monthly agribusiness brazilmonthly agribusiness … · challenging short-term outlook for the...

Second quarter GDP published by IBGE in late August came as bittersweet news for investors. On the upside, GDP results show that the worse of the recession has passed, with rising margins on investments and a lower rate of decline in household consumption. On the downside, we expected to see a stronger investment performance. Recovery in this and the next quarter will remain slow but steady, conditioned to the improvement in confidence. We forecast that Brazil’s GDP will fall 3.0% this year, but rebound 1.5% in 2017. The adjustment in the job market is still underway, reflected in additional modest increases in the unemployment rate and falling real wages. On the other hand, this scenario still confirms our favorable expectations for inflation. We forecast IPCA inflation of 7.2% in 2016, and expect some decompression in food inflation in the coming months. For 2017, we forecast IPCA inflation of 5%. Against this positive backdrop, we forecast a year-end exchange-rate of BRL3.20/USD, supported by domestic and external factors. We believe the Central Bank of Brazil will start easing monetary policy in October, and forecast a year-end Selic policy rate of 13.25%. Finally, despite a challenging short-term outlook for the fiscal accounts, we believe that the fiscal agenda will make progress in Congress - especially the proposed constitutional amendment that limits government spending growth to the previous year's inflation. We forecast a primary fiscal deficit of 2.5%/GDP in 2016 and of 2.1%/GDP in 2017.

The external scenario is gradually changing. Central Banks may be less willing to continue expanding liquidity, and there may be some volatility related to a small rate hike in the U.S., but we believe we are still some distance away from a scenario where Central Banks start tightening policy in earnest. Looking forward, we expect market conditions to be determined by: (i) the U.S. Federal Reserve, which will likely raise the policy rate by 25bps in December; and (ii) concerns (albeit more modest) about the fallout from the Brexit vote in the U.K. Finally, data was more favorable in China in August, pointing to a more modest slowdown in 2H2016 in response to the expansion of credit and a renewed increase in infrastructure investment.

September 2016

Macroeconomic Research Department

Macroeconomic Outlook

MONTHLY AGRIBUSINESS BRAZIL MONTHLY AGRIBUSINESS BRAZIL

Executive Summary Soybeans - International prices should continue at lower levels in the coming months, with the advance of the

record crop harvest in the U.S. Domestic prices should follow suit, because the Brazilian harvest has already ended.

Corn – International prices will likely remain low, reflecting the record U.S harvest. Domestic prices tend to settle at lower levels as the 2nd harvest continues extends until October, but we do not expect any sharp correction in light of the steep decline in output.

Coffee – The global supply and demand scenario should remain stable as a result of El Niño causing a drought in Asia and Colombia in the first semester, which ultimately kept international prices high. Domestic prices will follow the same trend as international prices.

Cattle – Cattle prices should remain stable at current levels, with no uptrends pressured by weaker domestic consumption rates. On the other hand, the increase in exports and low supply of livestock ready for slaughter will prevent a sharp decline in prices.

Sugar and Ethanol – International sugar prices will likely continue to rise as a result of global production deficit and low global stocks. This will lead to a crop more favorable to sugar production, and reduce supply of ethanol (ultimately leading to higher domestic fuel prices in the coming months).


15.39419.419

25.934 26.16031.370 32.345

41.917

52.01849.989

55.02760.018

57.162

68.688

75.324

66.383

81.49986.121

96.228 95.435

8.000

17.000

26.000

35.000

44.000

53.000

62.000

71.000

80.000

89.000

98.000

107.000

90/9

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91/9

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93/9

4

94/9

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96/9

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97/9

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00/0

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10/1

1

11/1

2

12/1

3

13/1

4

14/1

5

15/1

6

2

SO

YB

EA

NS

Soybean – International prices should continue at lower levels in the coming months, with the advance of the record crop harvest in the U.S. Domestic prices should follow suit, because the Brazilian harvest has already ended

Fundamentals

The USDA released the 5th report for the 2016/17 U.S. grain crop, which is currently in its development stages and will start being planted in October in Brazil. For the third consecutive month, the USDA raised the estimate for the U.S. crop, from 110.5 to 114.3 million tons, reflecting the productivity revision. Weather and crop conditions are positive in the U.S., which should drive productivity higher. The U.S. crop is expected to grow 6.9% to a new all-time high. The USDA kept the prognosis of 57.0 million tons in Argentina and reduced its estimate for the Brazilian harvest from 103 million to 101 million tons. The global stock-to-use ratio rose from 21.6% to 22.0% between last month and this month, still below previous crop’s ratio (23%).

Conab released the 12th and last survey for the 2015/16 harvest. Compared to last month, the estimate for soybean production remained unchangd. Compared to last year’s crop, however, production fell 0.8% despite a 3.6% increase in planted area, reflecting drought in the Midwest and excess rain in the South. Yields fell to 95.4 million tons, 5.5% below the record of 101 million tons expected at the beginning of the year.

The 2016/17 grain crop starts being planted in October and, considering the good profitability resulting from current price levels, we expect an increase in planted area. Ultimately, this may stabilize domestic soybean prices as of the beginning of the harvest, in March.

This month, NOAA (the U.S. national weather service) reduced the probability attributed to a La Niña event in 2016 to 50%, from 75% in June and 60% in July. The Australian Bureau of Meteorology rated the possibility of La Niña as ‘low intensity’ and more likely towards the end of the year.

International prices should remain at low levels in the coming months, reflecting the record harvest in the U.S. Domestic prices should follow suit, because Brazilian harvest has already ended.

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

44,37

39,81

30,59

45,68

40,14

73,92

50,53

61,83

53,38

80,96

68,17

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/

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10

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16

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16

3

Source: Deral Production and Estimate:

BRADESCO

Soybean producer price – Paraná

2000 – 2016 in R$ per 60 kg bag

Source: Bloomberg Production: BRADESCO

International soybean prices (US$ cents/bushel) 2000 – 2016

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

933

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

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05

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17

Soybean productivity – 1991 – 2016 in kg per hectare

Source and estimate: Conab Production: BRADESCO

1.580

2.027

2.1502.221

2.175

2.2992.367 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

2.870

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

Macroeconomic Research Department 4

CO

RN

Corn – international prices will likely remain low, reflecting the record U.S harvest. Domestic prices tend to settle at lower levels as the 2nd harvest continues extends until October, but we do not expect any sharp correction in light of the steep decline in output

Fundamentals The USDA released the 5th report for the 2016/17 crop and, after two upward revisions in previous

months, lowered its estimate of corn production in the U.S. from 384.9mn to 383.4mn tons – mainly due to lower productivity. The U.S. harvest will likely grow 11% relative to last year, to a new all-time high. The USDA kept its estimate of the Argentine harvest unchanged at 36.5mn tons, and raised its estimate of the Brazilian harvest (which starts being planted in October) from 80mn tons to 82.5mn tons. The global stock-to-use slightly decreased from 21.7% to 21.6% between last month and this month, at the same ratio of last season (21.8%).

Conab released the 12th and last report for the 2015/16 harvest. The estimate for the first corn harvest was revised down for each month starting in March, reflecting the drought that hit the main producing regions. Initially estimated at 28 million tons, the output for the 1st crop was lowered to 25.9 million tons. Since May, the estimate for the 2nd crop was also revised lower because of drought conditions in the Midwest in April and May and frost in Paraná. The 2nd crop, previously estimated at 57 million tons, was lowered to 41.1 million tons. Total corn output was estimated at 66.9 million tons - a 18 million ton (-20.9%) decline relative to last year. The stock-to-consumption ratio in the domestic market fell to 10.3%, compared with 18.3% in the last harvest, causing prices to soar. Prices had risen by 65% by May, but receded by 12% in the last three months.

The 2016/17 crop starts being planted next month and, considering the good profitability based on the current high prices, we anticipate an increase in planted area, which should stabilize domestic corn prices as of the beginning of the harvest, in March.

This month, NOAA (the U.S. national weather service) reduced the probability attributed to a La Niña event in 2016 to 50%, from 75% in June and 60% in July. The Australian Bureau of Meteorology rated the possibility of La Niña as ‘low intensity’ and more likely towards the end of the year.

International corn prices should remain at low levels in the coming months, reflecting the record harvest in the U.S. In the domestic market, prices tend to recede slightly, as the 2nd harvest crop progresses until October. Prices, however, should not register sharp decline and should not return the entire high recorded this year, due to the significant crop shortfall in Brazil.

Source and estimates: Conab Production: BRADESCO

Domestic corn production 1991 – 2016 in ´000 tons

24.096

30.77133.174

37.442 35.71632.393

42.290

35.281

47.411

42.129

35.007

42.515

51.370

58.652

51.004

57.407

72.980

81.506 80.05284.673

66.980

81.910

20.000

30.000

40.000

50.000

60.000

70.000

80.000

90.000

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*


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


International Corn prices (US$ cents/bushel) 2000 – 2016

217235

267

215

316

237

413

326

493

711

418

322347

546

753

603

763

662

439

502

335

410

323

373

160

260

360

460

560

660

760

860

jan/

00

jan/

01

jan/

02

jan/

03

jan/

04

jan/

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11

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dez/

1711,95

7,05

11,40

22,28

18,96

16,26

10,44

14,14

24,94

13,07

26,92

17,26

23,29

19,17

24,34

39,98

35,02

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

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06

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jan/

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09

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10

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16

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

4.207

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


Fundamentals

In June, the USDA released the 1st semi-annual report for the 2016/17 crop, suggesting a reduction in the stock-to-use ratio from 23.7% in the last crop to 20.9% in the current crop. For Brazil, the USDA estimated the harvest at 55.9 million bags, up 13.3% from the last crop, and higher than the Conab forecast, of 50 million bags. For Vietnam and Colombia, the estimate is 27.3 million and 13.3 million bags, respectively, which translates into decreases of 6.9% and 2.2% from the previous year, as a result of drought. For Indonesia, the estimate is a 14.9% decrease, totaling 10 million bags. Major producers faced a wide range of impacts caused by El Niño in the year’s first half. Brazil had a rainy period during the plant development and flowering stages, resulting in greater yields of the Arabica coffee. Asia and Central America were hit with droughts, which affected plant productivity. The next USDA report will be released in December.

According to specialized consulting firms, this will be the second crop with global production deficit.

Conab released the 2nd coffee crop report in late May. Comparing the January and May reports, the estimate for Arabica production rose from 38.8 million to 40.3 million 60-kilogram bags, a 3.8% increase benefited from good weather conditions in the producing regions. As for Robusta, estimates dropped from 11.7 million to 9.4 million bags, a 19.9% decline. For Espírito Santo, the decrease estimate was sharper, of 22.7%, while for Bahia, of 29.1%. Both states were the hardest hit by the drought. The next 2017/18 crop, which will begin to be harvested in April, may also register low Robusta productivity, since the plants are in flowering stages and the weather is still dry in Espírito Santo due to El Niño. The next Conab report will be released in September.

As a result of El Niño earlier this year, resulting in drought in Asia and Colombia crop areas, the global supply and demand framework should continue stable, contributing to continued high international prices. Domestic prices should follow the international price trend.

6

CO

FFE

E

Domestic coffee production – 1994 – 2016 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

49.669

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*

Coffee – The global supply and demand scenario should remain stable as a result of El Niño causing a drought in Asia and Colombia in the first semester, which ultimately kept international prices high. Domestic prices will follow the same trend as international prices


223,6239,8

337,0

230,4

291,4269,8

247,5

328,0

530,8

408,6

247,7

366,3

480,1

424,0

491,1

583,5635,1

90,0

190,0

290,0

390,0

490,0

590,0

jan/

00

jan/

01

jan/

02

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03

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7


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 65,9567,78

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

147,80

25,0

75,0

125,0

175,0

225,0

275,0

325,0

jan/

00

jan/

01

jan/

02

jan/

03

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04

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05

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17


BE

EF

Brazilian beef exports (in tons) 2013 – 2016

Source: SECEX Production: BRADESCO

130.420

137.185

129.482

97.221

104.810

108.574

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

201420152016

Cattle – Cattle prices should remain stable at current levels, with no uptrends pressured by weaker domestic consumption rates. On the other hand, the increase in exports and low supply of livestock ready for slaughter will prevent a sharp decline in prices

Fundamentals Beef exports are on the rise, benefitting from the opening of markets and a weaker exchange rate in the

first months of the year. Between January and August, shipped volumes increased by 7.7% compared to last year and should continue to grow as markets are opening up to Brazilian beef (United States, China, Japan, South Africa, Iraq, Iran and Saudi Arabia). This growth was led by: a 7.2% increase in exports to Europe, and 16.8% to Arab countries. For China and Saudi Arabia, which did not import any Brazilian meat last year, shipments totaled 95.5 thousand and 20.2 thousand tons, respectively. As for Venezuela and Russia, which are very dependent on oil revenues, they reduced the volumes purchased from Brazil by 72.4% and 26.8%, respectively.

Due to the job market downturn, consumers are replacing consumption of beef with chicken, which is more affordable. The movement of wholesale prices reflects this change in consumer behavior. Since the beginning of the year, prime beef prices rose only 1%, while poultry meat prices rose 9.6%.

The U.S. allowed the entry of Brazilian in natura beef, accepting beef from the regions where cattle are vaccinated against foot-and-mouth disease. Previously, they only accepted beef from the State of Santa Catarina, which was granted disease-free status without vaccination. The first shipments are expected to begin in September. Shipments destined to the U.S. market are unlikely to reach substantial volumes, because the annual quota without payment of export fees is 64 thousand tons, to be shared with Central American countries. But the U.S. market opening up to Brazil means a sanitary seal of approval that may allow Brazilian beef to be exported to other countries, such as South Korea, Canada, Japan and Mexico.

The supply of livestock ready for slaughter remains tight. Until August, slaughter volumes fell 2.4% against the same period last year, after an 8% decline last year. The high costs of corn-based and soybean-based feed will limit the expansion of confinement facilities and should not contribute significantly to increase the supply. The Institute of Agricultural Economics in the State of Mato Grosso estimates a 24% drop in the confined volume this year, compared to 2015, due to high feed costs combined with stagnant cattle prices.

Cattle prices should remain stable, potentially dropping due to the lower domestic consumption rates, which accounts for 80% of meat production. On the other hand, the increase in exports and low supply of animals ready for slaughter will prevent a sharp fall in prices.


Live cattle – producer price – São Paulo – 2002 – 2016 in R$ per arroba

Source: Cepea Production: BRADESCO

Slaughter Cattle in thousand heads

2013 - 2016

Source : MAPA Production : BRADESCO

2.485

2.2562.239

2.052

1.993

2.044

1.800

2.000

2.200

2.400

2.600

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

2014

2015

2016

61,8

93,3

74,5

109,6 106,9

90,897,0

108,4

125,2

150,7157,7

149,0

157,4

20,0

40,0

60,0

80,0

100,0

120,0

140,0

160,0

jan/

06

jan/

07

jan/

08

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09

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10

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11

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12

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13

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15

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16

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17

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17


222.429 223.460240.944

287.810314.969

257.592

320.650359.316

431.413

474.800

559.432

604.514623.905

560.364588.916

658.822634.767

665.586684.774

150.000

250.000

350.000

450.000

550.000

650.000

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*

Sugar cane production 1991 - 2016 in ´000 tons


10

SU

GA

R

AN

D

ET

HA

NO

L

Sugar and Ethanol – International sugar prices will likely continue to rise as a result of global production deficit and low global stocks. This will lead to a crop more favorable to sugar production, and reduce supply of ethanol (ultimately leading to higher domestic fuel prices in the coming months)

Fundamentals

In its semi-annual report released in May, the USDA estimated the global production for the 2016/17 crop at 169.3 million tons and consumption at 173.6 million tons, representing a global deficit of 4.3 million tons. In the previous crop, the deficit reached 6.9 million tons. The stock-to-use ratio is estimated at 18.9%, below the 22.0% recorded in the previous harvest. Specialized consulting firms also estimate global sugar deficit for the second consecutive crop.

Conab released the second report of the 2016/17 harvest in August, indicating a reduction in the sugar cane output estimate, down from an estimated 690.9 million tons in April to 684.8 million tons. This amounts to a 0.9% or 6 million tons decline, incorporating the effects from the droughts occurred in April and May in the Midwest region. Compared to the previous crop, production increased by 2.9%, as a result of improved weather conditions and expanded area. Sugar production is estimated at a record of 39.96 million tons, increasing by 6.5% compared to the previous report and 19.3% compared to the last harvest. Total ethanol production is estimated at 27.87 million liters, down 8.1% compared to the report in April and 8.5% compared to the last harvest. For hydrated ethanol (used directly in dual-fuel vehicles), the estimate was reduced by 11.9% between the two reports, while anhydrous ethanol (blended with gasoline) fell 2.1% on the same basis of comparison. Thus, the current crop is more focused on sugar, which is more profitable due to high international prices. The next Conab report will be released in mid-December.

According to Unica, the volume of sugarcane processed in the Center-South region until mid-August was 10.1% higher year over year. According to comments made by Unica, processing advanced thanks to the drier climate that allowed harvest operations. In the same period, sugar processing was 22% higher, while ethanol processing increased by 4.1%. Processing plants are directing more sugarcane for sugar production, at the expense of ethanol, due to better sugar profitability.

International sugar prices should remain high, reflecting a higher global production deficit and the drop in global stocks. Therefore, conditions are more favorable to the production of sugar, which will limit the supply of ethanol during the off season and should drive fuel prices up over the next few months.


1.062

1.291

1.025

1.354

1.076

1.316

1.148

1.842

1.285

1.548

1.740

920

1.020

1.120

1.220

1.320

1.420

1.520

1.620

1.720

1.820

1.920

jan/

12fe

v/12

mar

/12

abr/1

2m

ai/1

2ju

n/12

jul/1

2ag

o/12

set/1

2ou

t/12

nov/

12de

z/12

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

11

Source: BMF BOVESPA Production: BRADESCO

International sugar prices 2000 – 2016

In US$ Cents/ Lb


Hydrous Ethanol Prices 2012 - 2016 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

21,0

19,4

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

1993 – 2016

Sugar in ´000 tons Ethanol in ´000 liters


11.700

16.020

27.500

35.968

37.878

33.489

39.963

12.692

13.07810.518

14.640

23.007

25.763

27.595

23.640

30.462

27.870

8.000

15.000

22.000

29.000

36.000

43.000

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*

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

2011 - 2016




-24414

260.845

168.209

-130.404

89.446

1.613

940,8

1025

-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

Sep-

11N

ov-1

1Ja

n-12

Mar

-12

May

-12

Jul-1

2

Sep-

12N

ov-1

2Ja

n-13

Mar

-13

May

-13

Jul-1

3

Sep-

13N

ov-1

3Ja

n-14

Mar

-14

May

-14

Jul-1

4

Sep-

14N

ov-1

4Ja

n-15

Mar

-15

May

-15

Jul-1

5

Sep-

15N

ov-1

5Ja

n-16

Mar

-16

May

-16

Jul-1

6

Sep-

16

Non-commercial position

soybean prices

16-ju

n-

80.111

149.456

-113.383

109136

142245

-90966

746,8

789,5

545,3

340,5

429,5

-300000

-200000

-100000

0

100000

200000

300000

400000

500000

150

250

350

450

550

650

750

850

Sep-

11

Nov

-11

Jan-

12M

ar-1

2

May

-12

Jul-1

2

Sep-

12

Nov

-12

Jan-

13M

ar-1

3

May

-13

Jul-1

3

Sep-

13

Nov

-13

Jan-

14M

ar-1

4

May

-14

Jul-1

4

Sep-

14

Nov

-14

Jan-

15M

ar-1

5

May

-15

Jul-1

5

Sep-

15

Nov

-15

Jan-

16M

ar-1

6

May

-16

Jul-1

6

Sep-

16


corn price

37358

52313

208,9

168,3

117,25

-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

Sep-

11O

ct-1

1N

ov-1

1D

ec-1

1Ja

n-12

Feb-

12M

ar-1

2A

pr-1

2M

ay-1

2Ju

n-12

Jul-1

2A

ug-1

2Se

p-12

Oct

-12

Nov

-12

Dec

-12

Jan-

13Fe

b-13

Mar

-13

Apr

-13

May

-13

Jun-

13Ju

l-13

Aug

-13

Sep-

13O

ct-1

3N

ov-1

3D

ec-1

3Ja

n-14

Feb-

14M

ar-1

4A

pr-1

4M

ay-1

4Ju

n-14

Jul-1

4A

ug-1

4Se

p-14

Oct

-14

Nov

-14

Dec

-14

Jan-

15Fe

b-15

Mar

-15

Apr

-15

May

-15

Jun-

15Ju

l-15

Aug

-15

Sep-

15O

ct-1

5N

ov-1

5D

ec-1

5Ja

n-16

Feb-

16M

ar-1

6A

pr-1

6M

ay-1

6Ju

n-16

Jul-1

6A

ug-1

6Se

p-16


Coffee


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


Octavio de Barros - Macroeconomic Research Director 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

Global economics: Fabiana D’Atri / Felipe Wajskop França / Thomas Henrique Schreurs Pires / Ellen Regina Steter Brazil: Igor Velecico / Estevão Augusto Oller Scripilliti/ Andréa Bastos Damico / Myriã Tatiany Neves Bast /

Daniela Cunha de Lima / Ariana Stephanie Zerbinatti Brazilian sectors: Regina Helena Couto Silva / Priscila Pacheco Trigo Proprietary survey: Leandro Câmara Negrão/ Ana Maria Bonomi Barufi Internships: Gabriel Marcondes dos Santos / Wesley Paixão Bachiega / Carlos Henrique Gomes de Brito

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