8,8

6,3

9,0

8,4

17,9

8,9

13,1

11,3

28,4

14,6

32,1

21,9

29,5

24,9

17,7

15,4

10,7

14,9

22,9

16,316,3

3,0

9,0

15,0

21,0

27,0

33,0

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

jan/

17

dez/

17

Domestic sugar and ethanol production

Sugar in ´000 tons Ethanol in ´000 liters


11.700

19.380

38.16838.691

38.702

12.692

10.518

26.682

23.640

27.957 30.462

27.808 26.451

8.000

15.000

22.000

29.000

36.000

43.000

94/9

5

95/9

6

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

06/0

7

07/0

8

08/0

9

09/1

0

10/1

1

11/1

2

12/1

3

13/1

4

14/1

5

15/1

6

16/1

7

17/1

8*

SUGAR

ETHANOL


Harvest follow-up

Non-commercial positions and international soybean prices 2011 - 2016

Non-commercial positions and

international corn prices 2011 - 2016

Non-commercial positions and international coffee prices




884,75-93386

-160

-120

-80

-40

0

40

80

120

160

200

240

280

800

900

1.000

1.100

1.200

1.300

1.400

1.500

May

-14

Jun-

14Ju

l-14

Aug

-14

Sep-

14O

ct-1

4N

ov-1

4D

ec-1

4Ja

n-15

Feb-

15M

ar-1

5A

pr-1

5M

ay-1

5Ju

n-15

Jul-1

5A

ug-1

5Se

p-15

Oct

-15

Nov

-15

Dec

-15

Jan-

16Fe

b-16

Mar

-16

Apr

-16

May

-16

Jun-

16Ju

l-16

Aug

-16

Sep-

16O

ct-1

6N

ov-1

6D

ec-1

6Ja

n-17

Feb-

17M

ar-1

7A

pr-1

7M

ay-1

7

Soybean prices

Non-connercial positions

16-ju

n-

356

-73302

-300

-200

-100

0

100

200

300

300

350

400

450

500

550

May

-14

Jun-

14Ju

l-14

Aug

-14

Sep-

14O

ct-1

4N

ov-1

4D

ec-1

4Ja

n-15

Feb-

15M

ar-1

5A

pr-1

5M

ay-1

5Ju

n-15

Jul-1

5A

ug-1

5Se

p-15

Oct

-15

Nov

-15

Dec

-15

Jan-

16Fe

b-16

Mar

-16

Apr

-16

May

-16

Jun-

16Ju

l-16

Aug

-16

Sep-

16O

ct-1

6N

ov-1

6D

ec-1

6Ja

n-17

Feb-

17M

ar-1

7A

pr-1

7M

ay-1

7

Corn pricesNon-commercial positions

117,75

-1980

-40

-20

0

20

40

60

80

100

120

140

160

180

200

220

240

May

-14

Jun-

14Ju

l-14

Aug

-14

Sep-

14O

ct-1

4N

ov-1

4D

ec-1

4Ja

n-15

Feb-

15M

ar-1

5A

pr-1

5M

ay-1

5Ju

n-15

Jul-1

5A

ug-1

5Se

p-15

Oct

-15

Nov

-15

Dec

-15

Jan-

16Fe

b-16

Mar

-16

Apr

-16

May

-16

Jun-

16Ju

l-16

Aug

-16

Sep-

16O

ct-1

6N

ov-1

6D

ec-1

6Ja

n-17

Feb-

17M

ar-1

7A

pr-1

7M

ay-1

7

Coffee prices

Non-commercial positions


SO

YB

EA

NS

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%.

Snapshot of the market

13


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.

CO

RN


14


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.

CO

FFE

E


15


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.

BE

EF


16


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.

SU

GA

R

AN

D

ET

HA

NO

L

Snapshot of the Market

17


Fernando Honorato Barbosa

DEPEC - BRADESCO does not accept responsibility for any actions/decisions that may be taken based on the information provided in its publications and projections. All the data and opinions contained in these information bulletins is carefully checked and drawn up by fully qualified professionals, but it should not be used, under any hypothesis, as the basis, support, guidance or norm for any document, valuations, judgments or decision taking, whether of a formal or informal nature. Therefore, we emphasize that all the consequences and responsibility for using any data or analysis contained in this publication is assumed exclusively by the user, exempting BRADESCO from all responsibility for any actions resulting from the usage of this material. We all point out that access to this information implies acceptance in full of this term of responsibility and usage. The reproduction of the content in this report (partially or in full) is strictly forbidden except if authorized by BRADESCO or if the sources (the name of the authors, publication and BRADESCO) are strictly mentioned.

Team

Economists: Ana Maria Bonomi Barufi / Andréa Bastos Damico / Constantin Jancso / Daniela Cunha de Lima / Ellen Regina Steter / Estevão Augusto Oller Scripilliti / Fabiana D’Atri / Igor Velecico / Leandro Câmara Negrão / Marcio Aldred Gregory / Myriã Tatiany Neves Bast / Priscila Pacheco Trigo / Regina Helena Couto Silva / Thomas Henrique Schreurs Pires

Internships: Alexandre Stiubiener Himmestein/ Bruno Sanchez Honório / Christian Frederico M. Moraes / Felipe Alves Fêo Emery de Carvalho / Felipe Yamamoto Ricardo da Silva / Mariana Silva de Freitas / Rafael Martins Murrer

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