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ANALYSIS: Brazil's soybean production gets massive retrospective boost


Brazil’s state-run food supply and statistics agency, Conab, has just revised its estimates for the country’s soybean output for the past seven years. It has raised by 14.4m tonnes its output over the last seven seasons - and now estimates the 2019-20 crop, drawing to a close, at 124.46m tonnes, which it says is 3.6m tonnes higher than previously thought.


Justifying the revision, Guilherme Bastos, Conab’s president, said: "Our commitment is to the quality of the information." Conab said it will now set about making similar revisions for Brazil’s corn, cotton, coffee, wheat and other major crops.


Judgements about the size of a crop are always more reliable when the final harvester halts; pre-harvest estimates are always being revised, keeping analysts busy. But it’s alarming that Conab should have got soybeans so wrong since 2013-14. How can we be sure it has got it right now? Conab promises to publish updated supply/demand figures in the next grain harvest survey, on 10 September.


Brazil’s beans go east


For the 2020-21 season Conab says Brazil’s overall harvest will gather in 278.7m tonnes of all types of agricommodities including corn, cotton, rice and soybeans. This will be an 8% rise year-on-year according to the agency.


Given the collapse in the Brazilian Real against the US dollar, the prices farmers are today about 50% higher year-on-year, according to the latest estimate from Rabobank - a powerful incentive to plant and harvest as much as feasible.


Brazil’s 2020-21 soybean crop, Conab forecasts, will be 133.5m tonnes, that of corn 112.9m tonnes. The area planted to soybeans will expand by 3% and reach almost 38m hectares; that of corn will be almost 20m hectares, a year-on-year rise of 7%, says Conab.


"Grain prices are expected to remain high, leveraged by the appreciation of the dollar" (at the start of the year four Reals would get $1, today the exchange rate is Reals 5.5 to $1, with expectations that it will be Reals 6 to $1 by the end of 2020) "and good international demand" (aka China).


Conab thinks that Brazilian soybean exports will increase by 5.8% and hit 86.79m tonnes: "China can buy around 80% of this" says Conab. Indeed it can.


Cotton the kicker


The only downbeat part of Conab’s latest news is cotton. The area planted to cotton in Brazil will fall by 11% and the harvest will drop by 12%, it says.


Cotton has been on a rollercoaster so far this year, with a shift of almost 40% between its trough and peak and is now trading around 65 cents per pound.


In the middle of this month the USDA said the world cotton stocks-to-use ratio was back up around 90%, thanks to the drop in demand brought on by Covid-19 - against the 30% to 60% ratio seen between 1960-61 and 2010-11. The abandonment rate in the US for the 2020-21 season was pegged by the USDA at 24% (the 10-year average is 20%) but the US is still likely to produce 18m bales.


The kicker is in the weather - there are three months of the Atlantic hurricane season left, with plentiful scope for damage to the developing US south and south-eastern cotton crop.

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