monthly agribusiness brazilmonthly ......2016 and 2017 down to 3.4% and 3.6%, respectively, versus...

global markets began the year with high volatility and increased risk aversion due to the Chinese stock market

correction, the depreciation of the renmimbi, the substantial slide in commodity prices and the consequent risk of

a more pronounced slowdown of the Chinese economy, which affected asset prices worldwide. In addition, the

great majority of economies lost momentum. In fact, the IMF recently revised its global GDP growth estimates for

2016 and 2017 down to 3.4% and 3.6%, respectively, versus 3.1% in 2015, despite the continuing global

recovery, due to the rebalancing of China’s economy, even lower commodity prices and the difficulties facing

certain important emerging nations (notably Brazil and Russia). Thus the risks to this scenario remain negative

and tied to monetary normalization in the United States and the resurgence of geopolitical tension in various

regions of the world. The IMF expects developed market GDP expansion of 2.1% in 2016 and 2017, and

emerging market growth of 4.3% this year and 4.7% next year.

Concerns over the handling of fiscal policy and uncertainties remain high, keeping confidence at low levels.

There has been no interruption in Brazil’s economic slowdown, which is particularly evident in the worsening of

the job market. Frustration with tax collection and the need to raise revenue and reduce spending have increased

the challenges facing the fiscal adjustment. At the same time, the signals coming from the economy remain

disappointing, leading us to once again alter our GDP shrinkage estimate for this year to 3.5%, following last

year’s reduction of 3.9%, remembering that the IBGE will publish these figures on March 3. The weakening of

domestic activity and the difficulty in adjusting the public accounts, as well as the dollar’s global scale upward

tendency and the decline in commodity prices, should ensure continuing pressure on the exchange rate, which

has not been reflecting the economic fundamentals and which we believe will close the year at R$/US$4.00.

Given the poor performance of the economy, we expect the IPCA consumer price index to move up by 6.9% in

2016. As a result of this slowdown over last year (10.67%), as well as the uncertain global outlook and the

Brazilian recession, we expect the Selic benchmark interest rate to close the year at 13.25%.

January 2016 Macroeconomic Research Department

Macroeconomic Outlook

MONTHLY AGRIBUSINESS BRAZIL MONTHLY AGRIBUSINESS BRAZIL

Executive Summary

Soybeans

International prices should remain at the low level of recent months, reflecting ample global stocks. Domestic

prices, on the other hand, should stay high, favored by the appreciated dollar.

Corn

With lower production in both the U.S. and Brazil, due to the routing of more area to soybean, international

prices should remain high, albeit moderately given the exceptionally elevated stocks to use ratio, as should

domestic prices, reflecting the decline in Brazilian output, healthy export volume and strong domestic

consumption in response to higher poultry production.

Coffee

International prices should begin to fall, reflecting the healthy harvest estimates in Brazil, while domestic prices

should remain high, benefiting from the depreciated exchange rate. However, volatility is still likely to continue, in

response to news regarding the development of the Brazilian crop and the possible adverse impact of El Niño on

the Asian plantations.

Cattle

The combination of a depreciated exchange rate and expectations of the opening of several markets to Brazilian

beef exports should sustain the increase in cattle prices, although this will be mitigated by reduced domestic

demand and the effects of El Niño-induced rainfall on pasture.

Sugar and Ethanol

International sugar prices and domestic ethanol prices should continue to move up moderately until the entry of

the new Brazilian sugarcane harvest in April, sustained by domestic ethanol demand, given the increase in

gasoline prices, and the improved adjustment between global sugar supply and demand.

Macroeconomic Research Department

15.39419.419

25.934 26.160

31.370 32.345

41.917

52.01849.989

55.027

60.01857.162

68.688

75.324

66.383

81.499

86.121

96.228

102.111

8.000

17.000

26.000

35.000

44.000

53.000

62.000

71.000

80.000

89.000

98.000

107.000

90

/91

91

/92

92

/93

93

/94

94

/95

95

/96

96

/97

97

/98

98

/99

99

/00

00

/01

01

/02

02

/03

03

/04

04

/05

05

/06

06

/07

07

/08

08

/09

09

/10

10

/11

11

/12

12

/13

13

/14

14

/15

15

/16

*

em mil toneladasFonte e Projeção: CONAB

Elaboração: BradescoProdução Nacional de Soja 1990 - 2012

2

SO

YB

EA

NS

Soybean – International prices should remain at the low level of recent

months, reflecting ample global stocks. Domestic prices, on the other

hand, should stay high, favored by the global appreciation of the dollar

Fundamentals

In this month’s report, the USDA altered its U.S. production estimate for the 2015/16 harvest from 108.4

million to 107.0 million tonnes and maintained its forecasts for Brazil and Argentina at 100 million and 57

million tonnes, respectively. As a result, the stocks to use ratio was reduced from 26.4% to 25.2%,

although this is still very close to last year’s level (26.2%), which was the highest for five harvests.

Conab 4th 2015/16 harvest survey revised estimated soybean production down by 0.3% over the previous

month’s estimate due to the worsening of expectations regarding yields in Mato Grosso, where rainfall has

been sparse. Output is now estimated at 102.1 million tonnes, but still 6.1% up on the previous harvest. In

fact, soybean is the current season’s best performer, being the only crop to record an increase in planted

area in response to healthy profitability as a result of the appreciation of the dollar. This will therefore be

the fourth consecutive year of record soybean output.

International soybean prices are likely to remain at the low levels of recent months in response to high

global stocks, while domestic prices should remain high, reflecting the worldwide appreciation of the dollar.

Source and Estimate: Conab

Production: BRADESCO

National

production of

soybeans 1991 –

2016 – in ´000 tons


18,04

26,63

19,98

43,93

32,42

48,15

22,57

28,62

27,03

44,37

39,81

30,59

45,68

40,14

73,92

50,53

61,83

53,38

69,98

66,10

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

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

SOJA EM GRÃO PREÇO AO PRODUTOR - PRAÇA PR

em R$ por saca de 60 kg Fonte: Deral PR Elaboração e Projeção: Bradesco

de

z/1

6

3

Source: Deral

Production and Estimate:

BRADESCO

Soybean producer

price – Paraná

2000 – 2016

in R$ per 60 kg bag

Source: Bloomberg


International soybean prices

(US$ cents/bushel)

2000 – 2016

491

546507

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

965889

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

PREÇOS INTERNACIONAIS DE SOJA - BOLSA DE CHICAGO - CBOT PREÇO FUTURO 1º VENCTO 2000 - 2010

em US$ cents por bushel

em US$ cents por bushel

Fonte: Bloomberg Elaboração: Bradesco•Projeção de preço: média dos preços futuros

de

z/1

6

Soybean

productivity –

1991 – 2016

in kg per hectare

Source and estimate: Conab


1.580

2.027

2.1502.221

2.175

2.2992.367 2.395

2.751

2.567

2.816

2.339

2.245

2.419

2.816

2.629

2.927

3.115

2.651

2.938

2.854

2.998

3.073

1.500

1.700

1.900

2.100

2.300

2.500

2.700

2.900

3.100

3.300

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*

em kg por ha Fonte e Projeção: Conab Elaboração: Bradesco Produtividade da lavoura de soja - 1990 - 2012

Macroeconomic Research Department 4

CO

RN

Corn – With lower production in both the U.S. and Brazil, due to the routing

of more area to soybean, international prices should remain high, albeit

moderately given the exceptionally elevated stocks to use ratio, as should

domestic prices, reflecting the decline in Brazilian output, healthy export

volume and strong domestic consumption in response to higher poultry

production

Fundamentals

The USDA has revised its U.S. 2015/16 corn production estimate down from 346.8 million to 345.5 million

tonnes, 4.3% lower than the previous crop, due to the routing of more area to soybean, while maintaining

its Argentinian and Brazilian forecasts at 25.6 million and 81.5 million tonnes, respectively. As a result, the

current month’s stocks to use ratio is 21.6%, still above the last harvest’s figure, which closed at 19.8%.

Conab’s 4th 2015/16 harvest survey pointed to a 7.8% reduction in planted area for the 1st corn crop over

the previous harvest, ceding space to soybean. In comparison with the previous month’s survey, the

estimate edged up by 1.0%, favored by expectations of higher yields. Estimated planted area for the 2nd

crop was maintained, given that planting will only start in February. Consequently, total corn production is

estimated at 82.3 million tonnes (27.8 million tonnes for the 1st crop and 54.6 million for the 2nd), 2.8%

down on the previous season.

Given the deterioration of the job market and the tightening up of household budgets, consumers are

replacing their purchases of beef with chicken, whose prices are more affordable. This tendency is

increasing demand for corn, the main ingredient of poultry feed. As a result, Conab estimates a 4%

increase in domestic corn consumption this year to 58.2 million tonnes. Consequently, exports should fall

by 9.3%, from 30.9 million to 28 million tonnes. However, this volume is still high, representing 34% of

Brazilian production, versus 36.5% in the previous harvest.

Reduced production in the United States and Brazil should favor an upturn in international corn prices,

albeit a very modest one, given that the stocks to use ratio is still exceptionally high. Domestic prices

should also remain high as a result of the lower harvest in Brazil, healthy export volume (although down

on the previous harvest) and strong domestic consumption to meet increased poultry output.

Source and estimates: Conab


Domestic corn

production 1991 –

2016 in ´000 tons

24.096

30.77133.174

37.44235.716

32.393

42.290

35.281

47.411

42.129

35.007

42.515

51.370

58.652

51.004

56.01857.407

72.980

81.506 80.052

84.67382.328

20.000

30.000

40.000

50.000

60.000

70.000

80.000

90.000

90

/91

91

/92

92

/93

93

/94

94

/95

95

/96

96

/97

97

/98

98

/99

99

/00

00

/01

01

/02

02

/03

03

/04

04

/05

05

/06

06

/07

07

/08

08

/09

09

/10

10

/11

11

/12

12

/13

13

/14

14

/15

15

/16

*em mil toneladas Fonte e Projeção: Conab

Produção Nacional de Milho - 1991 - 2012


Corn productivity

– in kg per hectare

1991 – 2016



Source: Deral

Production and Estimate:

BRADESCO

Corn producer price

– Paraná

2000 – 2016

in R$ per 60 kg bag

Source: Bloomberg


International Corn prices

(US$ cents/bushel)

2000 – 2016

217

235

267

215

316

237

413

326

493

711

418

322

347

546

750

598

766

661

440

502

337367

391

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

Milho - Bolsa de Chicago - CBOTPreço futuro 1º vencimento

Em US$ cents por bushelFonte: Bloomberg Elaboração e Projeção: Bradesco

de

z/1

6

11,95

7,05

11,40

22,28

18,96

16,26

10,44

14,14

24,94

13,07

19,96

26,92

17,26

23,29

17,8419,17

24,37

5,0

10,0

15,0

20,0

25,0

30,0

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

Preço pago ao produtor de milho - Paraná Fonte: DeralElaboração e Projeção:

Em R$ por saca de 60 kg Fonte: DeralElaboração e Projeção:

Em R$ por saca de 60 kg

de

z/1

6

1.791

2.1942.3492.344

2.622

2.356

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

5.1495.057

5.396 5.411

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

5.500

6.000

90

/91

91

/92

92

/93

93

/94

94

/95

95

/96

96

/97

97

/98

98

/99

99

/00

00

/01

01

/02

02

/03

03

/04

04

/05

05

/06

06

/07

07

/08

08

/09

09

/10

10

/11

11

/12

12

/13

13

/14

14

/15

15

/16

*

em kg por ha Produtividade - Milho - 1991 - 2012


Fundamentals

The USDA’s mid-December report reduced estimated Brazilian 2015/16 harvest output from 52.4 million

bags, estimated in June, to 49.4 million bags in December, reflecting the impact of the drought in the

Southeast region last year. In the case of the global crop, the USDA lowered its estimate from 152.7

million to 150.1 million bags between the same two periods, primarily due to the downward revision for

Brazil. These revisions helped sustain prices. In the case of Vietnam, which produces robusta coffee, the

USDA estimated production expansion from 28.6 to 29.3 million bags between the two surveys. However,

Vicofa, the local coffee growers’ association, estimated output of just 18 million bags, in response to the

low prices received for the previous harvest, which discouraged planting. It is worth remembering that the

2015/16 crop is currently in the harvesting phase in Vietnam and Colombia, while in Brazil, harvesting

has been concluded (harvesting of Brazil’s 2016/17 crop will begin in May). According to the

meteorological services, El Niño should lead to lack of rainfall in the equatorial regions, possibly

jeopardizing the crops in such coffee-producing countries as Vietnam, Indonesia and Colombia.

In January, Conab published its first survey of Brazil’s 2016/17 crop, the higher of the two-year coffee

cycle, which estimated production of 50.5 million 60 kg bags, 16.9% up on the 43.2 million bags produced

in the previous harvest. Arabica output is expected to move up by 21.1% over the 32.1 million bags

recorded last year, reaching 38.8 million bags. The upturn is due to favorable weather conditions and the

increase in planted area, which increased by 6.6% in Minas Gerais, 4.5% in Paraná and 1.0% in São

Paulo. Despite the Paraná expansion, however, Conab estimates that the state’s production will fall by

18.6%, given that the previous harvest was exceptionally good, benefiting from the recovery of yields

following two poor years. Robusta output is estimated at 11.7 million bags, 4.9% more than the 11.2

million bags produced in the previous harvest, fueled by the 6.5% increase in planted area in Bahia,

raising expected output in the state by 55.1%. In Espírito Santo, the state that produces the most robusta,

planted area fell by 7.5%, due to the difficulties confronting growers due to weather variations last year.

Nevertheless, yields will be healthier this year and Conab expects the state’s output to fall by only 0.8%.

In the coming months, attention will be focused on the development of the plants in Brazil and the

behavior of El Niño in the Asian countries. There is a risk of harvest failure in the coffee producing

regions of Indonesia and India, whose development periods begin as of October, as they could suffer

from an El-Niño-driven regional drought.

Thanks to estimates of a good harvest in Brazil, international coffee prices should begin to fall, although

Brazilian prices should remain high, favored by the exchange rate. Volatility will also be a feature, in line

with crop development in Brazil and possible adverse effects of El Niño on the crops in Asia.

6

CO

FF

EE

Domestic coffee

production – 1994 – 2016

in ´000 60 kg bags



26.000

16.800

27.500

18.860

34.547

27.170

31.100

28.137

48.480

28.820

39.272

32.944

42.512

36.070

45.992

39.470

48.095

43.484

50.82649.152

45.342

43.235

50.535

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*

Fonte e projeção (*): Conab Elaboração: BradescoProdução Nacional de Café - 1994 - 2012mil sacas de 60 kg

Coffee – International prices should begin to fall, reflecting the healthy

harvest estimates in Brazil, while domestic prices should remain high.

However, volatility is still likely to continue, in response to news

regarding the development of the Brazilian crop and the possible

adverse impact of El Niño on the Asian plantations


Source: Bloomberg


International Coffee

Prices 2000 - 2016

In US$ cents/ Lb

Source: BMF BOVESPA Production: BRADESCO

Arabica coffee – São

Paulo 2000 – 2016

in US$ per 60 kg bag

115,06

63,07 65,95

67,78

99,48

127,53

96,55

131,18

152,04

108,67

142,45

204,99

272,07

180,03

150,03

117,62

197,02

118,14117,85

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

Projeção de preço: média dos preços futuros Café em grão - Bolsa de Nova York - NYBOT2000 - 2010Em US$ cents por libra peso

Fonte: Bloomberg Elaboração:

de

z/1

6

223,6239,8

337,0

230,4

291,4

245,8

269,8

247,5

328,0

530,8

457,8 408,6

247,7

366,3

480,1

424,0

479,3

523,8528,0

90,0

140,0

190,0

240,0

290,0

340,0

390,0

440,0

490,0

540,0

590,0

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

Café Arábica - Preço ao Produtor - Praça São Paulo 2000 - 2012Em R$ por saca 60 kg Fonte: Cepea EsalqElaboração e Projeção: Bradesco

de

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6


Fundamentals

Although beef export volume began moving up as of the beginning of the second half of last year in

response to the depreciation of the real, it still fell by 13.3% in 2015 as a whole, reflecting reduced

purchases by Russia (-47.9%) and Venezuela (-40.4%), both of which were suffering from the effects of

the reduction in oil prices and the devaluation of their currencies against the dollar.

This year, the depreciation of the real will continue to fuel shipment expansion, as will two other

exceptionally important factors: (i) the opening of several markets to Brazilian beef, namely the United

States, China, Japan, South Africa, Iraq, Iran and Saudi Arabia, together with ongoing negotiations with

countries in Central America and Asia, notably Thailand and Indonesia; (ii) the reduction in Australian

exports to Asian countries due to the lower number of animals ready for slaughter. The USDA expects

Brazilian beef export volume to increase by 9.2% this year, while Abiec (the meat exporters’ association)

estimates an upturn of 25%.

Although we should experience greater demand for beef, supply is also likely to move up, given that the

retention of females, which has been occurring in Brazil since 2014, has raised potential supply of bull

calves in 2016. After peaking in May last year, bull-calf prices began to decline, having fallen by 7%

through December.

Domestic meat consumption is expected to cool, reflecting the worsening of the job market and lower

consumer earnings. The wholesale meat price trajectory is giving indications that consumers are

replacing purchases of lower quality beef cuts with chicken. Between mid-2015 and the beginning of

January 2016, the price of lower quality cuts fell by 5% while chicken prices increased by 16%.

Expectations of higher exports this year, fueled by the depreciation of the real and the opening of new

markets, should keep fatstock prices at high levels, while downward pressure will be exerted by weak

domestic demand and higher rainfall, which will improve pasture maintenance.

8

BE

EF

Brazilian beef

exports (in tons)

2013 – 2015

Source: SECEX


104.974

120.133

80.000

90.000

100.000

110.000

120.000

130.000

140.000

150.000

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

Exportações Brasileiras de carne bovina - 2010 - 2012 - Em toneladas Fonte: Secex Elaboração: Bradesco

2013

2014

2015

Cattle – The combination of a depreciated exchange rate and

expectations of the opening of several markets to Brazilian beef

exports should sustain the increase in cattle prices, although the

upturn will be mitigated by reduced domestic demand and the effects

of El Niño-induced rainfall on pasture


42,2

51,7

61,8

93,3

74,5

109,6106,9

90,897,0

108,4

125,2

150,7

151,3

161,5

20,0

40,0

60,0

80,0

100,0

120,0

140,0

160,0

180,0

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

BOI GORDO PREÇO AO PRODUTOR - PRAÇA SP

Em R$ por arroba (15 kg)Fonte: Cepea EsalqElaboração e Projeção: Bradesco

de

z/1

6

Live cattle –

producer price –

São Paulo – 2002

– 2016

in R$ per arroba

Source: Cepea


Slaughter Cattle in

thousand heads

2013 - 2015

Source : MAPA

Production : BRADESCO

2.294

2.485

2.2562.208

2.079

1.800

2.000

2.200

2.400

2.600

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

Abates mensais de boi - 2010 - 2012 - Em toneladas Fonte: Secex Elaboração: Bradesco

2013

2014

2015


222.429 223.460240.944

287.810

314.969

257.592

320.650

359.316

431.413

474.800

559.432

604.514623.905

560.364

588.916

658.822

634.767

658.702

150.000

250.000

350.000

450.000

550.000

650.000

90

/91

91

/92

92

/93

93

/94

94

/95

95

/96

96

/97

97

/98

98

/99

99

/00

00

/01

01

/02

02

/03

03

/04

04

/05

05

/06

06

/07

07

/08

08

/09

09

/10

10

/11

11

/12

12

/13

13

/14

14

/15

15

/16

*

mil toneladasProdução Nacional de Cana-de-Açúcar - 1990 - 2013

Fonte e projeção : Conab Elaboração. Bradesco

Fundamentals

In its latest report published in December, Conab estimated sugarcane production from the 2015/16

harvest at 658.7 million tonnes, 3.8% up on the previous crop and slightly higher than August’s estimate

of 655.2 million tonnes due to improved weather conditions.

Given the substantial increase in domestic ethanol consumption due to the upturn in gasoline prices,

more sugarcane is being routed to ethanol production this harvest. Between August and December,

estimated sugar output was reduced by 7.2%, from 37.3 million to 34.6 million tonnes, while the ethanol

estimate climbed by 2.4%, from 28.5 million to 29.2 million liters in the same period. As a result, total

sugar and ethanol production should fall by 2.7% and rise by 1.9%, respectively, in relation to the

previous harvest, while hydrous ethanol output should move up by 7.4%.

The USDA’s November survey indicated an improved adjustment between global supply and demand,

with the stocks to use ratio falling from 26%, in the previous harvest, to 22.9%. Specialist international

consulting firms are pointing to a global sugar industry deficit following five consecutive years of surplus.

According to Unica, three months before the end of sugarcane processing from the 2015/16 crop,

crushed volume in the Central-South was 4.6% higher than in the same period last year, while production

of sugar and anhydrous ethanol (mixed with gasoline) were down by 4.4% and 3.4%, respectively. On

the other hand, output of hydrous ethanol, used directly in flex-fuel vehicles, was up by 10.9% in order to

meet the strong increase in consumption following the gasoline price hike.

According to Unica, three months before the end of sugarcane processing from the 2015/16 crop,

crushed volume in the Central-South was 4.6% higher than in the same period last year, while production

of sugar and anhydrous ethanol (mixed with gasoline) were down by 4.4% and 3.4%, respectively. On

the other hand, output of hydrous ethanol, used directly in flex-fuel vehicles, was up by 10.9% in order to

meet the strong increase in consumption following the gasoline price hike.

International sugar prices began climbing as of August, reflecting a combination of: (i) the disclosure, by

specialist consulting firms, that the current harvest will result in a global sugar deficit; (ii) increased

rainfall in the producing regions in the final processing phase, hampering crushing; and (iii) the 6%

increase in refinery-gate gasoline prices at the end of September, fueling demand for ethanol.

International sugarprices should continue to move up moderately in response to higher ethanol demand

as a result of the upturn in gasoline prices and the improved adjustment between global sugar supply and

demand. Ethanol prices should remain under pressure until the entry of the new harvest in April, fueled

by robust demand and higher gasoline prices.

Sugar cane production

1991 - 2016

in ´000 tons



10

SU

GA

R

AN

D

ET

HA

NO

L

Sugar and Ethanol – International sugar prices and domestic ethanol

prices should continue to move up moderately until the entry of the new

Brazilian sugarcane harvest in April, sustained by domestic ethanol

demand, given the increase in gasoline prices, and the improved

adjustment between global sugar supply and demand


Source: BMF BOVESPA


International sugar

prices 2000 – 2016

In US$ Cents/ Lb

Source: Bloomberg


Hydrous Ethanol

Prices

2012 - 2016

in R$ per cubic meters

5,6

10,7

9,0 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

13,95

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

Preços internacionais de açúcar – NYBOT – Preço futuro 1º Vencto 2000 – 2013Fonte: Bloomberg Elaboração: Bradesco

Em US$ cents por libra peso

de

z/1

6

Domestic sugar and

ethanol production

1993 – 2016

Sugar in ´000 tons

Ethanol in ´000 liters



11.700

19.380

16.020

27.500

38.168

35.968

37.878

35.56034.613

12.692

13.078

10.518

14.640

23.007

25.763

27.595

23.640

28.660 29.215

8.000

15.000

22.000

29.000

36.000

43.000

93

/94

94

/95

95

/96

96

/97

97

/98

98

/99

99

/00

00

/01

01

/02

02

/03

03

/04

04

/05

05

/06

06

/07

07

/08

08

/09

09

/10

10

/11

11

/12

12

/13

13

/14

14

/15

15

/16

*

Açúcar em mil toneladasEtanol em mil litros

Fonte e (*) Projeção: Conab Elaboração: Bradesco

Produção nacional de açúcar e de etanol 1993 – 2013

SUGAR

ETHANOL

1.062

1.291

1.025

1.146

1.225

1.354

1.150

1.136

1.076

1.316

1.1921.148

1.353

1.590

1.708

1.770

1.455

1.470

920

1.020

1.120

1.220

1.320

1.420

1.520

1.620

1.720

1.820

Jan

-12

Feb

-12

Mar-

12

Ap

r-12

May

-12

Ju

n-1

2Ju

l-12

Au

g-1

2S

ep

-12

Oc

t-1

2N

ov-1

2D

ec-1

2Jan

-13

Feb

-13

Mar-

13

Ap

r-13

May

-13

Ju

n-1

3Ju

l-13

Au

g-1

3S

ep

-13

Oc

t-1

3N

ov-1

3D

ec-1

3Jan

-14

Feb

-14

Mar-

14

Ap

r-14

May

-14

Ju

n-1

4Ju

l-14

Au

g-1

4S

ep

-14

Oc

t-1

4N

ov-1

4D

ec-1

4Jan

-15

Feb

-15

Mar-

15

Ap

r-15

May

-15

Ju

n-1

5Ju

l-15

Au

g-1

5S

ep

-15

Oc

t-1

5N

ov-1

5D

ec-1

5Jan

-16

Feb

-16

Mar-

16

Ap

r-16

May

-16

Ju

n-1

6Ju

l-16

Au

g-1

6S

ep

-16

Oc

t-1

6N

ov-1

6

em R$ por metro cúbico


Harvest follow-up

Non-commercial

positions and

international

soybean prices

2009 - 2015

Non-commercial

positions and

international corn prices

2009 - 2015

Non-commercial

positions and

international

coffee prices

2009 - 2015

Source: Bloomberg


Source: Bloomberg


Source: Bloomberg


-27264

192117

-24414

260.845

46.808

168.209

-130.404

-20775

1.613

940,8 922,5

-160.000

-120.000

-80.000

-40.000

0

40.000

80.000

120.000

160.000

200.000

240.000

280.000

0

200

400

600

800

1.000

1.200

1.400

1.600

1.800

2.000

Jan

-10

Ap

r-10

Ju

l-10

Oc

t-1

0

Jan

-11

Ap

r-11

Ju

l-11

Oc

t-1

1

Jan

-12

Ap

r-12

Ju

l-12

Oc

t-1

2

Jan

-13

Ap

r-13

Ju

l-13

Oc

t-1

3

Jan

-14

Ap

r-14

Ju

l-14

Oc

t-1

4

Jan

-15

Ap

r-15

Ju

l-15

Oc

t-1

5

Jan

-16

Non-commercial position

Soybean price

16-j

un

-09

-66.274

385.009

80.111

149.456

-113.383

-15328

746,8

789,5

545,3

340,5

360

-300000

-200000

-100000

0

100000

200000

300000

400000

500000

150

250

350

450

550

650

750

850

Jan

-10

Sep

-10

May

-11

Jan

-12

Sep

-12

May

-13

Jan

-14

Sep

-14

May

-15

Jan

-16


Corn price

46.478

50.224

38.200

-2147

281,7

208,9

168,3

125,25

-30.000

-20.000

-10.000

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

-20

30

80

130

180

230

280

330

380

Jan

-10

Mar-

10

May

-10

Ju

l-10

Sep

-10

No

v-1

0

Jan

-11

Mar-

11

May

-11

Ju

l-11

Sep

-11

No

v-1

1

Jan

-12

Mar-

12

May

-12

Ju

l-12

Sep

-12

No

v-1

2

Jan

-13

Mar-

13

May

-13

Ju

l-13

Sep

-13

No

v-1

3

Jan

-14

Mar-

14

May

-14

Ju

l-14

Sep

-14

No

v-1

4

Jan

-15

Mar-

15

May

-15

Ju

l-15

Sep

-15

No

v-1

5

Jan

-16

Posições Não Comerciais e Preços Internacionais de café - 2007 - 2014 - Fonte: Bloomberg Elaboração: Bradesco


Coffee

16-j

un

-09


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%.

Source: Usda


World ranking of

the soybean

complex 2011 –

2012 harvest

Snapshot of the market

13

Ranking Production Export Production Export Production Export

US 35,5% 44,2% 20,2% 14,0% 20,6% 12,9%

Brazil 26,4% 32,0% 15,1% 22,9% 15,8% 16,2%

Argentina 19,8% 12,8% 17,2% 49,3% 17,7% 54,6%

China 5,6% 0,0% 25,8% 0,0% 24,6% 0,0%

Grains Meal Oil


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


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.


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.

Distribuição regional da produção de café robusta:

71,2% Espírito Santo

14,3% Rondônia

6,4% Bahia

2,4% Minas Gerais

CO

FF

EE


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.


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.


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

Complexo Sucroalcooleiro

Da cana-de-açúcar produzida no Brasil, 46% se destina à produção de cana e 54% à produção de

etanol (safra 2011/12).

O açúcar tem a seguinte destinação: 68% exportação e 32% mercado doméstico. O etanol tem a

seguinte destinação: 7% exportação e 63% mercado interno.

Do total de etanol produzido, 68% é hidratado (usado como combustível nos carros flex fuel) e 32% é

usado como anidro (misturado à gasolina na proporção de 20% a 26%).

O açúcar é uma cultura de exportação, visto que o nível de produção excede o consumo em torno de

70%. Isso significa dizer que qualquer crescimento da produção nacional gera excedente exportável.

Países de destino

Açúcar Bruto (73% da produção) : 16% Rússia, 10% China;

Açúcar Refinado (27% da produção): Países árabes e africanos;

Etanol: 34% EUA, Coreia do Sul 15%, Japão 14%.

Sazonalidade

A cana é uma cultura perene, pois o tempo entre o plantio e a colheita da cana é de 18 meses, e da

mesma planta é possível fazer até 6 cortes, em média.

O período de colheita da cana ocorre entre abril e novembro. Nesse período as usinas operam 24

horas. Entre os meses de janeiro e março as plantas são desmontadas para manutenção.

O Brasil é o único grande player mundial com safra no 1º semestre do ano. Os demais: EUA, Europa,

Índia, Tailândia e Austrália têm início de safra a partir do 2º semestre do ano.

Regionalização

65% Sudeste, 16,8% Centro-Oeste, 10,3% Nordeste, 7,3% Sul.

Ranking

O Brasil é o maior produtor mundial de açúcar com participação de 21,2%. Os demais players são: Índia

16,8%, União Europeia 9,9%, China 7%, Tailândia 6%.

O Brasil é o maior exportador, com participação de 42% no mercado global. Os demais exportadores

são: Tailândia 15,3%, Austrália 5,2%.

Os maiores produtores mundiais de etanol são: 45% EUA e 33,5% Brasil.


Source: IBGE, CEPEA


Seasonality of

slaugther of steers

and cows and live

cattle prices

1997 – 2010

in R$ per arroba

Octavio de Barros - Macroeconomic Research Director

Marcelo Cirne de Toledo

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

Economia Internacional: Fabiana D’Atri / Felipe Wajskop França / Daniela Cunha de Lima /Thomas Henrique Schreurs

Pires

Economia Doméstica: Igor Velecico / Andréa Bastos Damico / Ellen Regina Steter / Myriã Tatiany Neves Bast / Ariana

Stephanie Zerbinatti

Análise Setorial: Regina Helena Couto Silva / Priscila Pacheco Trigo / Leandro de Oliveira Almeida

Pesquisa Proprietária: Fernando Freitas / Leandro Câmara Negrão/ Ana Maria Bonomi Barufi

Estagiários: Davi Sacomani Beganskas / Henrique Neves Plens / Mizael Silva Alves / Gabriel Marcondes dos

Santos / Wesley Paixão Bachuga / Carlos Henrique Gomes de Brito / Gustavo Assis Monteiro

monthly agribusiness brazilmonthly ......2016 and 2017 down to 3.4% and 3.6%, respectively, versus...

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