Market Morsel: Brazil dry – but expecting record crops?

Market Morsel

Brazil is one of the powerhouses of cropping exports. If they have a crop failure, it has a bit impact upon grain and oilseed pricing.

The first chart below shows the importance of Brazil to the global trade in Soybeans and Corn. Whilst we don’t grow vast quantities of these commodities, they do influence our pricing. For soybeans,  movements flow through to Canola. Corn, as we all know, can be a driver of wheat pricing.

At the moment, there have been concerns that Brazil is too dry for the coming crop. The reality, however, whilst it is dry, Brazil is currently in the dry period.

The second chart shows the seasonality of rainfall in Mato Grosso, one of the main growing regions. It is typical to have dry weather during this period. However, this region has been experiencing below-average rainfall throughout most of 2021, and the end of 2020.

The Brazilian government is presently quite optimistic. CONAB, the state forecaster, has some optimistic outlooks for the coming year.  They estimate for the 2021/22 season, soybean production of 141.3mmt, and for corn 115.9mmt. These are very high levels, in fact, record levels.

These increased projections are based on an expansion in the area due to the high prices being experienced at present.

This is logical, as high prices promote larger acreages. The reality is that Brazil will need friendly weather to get to these levels, and expectations of another La Nina could frustrate these outlooks.

There is still a very long way to go for the Brazilian crop.