December 11, 2014

Conab Increases Brazilian Soy Estimate, Lowers Wheat Estimate

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Brazilian soybeans - In their December Crop Report, Conab increased the estimate for the 2014/15 Brazilian soybean crop by 5.3 million tons from 90.5 million tons in November to the current estimate of 95.8 million tons. If achieved, it would represent an increase of 11% compared to last year and set a new record for soybean production in Brazil. Conab gave an overall upbeat assessment of the soybean crop despite a slow start to planting in September and October. They stated that the weather improved in November allowing for a more rapid planting pace during the month. The conclusion of the soybean planting in Brazil should occur at about the normal time.

The 2014/15 soybean acreage in Brazil was increased 373,000 hectares compared to November to 31.66 million or 4.9% more than in 2013/14. The soybean yields is now estimated at 3,026 kg/ha (43.8 bu/ac) compared to last year's yield of 2,854 kg/ha (41.3 bu/ac) or an increase of 6%. Many analysts had expected that the delayed soybean planting would result in lower soybean yields, but Conab does not share that sentiment.

Brazilian corn - The total Brazilian corn production estimate was increased 0.56 million tons from the November estimate to 78.68 million tons or a decline of 1.5% compared to the 79.9 million tons produced in 2013/14. The full-season corn production is expected to decline with the safrinha corn production increasing, but the safrinha estimate is expected to be adjusted downward in future reports.

Conab is estimating that the full-season corn acreage will decline 6.6% compared to last year to 6.18 million hectares. The full-season corn yield is estimated at 4,736 kg/ha or 1% less than last year. The total full season corn production is estimated at 29.2 million tons or 7.5% less than last year. If achieved, the full-season corn crop would represent 37% of Brazil's total corn production in 2013/14. Conab is reporting that there are scattered dry pockets could impact the full-season corn yield in parts of northeastern Brazil as well as Parana and Rio Grande do Sul.

As far as the safrinha corn crop is concerned, Conab carried forward the same safrinha corn acreage that was plant6ed in 2013/14, but they did state that the safrinha corn acreage is expected to decline due to potential delays in the soybean harvest.

Interestingly the yield of the safrinha corn is estimated at 5,381 kg/ha (82.8 bu/ac) or 2.4% more than the 5,255 kg/ha achieved last year (80.9 bu/ac). Most analysts are expecting a lower corn yield due to the delayed planting of the crop early next year. The Mato Grosso Institute of Agricultural Economics (Imea) is expecting the safrinha corn yield in Mato Grosso to decline by 6% in 2014/15, whereas Conab is expecting the yield to increase by 3.2%.

Conab is estimating the safrinha corn production at 49.4 million tons or 2.4% more than the 48.2 million tons produced last year. If achieved, the safrinha crop would represent 63% of Brazil's total corn crop. Conab's safrinha corn estimate should be viewed as only an intermediary estimate until a formal estimate is released either in January or February.

Brazilian wheat - Conab lowered the estimate for the 2014/15 Brazilian wheat crop 15% from 7.0 million tons in November to 5.9 million tons in December. The states of Parana and Rio Grande do Sul are the two principal wheat producing states in Brazil and basically everything that could go wrong with the wheat crop in Rio Grande do Sul did go wrong including: freezing temperatures, torrential rains, strong winds, lack of sunshine, excessive heat, hail, and excessive diseases pressure. As a result, the wheat yield in Rio Grande do Sul was lowered to 1,330 kg/ha (20 bu/ac), which is approximately half of the initial yield expected at the start of the growing season (2,700 kg/ha or 41.5 bu/ac).

In addition to low yields, the quality of the wheat is also very poor. In many areas of Rio Grande do Sul, only half of the wheat is of milling quality with the remainder only suited for animal rations. The wet weather resulted in very high levels of diseases with some farmers applying up to ten fungicide applications in an unsuccessful attempt to keep the diseases under control.

As a result of the very disappointing wheat crop, Brazil will need to import 6-7 million tons of wheat to meet the domestic demand of 12 million tons. The vast majority of the imports will come from neighboring Argentina where the wheat harvest is approximately half completed.