MONTHLY AGRIBUSINESS BRAZILMONTHLY AGRIBUSINESS … · prices should follow suit Fundamentals The...

In light of the improved confidence among executives and households in general, expectations surrounding the recovery of the Brazilian economy are still on the rise. After the GDP slowdowns expected in the second and third quarters, we estimate growth for the last three months of this year. At this stage of the recovery, we should see a stronger comeback in the industrial sector, followed by the retail and services. Nonetheless Brazil’s GDP will fall 3.0% this year, but will grow 1.5% next year. Despite that, labor market adjustments are still under way, since there are slight increases in the unemployment rate and wages are likely to follow the decompression trend. On the other hand, this scenario continues sustaining our favorable expectations for inflation, especially for next year. Reflecting the pressures from food prices, we forecast a 7.2% increase in the IPCA for 2016, but for 2017 we should see important relieve, with a forecast increase of 5.0%. Favoring those positive conditions, the exchange rate – influenced by internal and external conditions – continues to appreciate, which is compatible with our forecast that the Brazilian Real will close the year at BRL/USD 3.20. Thus, the Central Bank is likely to start easing the interest rates at its meeting in October, bringing the Selic rate to 13.25% at the end of the year. Finally, even acknowledging that the challenges are still high for the public accounts, and the results are getting worse in the short term, we should see reform progress throughout this second half, especially referring to a constitutional amendment bill limiting the rise in public spending according to the inflation. The primary deficit as a percentage of GDP will reach 2.5% and 2.1% in 2016 and 2017, respectively.

The external scenario continues to be marked by moderate growth and the ample liquidity conditions guaranteed by the monetary authorities from the major central banks around the world. We think that these policies will not change considerably in the coming months. That is because: (i) we believe that the Fed will increase the interest rate again only in December; (ii) there are still concerns related to the effects of the exit of the United Kingdom from the European Union, so monetary easing bias will remain in place in the region and growth is expected to be moderate comparing to the one registered in the first half and (iii) China's economic slowdown trend should intensify over the next few months.

August 2016

Macroeconomic Research Department

Macroeconomic Outlook

MONTHLY AGRIBUSINESS BRAZIL MONTHLY AGRIBUSINESS BRAZIL

Executive Summary Soybeans - International prices tend to settle at lower levels, in response to the good development of the U.S.

crop and to a more comfortable inventory level. Brazilian crop is already set and, therefore, domestic prices should follow suit.

Corn – International prices are likely to settle at current levels, reflecting the positive outlook for the U.S. harvest. Domestic prices tend to fall, as the harvest progresses. In any event, we do not expect sharp falls and prices are unlikely to go back to this year’s high levels, given the significant crop losses.

Coffee – Supply and demand remain balanced due to El Niño, which caused drought and affected crops in Asia and Colombia, so prices continue to be high. Domestically, prices will continue to increase, as a result of the possible effects that the frost in Brazil had on the productive potential of the plant for the next 2017/18 crop, which will be a low biennial cycle.

Cattle – Prices will continue to be high, but additional increases are not expected. The argument for that scenario is that (i) export demand remains strong while supply of animals ready for slaughter is low, which worsens during the winter and (ii) domestic demand, which accounts for 80% of meat production, continues to drop.

Sugar and Ethanol – International sugar prices tend to remain high, in response to the increased global production deficit and global low inventories. Due to better sugar profitability, the crop should benefit sugar and limit the supply of ethanol, causing fuel prices to increase 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 95.419

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

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

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07/0

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08/0

9

09/1

0

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 tend to settle at lower levels, in response to the good development of the U.S. crop and to a more comfortable inventory level. Brazilian crop is already set and, therefore, domestic prices should follow suit

Fundamentals

The USDA released the 4th report for the 2016/17 U.S. grain crop, which is currently in its development stages. For the second consecutive month, the USDA raised the estimate for the U.S. crop from 105.6 to 110.5 million tons, reflecting the productivity revision. Weather and crop conditions are good in the U.S., which should drive up productivity. For Brazil and Argentina, where planting is set to start in October, the USDA kept its forecasts of 103.0 and 57.0 million tons, respectively. The global inventory-to-consumption ratio increased from 20.4% last month to 21.6% this month.

Conab released the 11th report for the 2015/16 crop and, for the 5th consecutive month, revised its estimates downward for the production of soybeans, whose harvest is finished. The revision reflected an adjustment in the expected productivity level, affected by drought in the Center-West and excess rain in the South. The crop, which was estimated at a record of 102 million tons at the beginning of the year, is now estimated at 95.4 million tons, representing a 0.8% decline compared with the previous one.

NOAA, which is the U.S. national weather service, reduced the probability of a La Niña occurring between August and September. It is now likely to form during the last months of the year or the beginning of 2017, and be less intense than forecasted earlier. Thus, the risk of drought and consequently productivity losses of the U.S. crop is avoided. In Brazil, the development of the 2016/17 crop will be under the La Niña effects, which are expected to be a milder climate and no excess rain in the Northeast.

International prices tend to settle at lower levels in the months ahead, reflecting the good development of the U.S. crop and more comfortable global inventory levels. Domestic prices should follow the international trend, taking into account that the Brazilian harvest is finished and the estimates in the coming months should not be surprising.

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

63,78

80,96

74,67

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/

08

jan/

09

jan/

10

jan/

11

jan/

12

jan/

13

jan/

14

jan/

15

jan/

16

dez/

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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15

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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 are likely to settle at current levels, reflecting the positive outlook for the U.S. harvest. Domestic prices tend to fall, as the harvest progresses. But we do not expect sharp falls and prices are unlikely to go back to this year’s high levels, given the significant crop losses

Fundamentals The USDA released the 4th report for the 2016/17 crop, revised its estimates for U.S. corn production

upward from 369.3 to 384.9 million tons for the second consecutive month, as a result of greater yields. The U.S. crop development and the weather have been positive. For Argentina, where planting will start in October, its forecast increased from 34 million to 36.5 million tons. For Brazil, which will also start planting in October, the USDA maintained its forecast of 80 million tons. The global inventory-to-consumption ratio increased from 20.6% last month to 21.7% this month.

For the 6th month in a row, Conab revised downward its estimate for the 1st corn crop, as a result of the smaller acreage favoring soybeans and the drop in productivity affected by drought in April and May. Initially estimated at 28 million tons, the output for the 1st crop is now estimated at 25.9 million tons. Since April, the estimate for the 2nd crop has been revised downward, as a result of the drought that occurred between April and May in the Center-West and the frost in Paraná. The crop, which was previously estimated at 57 million tons, is now estimated at 42.6 million tons. The total corn output should reach 68.5 million tons, equivalent to a shortfall of 16.2 million tons, falling 19.1% compared with the last crop. The inventory-to-consumption ratio in the domestic market fell to 8.2%, compared with 18.7% in the last harvest, causing prices to soar. Up until May, prices rose 65% but, as harvest started, they dropped by 13% in the past two months. Conab estimates corn exports to drop from 22 to 20 million tons this year – compared with 30 million tons shipped last year. But these numbers can still be reduced, since some export contracts have been cancelled due to scarcity of the grain in the domestic market.

NOAA reduced the probability of La Niña occurring between August and September. Now it is likely to form during the last months of the year or the beginning of 2017, and be less intense than forecasted earlier. Therefore, the risk of drought and consequently productivity losses of the U.S. crop are avoided. In Brazil, the development of the 2016/17 crop will be under the La Niña effects, which are expected to be a milder climate and no excess rain in the Northeast.

In the coming months, international prices should likely settle at current levels, reflecting the positive outlook for the U.S. harvest. In the domestic market, prices tend to fall, as the harvest progresses. But we do not expect sharp falls and prices are unlikely to go back to this year’s high levels, given the significant crop losses.

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

51.00456.018

57.407

72.980

81.506 80.05284.673

68.476

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*


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

322

374

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

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10

jan/

11

jan/

12

jan/

13

jan/

14

jan/

15

jan/

16

jan/

17

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

34,69

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

jan/

06

jan/

07

jan/

08

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09

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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

4.301

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 its 1st semi-annual report for the 2016/17 crop released in June, the USDA suggested a reduction in the inventory-to-consumption ratio to drop from 23.7% 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, which is for 50 million bags. For Vietnam and Colombia, the estimate is 27.3 million and 13.3 million bags, respectively, which translate to 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, adding up to 10 million bags. Major producers faced a wide range of impacts caused by El Niño. Brazil had a rainy period during the plant development and flowering stages, resulting in greater yields. Asia and Central America were hit with droughts, which affected plant productivity. The next USDA report will be released in December.

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 estimate was decreased by 22.7%, while Bahia saw an even sharper drop, of 29.1%. Both states were the hardest hit by the drought. The next Conab report will be released in September. Espírito Santo recorded a fall in conilon production in the past two crops, because of the effects of drought. The next 2017/18 crop, which will begin to be harvested in April, may also register low productivity, since the plants are in flowering stages and the weather is still dry in that State due to El Niño. Starting in October, La Niña is expected to be more active, bringing rains; however, meteorologists point out that part of the losses will not be reversed.

La Niña brings risk of frosts in coffee-producing regions in the country. Indeed, frost occurred in July in the producing regions of Minas Gerais and São Paulo. That may have affected the crops, causing impacts that will be noticeable only in next 2017/18 harvest. Prices reacted to the effects of the frost, but the reported losses are likely to be limited.

International prices tend to remain high, in response to a more balanced supply and demand, due to El Niño, which brought drought to crops in Asia and Colombia. Domestic prices will follow the international trend. Another factor that may keep prices high are the possible effects that the frost had on the productive potential of the plant for the next 2017/18 crop, which will be a low biennial cycle.

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 – Supply and demand remain balanced due to El Niño, which caused drought and affected crops in Asia and Colombia, so prices continue to be high. Domestically, prices will remain high, as a result of the possible effects of the frost in Brazil



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

136,85

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

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06

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07

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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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14

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15

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16

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17

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17

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

550,8599,8

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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04

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05

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BE

EF

Brazilian beef exports (in tons) 2013 – 2016

Source: SECEX Production: BRADESCO

130.420

137.185

129.482

97.221

104.852

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 – Prices will continue to be high, but additional increases are not expected. On the one hand, export demand remains strong while supply of animals ready for slaughter is low. On the other hand, domestic demand, which accounts for 80% of meat production, continues to drop

Fundamentals Beef exports are on the rise, benefited from the opening up of the markets and the exchange rate that

remained at a more depreciated level in the first months of the year. Between January and July, the shipped volumes increased by 9.4% compared to last year, and should continue to grow as markets are opening up to Brazilian meat (United States, China, Japan, South Africa, Iraq, Iran and Saudi Arabia). This growth was led by a 7.4% increase in exports to Europe, and 18% to Egypt. For China and Saudi Arabia, which did not import any Brazilian meat last year, shipments totaled 90.4 thousand and 17.5 thousand tons, respectively. As for Venezuela and Russia, which are very dependent on oil revenues, they reduced the volumes purchased from Brazil by 74.6% and 26.4%, 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 have fallen 21%, while choice cut prices have dropped 5%. Poultry meat prices have already increased by 8%.

The USA 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 that could allow Brazilian beef to be exported to other countries such as South Korea, Canada, Japan and Mexico.

The supply of animals ready for slaughter continues to be tight. In the first half of this year, slaughter volumes fell 2.4% against the same period last year, after an 8% drop 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.

Cattle prices will be pressured to rise due to export demand and low supply of animals ready for slaughter, which is worsened during a dry winter. But they will also be pressured to drop mainly by the domestic market, which represents 80% of the beef production and continues to be considerably weakened due to high unemployment rates and the decline in the population’s real income. Wholesale beef prices continue to fall, indicating consumption downturn. Thus, we believe that cattle prices will continue to be high in the months ahead, but we do not expect additional increases.


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

2.095

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

42,2

51,7

61,8

93,3

74,5

109,6 106,9

90,897,0

108,4

125,2

150,7157,7 155,7

20,0

40,0

60,0

80,0

100,0

120,0

140,0

160,0

jan/

02

jan/

03

jan/

04

jan/

05

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06

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07

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08

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09

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10

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11

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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

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7

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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 tend to remain high, in response to the increased global production deficit and global low stocks. Due to better sugar profitability, the crop should benefit sugar and limit the supply of ethanol, causing fuel prices to increase 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 was 6.9 million tons. The inventory-to-consumption 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 2nd report for the 2016/17 crop this month and reduced the estimate for sugarcane production. The production, which was previously estimated at 690.9 million tons in April, is now estimated at 684.8 million tons, decreasing by 6 million tons, or 0.9%, due to the recent drought in the Center-West. Compared to the previous crop, the production increased by 2.9%, as a result of improved weather conditions and the 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, dropping 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 has been registering better profitability due to high international prices.

According to Unica, the volume of sugarcane processed in the Center-South region until the beginning of August was 13% higher than in the same period last 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 26.1% higher, while ethanol processing increased by 7.0%. With that, processing plants are directing more sugarcane for sugar production, at the expense of ethanol, due to better sugar profitability.

Unlike El Niño, which caused drought in India, La Niña tends to be beneficial to sugar, improving the monsoons and bringing more rain to the country. For Brazil, La Niña tends to be milder in the sugarcane-producing regions, and should not cause any significant changes.

International sugar prices tend to remain high, as a result of the increased global production deficit and global low stocks. With good international sugar prices, the production should benefit sugar, limiting the supply of ethanol and pressuring prices during the off season.


1.062

1.291

1.025

1.354

1.076

1.316

1.148

1.842

1.285

1.505

1.640

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

20,2

18,7

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

127908

1.613

940,8

1006,25

-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

Aug

-11

Oct

-11

Dec

-11

Feb-

12A

pr-1

2Ju

n-12

Aug

-12

Oct

-12

Dec

-12

Feb-

13A

pr-1

3Ju

n-13

Aug

-13

Oct

-13

Dec

-13

Feb-

14A

pr-1

4Ju

n-14

Aug

-14

Oct

-14

Dec

-14

Feb-

15A

pr-1

5Ju

n-15

Aug

-15

Oct

-15

Dec

-15

Feb-

16A

pr-1

6Ju

n-16

Aug

-16

Non-commercial position

soybean prices

16-ju

n-0

80.111

149.456

-113.383

109136

142245

-14451

746,8

789,5

545,3

340,5

415,75

-300000

-200000

-100000

0

100000

200000

300000

400000

500000

150

250

350

450

550

650

750

850

Aug

-11

Oct

-11

Dec

-11

Feb-

12A

pr-1

2

Jun-

12

Aug

-12

Oct

-12

Dec

-12

Feb-

13A

pr-1

3

Jun-

13

Aug

-13

Oct

-13

Dec

-13

Feb-

14A

pr-1

4

Jun-

14

Aug

-14

Oct

-14

Dec

-14

Feb-

15A

pr-1

5

Jun-

15

Aug

-15

Oct

-15

Dec

-15

Feb-

16A

pr-1

6

Jun-

16

Aug

-16

Non-commercial positioncorn price

45.248

208,9

168,3

117

-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

Aug

-11

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

6

Non-commercial position

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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