I did pretty well in school, except when it came to math. I mean, that's what calculators were for, right? And that's also why it's pretty handy to keep in touch with guys like Anderson Galvao, the head of the Brazilian ag consultancy Celeres. His group just issued its latest estimate for the size of the coming Brazilian corn and bean crops—and despite the drop in commodity prices, he says Brazilian farmers will plant 79.5 million acres of soybeans in 2015-16, up 2.3% from last season.
"The soybean area will increase in 2015-16 in its last gasp of expansion," he told me. "The locomotive is slowing down. Given current market conditions—with Chicago beans under $9 per bushel and the dollar-real exchange rate at around 4:1—I think we'll see a big cropping cost increase in 2016-17, and both companies and producers with dollarized debt will not be very liquid."
Yield, production, exports
Galvao's team, though, is guessing yield will come to 44.8 bushels per acre, down about one% from 2014-15. That would mean that Brazil will produce 97.08 million tonnes of soybeans this cycle, up just over one% from last season.
I dug out my cell phone and tried to follow along in the calculator function.
But even with that slight production increase, an exchange rate favorable to the rest of the world brought the team to up its estimate of total Brazilian 2015-16 bean exports to 50.7 million tonnes.
Meanwhile, Celeres says Brazilians will continue their trend of growing more second-crop corn. Galvao says the 2015-16 main-crop corn area in Brazil will be down two%, to 14.5 million acres as producers make more money on competing soy. That said, the second-crop corn area is slated to be up 4.4%, to a whopping 23.8 million acres producing some 94 bushels per acre. That would bring Brazil's second-crop corn production to 57 million tonnes in 2013-14, up 3.2% from last time around.
"The combination of main crop soybeans plus second-crop corn has shown itself quite profitable for producers, even in Mato Grosso. Any corn price level above $1.47 per bushel in Mato Grosso will incentivize producers, and increase winter corn production. So the second-crop corn crop will be up 3.2%."
Did he say $1.47? I double-checked my calculator.
But you don't have to be a math guy to see the big picture. The Brazilians aren't operating under the same assumptions as the U.S. producer (See my article Brazil or U.S. Who wins the low price battle? in this month's Farm Futures.) The ability to rotate corn and beans in a single season brings agronomic benefits beyond a mere calculation of commodity prices, and though the exchange rate will hit ever harder when it's time to arrange next season's cropping loans and buying inputs, those beans get more lucrative each time the U.S. dollar ratchets up in value.
Try running that through the calculator.
The opinions of James Thompson are not necessarily those of Farm Futures or the Penton Farm Progress Group.