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The direction of economic policies has been a key factor in increasing the chances for economic stabilization and GDP recovery. Before recent political events, growth drivers were a on a solid path towards positive terrain. That path wasn’t necessarily smooth, and first-half data available so far does not suggest that a strong economic recovery is already in place. For instance, first-quarter GDP is likely to be positive – but will receive a significant boost from one-offs, whose effect will be reversed or no longer affect the economy over the remainder of the year. These include: (i) a sharp growth of agricultural GDP; (ii) a change in the seasonal-adjustment model for the GDP; (iii) a decrease in the use of thermal power plants (which increases the sector’s added value); (iv) a 50-60% increase in automobile exports. Combined, we estimate that these one-offs contributed with 1.1 percentage points to headline first quarter GDP growth. In other words, without these one-offs, we estimate that GDP would have fallen by 0.2%. Meanwhile, second-quarter GDP data suggest a contraction, but will also be affected by recent volatility. Leaving aside the one-offs mentioned above (which this quarter will have a negative effect on GDP), a negative reading for 2Q GDP should be interpreted as evidence that the economy is moving sideways during 1H17, rather than a stop-and-go growth pattern. Recent political events could have a negative effect on the outlook, but it is still too early to assess the impact of the latest news on the economy or asset prices.
We maintain our positive assessment of global economic growth unchanged. Geopolitical risk appears to have diminished, despite some signs of softness in the U.S. and Chinese economies during 1Q17. U.S. Treasury bond yields have fallen, reflecting expectations that the pace of normalization by the Federal Reserve will likely remain moderate, resulting in some dollar weakness and softer commodity prices.
May 2017
Macroeconomic Research Department
Macroeconomic Outlook
MONTHLY AGRIBUSINESS BRAZIL MONTHLY AGRIBUSINESS BRAZIL
Executive Summary Soybeans - The Brazilian harvest is now over, and attention will turn to the North American crop, which is
expected to decline relative to last harvest. This and growing global consumption may exert some pressure on prices, but this will likely be limited by comfortable international stocks.
Corn – The expected retraction for the North American crop will be reflected in international prices, which should stay on a moderate upward trend. This increase will also be contained by stock levels, which also remain at comfortable levels, although lower than soy. Domestic prices may drop as the second harvest’s record crop makes its way to the market.
Coffee – International prices are expected to rise moderately over the next few months due to tighter global supply, as Brazilian production enters a cyclical “off” production year. Domestic prices will remain high, due to a weaker Brazilian harvest.
Cattle – Cattle price is expected to drop due to weak domestic consumption, no-growth forecasts for exports and an increased supply of animals ready for slaughter, resulting from an oversupply of calves.
Sugar and Ethanol – Although sugar production in the current harvest has been stable, it is set to be the second highest ever for Brazil. That, combined with expected production surpluses around the globe, has caused the supply outlook to surge, which should keep prices at low levels. Ethanol prices are expected to fall as the harvest moves to market.
Macroeconomic Research Department
15.39419.419
25.934 26.16031.370 32.345
41.917
52.018 49.98955.027
60.01857.162
68.688
75.324
66.383
81.49986.121
95.435
113.013
8.000
28.000
48.000
68.000
88.000
108.000
90/9
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91/9
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92/9
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7*
2
SO
YB
EA
NS
Soybean – The Brazilian harvest is now over, and attention will turn to the North American crop, which is expected to decline relative to last harvest. This and growing global consumption may exert some pressure on prices, but this will likely be limited by comfortable international stocks
Fundamentals
The USDA released the 1st report for the 2017/18 grain harvest, which is currently being planted in the U.S. and will start being planted in Brazil and in Argentina in September. U.S. soy production is estimated at 115.8 million tons, or 1% lower than the previous harvest (117.2 million tons). Planted acreage is expected to be up 7.1%, but productivity is forecasted to drop 7.9%. Global consumption is expected to grow 3.9%. The global stock-to-consumption ratio is estimated at 25.8%, down from 27.2% in the last harvest. Despite the declining production, the output of the last four crops has allowed global stocks to rebound to comfortable, albeit still lower levels. Argentina is expected to produce 57 million tons, same volume of the crop currently being harvested in the country. For Brazil, the USDA forecasts 107 million tons, or 4.1% lower than the current harvest (111.6 million tons).
Conab disclosed the eighth estimate for the 2016/17 harvest, which is in its final stages in Brazil. Production is expected to reach a record high of 113.0 million tons, up 18.4% (or 17.6 million tons) from the previous harvest. Compared to last month’s report, Conab revised its estimate upwards for the fifth consecutive month, this time from 110.2 to 113.0 million tons, which reflects the improved yield estimates.
The probability of an El Niño event taking place this year has become less likely, as the a neutral weather pattern seems to be taking shape for 2017, with more rain than in 2016. Most of that rain is expected to take fall over the winter, but the winter months should not be drier than average.
Crop forecasts for Brazil have become increasingly bullish over the past few months, which implies a sharp drop in prices ahead. Soy forecasts in the months ahead will be more reliable, as much of the crop has already been harvested, which will keep prices from dropping even more. Another positive is the fact that, over the next few months, attention will be focused more on the development of the U.S. crop, which will be smaller compared to the last harvest. The combination of a smaller crop in the U.S. and constant rise in consumption is expected to lead to higher prices, but which will be limited by stock levels, which remain very comfortable.
Source and Estimate: Conab Production: BRADESCO
National production of soybeans – in ´000 tons
Macroeconomic Research Department
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
55,99
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
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14
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15
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17
dez/
17
3
Source: Deral Production and Estimate:
BRADESCO
Soybean producer price – Paraná
in R$ per 60 kg bag
Source: Bloomberg Production: BRADESCO
International soybean prices (US$ cents/bushel)
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
976
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/
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jan/
14
jan/
15
jan/
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jan/
17
dez/
17
Soybean productivity – in kg per hectare
Source and estimate: Conab Production: BRADESCO
1.580
2.0272.150
2.221 2.1752.299
2.367 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
3.338
1.500
1.700
1.900
2.100
2.300
2.500
2.700
2.900
3.100
3.300
3.500
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*
Macroeconomic Research Department
Fundamentals The USDA released the 1st report for the 2017/18 grain harvest, which is currently being planted in the
U.S. and will start being planted in Brazil and in Argentina in September. U.S. production is estimated at 357.3 million tons, or 7.1% lower than the previous harvest. Planted acreage, most of which is reserved for soy production, will be 4.3% smaller. Expect yield is 2.2% lower. Global consumption is set to grow 0.8%. The stock-to-use ratio is estimated at 18.4%, below the 21.3% recorded in the previous harvest. Despite a drop in U.S. production, the positive output of the last four crops has allowed global stocks to rebound to comfortable, albeit still lower levels. Argentina is expected to produce 40 million tons, same volume of the crop currently being harvested in the country. For Brazil, the USDA forecasts 95 million tons, or 1.0% lower than the current harvest (96 million tons).
Conab published the eighth estimate for the 2016/17 grain crop for Brazil, which is already being harvested. Total corn production should reach 92.8 million tons, 39.5% above last year’s harvest, the equivalent of 26.3 million tons. The first harvest is expected to yield 30.2 million tons, or a 17.1% increase. Meanwhile, the second harvest – which last year saw a considerable drop in production due to drought conditions – should recover its yield potential. The current forecast is 53.7% above last year’s total, at 62.7 million tons. Compared to last month’s report, Conab revised the first harvest forecast from 29.9 upwards to 30.2 million tons, which is due mostly to the improved yield estimates. For the second harvest, expected to begin in June, estimates vary between 61.7 and 62.7 million tons. Given the robust growth of Brazilian corn output in 2017, producers may look at exports as an outlet for surplus production. In the last harvest, 18.9 million tons were exported. For this year, Conab expects exports to rise by 7.1 million tons, for a total of 26 million tons. Still, domestic corn stocks should go from 8 to 20 million tons, which amounts to 34% of consumption, up from 15% in 2016.
The probability of an El Niño event taking place this year has diminished, and current weather forecasts point to average rainfall for the second harvest’s development stage, with chances of frost over the winter.
Domestic prices have declined sharply in the past few months, due to the first-harvest crop being 17.1% larger than the past harvest, and the expectations for the record harvest (53.7% larger) to hit the market in June. Prices could drop further in the next few months, as the second harvest gets underway.
International prices are expected to remain high, due to a smaller U.S. crop. This increase will also be limited by stock levels, which remain at comfortable, albeit still lower levels. Domestic prices could drop further, as a record Brazilian harvest moves into full swing and the second harvest gets underway in June.
24.096
30.77133.174
37.442 35.71632.393
42.290
35.281
47.41142.129
35.007
42.515
51.370
58.652
51.00456.01857.407
72.980
81.50680.05284.673
66.531
92.832
20.000
30.000
40.000
50.000
60.000
70.000
80.000
90.000
100.000
90/9
1
91/9
2
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3
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8
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9
99/0
0
00/0
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01/0
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02/0
3
03/0
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04/0
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05/0
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7*
4
CO
RN
Corn – The expected retraction for the North American crop will be reflected in international prices, which should stay on a moderate upward trend. This increase will also be contained by stock levels, which also remain at comfortable levels, although lower than soy. Domestic prices may drop as the second harvest’s record crop makes its way to the market
Source and estimates: Conab Production: BRADESCO
Domestic corn production in ´000 tons
Macroeconomic Research Department 5
Corn productivity – in kg per hectare
Source and estimate: Conab Production: BRADESCO
Source: Deral Production and Estimate:
BRADESCO
Corn producer price – Paraná
in R$ per 60 kg bag
Source: Bloomberg Production: BRADESCO
International Corn prices (US$ cents/bushel)
217235
267
215
316
237
413
326
493
711
418
322347
546
753
603
763
662
439
502
335
410
323
385
160
260
360
460
560
660
760
860
jan/
00
jan/
01
jan/
02
jan/
03
jan/
04
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05
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dez/
1711,95
7,05
11,40
22,28
18,9616,26
10,44
14,14
24,94
13,07
26,92
17,26
23,29
19,17
24,34
39,98
20,77
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/
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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
4.178
5.383
1.500
2.000
2.500
3.000
3.500
4.000
4.500
5.000
5.500
6.000
90/9
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91/9
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5
15/1
6
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7*
Macroeconomic Research Department
Fundamentals
The latest USDA biannual report for the 2016/17 harvest, which has already been completed in Brazil and is currently underway in other producing countries, showed a global stock-to-consumption ratio of 21.7%, which is lower than the last two harvests (22.9% and 28.8%). Stocks have been tight due to limited production growth, which has been unable to meet a more robust rise in consumption. The next USDA report will be released in June 2017.
Conab released the second report for the 2017/18 coffee harvest, which is currently underway. Total coffee production was revised downwards slightly (from 45.58 to 45.56 million bags). Arabica forecast dropped from 36.5 million bags to 35.4 million, 2.8% lower than the January estimate and 18.3% below last harvest, as it enters an “off” year in the biennial production cycle. Robusta production is expected to grow from 9.1 to 10.1 million bags, 11% higher than the January forecast and 26.9% above last harvest (which suffered from drought conditions). Despite the improved forecasts, the robusta harvest remains below its potential for 13 million bags, which was last seen before the crop failure of the past two years.
The probability of an El Niño event taking place this year has become less likely, and the current weather forecasts call for average rainfall during the harvest period, with chances of frost over the winter.
International coffee prices fell between February and mid-May, due to the variations in currency market and investment funds selling their positions amid tightening supply concerns.
International prices are expected to rise moderately in the months ahead, due to tighter global supply, as Brazilian production enters a cyclical “off” production year. Domestic prices will remain high due to a smaller Brazilian crop.
6
CO
FFE
E
Domestic coffee production in ´000 60 kg bags
Source and estimate: Conab Production: BRADESCO
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
51.369
45.563
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
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04/0
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07/0
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10/1
1
11/1
2
12/1
3
13/1
4
14/1
5
15/1
6
16/1
7
17/1
8*
Coffee – International prices are expected to rise moderately over the next few months due to tighter global supply, as Brazilian production enters a cyclical “off” production year. Domestic prices will remain high, due to a weaker Brazilian harvest
Macroeconomic Research Department 7
Source: Bloomberg Production: BRADESCO
International Coffee Prices in US$ cents/ Lb
Source: BMF BOVESPA Production: BRADESCO
Arabica coffee – São Paulo 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
160,47
138,62137,50
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
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07
jan/
08
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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
jan/
16
jan/
17
dez/
17
223,6 239,8
337,0
230,4
291,4269,8
247,5
328,0
530,8
408,6
247,7
366,3
480,1
424,0
556,7
467,6
535,2
50,0
150,0
250,0
350,0
450,0
550,0
650,0
750,0
jan/
00
jan/
01
jan/
02
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17
Macroeconomic Research Department 8
BE
EF
Brazilian beef exports (in tons)
Source: SECEX Production: BRADESCO
129.482
97.221
108.879107.175
120.765
88.796
80.000
90.000
100.000
110.000
120.000
130.000
140.000
jan fev mar abr mai jun jul ago set out nov dez
201520162017
Cattle – Cattle price is expected to drop due to weak domestic consumption, no-growth forecasts for exports and an increased supply of animals ready for slaughter, resulting from an oversupply of calves
Fundamentals In mid-March, the Federal Police launched the operation “Carne Fraca” (“Weak Meat”), which uncovered
illegal practices in the inspection of a small number of Brazilian meatpackers. The main buyers, including China, Hong Kong, Egypt, Saudi Arabia, South Africa and the European Union – which together account for more than 50% of exports –, immediately announced an embargo on Brazilian meat pending further investigations. Two weeks later, these countries lifted the temporary embargoes, but vowed to impose stricter control of shipments. As a result, the volume of beef exports fell 26.5% in April, with a similar drop in value.
Domestic calf supply has risen due to the retention of cows in the last few years, leading to lower cattle prices. Calf prices have already dropped 18% since April last year. As a result, the ratio between cattle for slaughtering and calves improved, despite the recent drop in cattle prices. This uptrend will cause the supply of cattle for slaughtering to rise in the short and medium terms.
In April, the price of cattle dropped 4% on the heels of the Weak Meat scandal. However, prices returned to previous levels in May. Good weather allowed producers to keep the cattle on the pasture, while they waited for prices to improve.
Fundamentals should keep cattle prices at low levels in the next few months, led by: (i) weak domestic consumption, reflecting the still ongoing adjustments in the labor market; (ii) the growing supply of animals ready for slaughter, in response to an increase in the supply of calves; (iii) a downshift in exports, which account for 20.0% of total demand and should grow less than originally expected, due to the fallout from the Weak Meat operation.
Macroeconomic Research Department
Live cattle – producer price – São Paulo in R$ per arroba
Source: Cepea Production: BRADESCO
Slaughter Cattle in thousand heads
Source : MAPA Production : BRADESCO
2.253
2.058
1.998
2.081
2.047
2.120
1.840
1.890
1.940
1.990
2.040
2.090
2.140
2.190
2.240
2.290
jan fev mar abr mai jun jul ago set out nov dez
2015
2016
2017
61,8
93,3
74,5
109,6 106,9
90,897,0
108,4
125,2
150,7157,7
148,1
136,9139,47
20,0
40,0
60,0
80,0
100,0
120,0
140,0
160,0
jan/
06
jan/
07
jan/
08
jan/
09
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10
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17
Macroeconomic Research Department
222.429240.944
287.810314.969
257.592
320.650359.316
431.413
474.800
559.432
604.514623.905
560.364588.916
658.822634.767
657.184647.626
150.000
250.000
350.000
450.000
550.000
650.000
90/9
191
/92
92/9
393
/94
94/9
595
/96
96/9
797
/98
98/9
999
/00
00/0
101
/02
02/0
303
/04
04/0
505
/06
06/0
707
/08
08/0
909
/10
10/1
111
/12
12/1
313
/14
14/1
515
/16
16/1
717
/18*
Sugar cane production in ´000 tons
Source and estimate: Conab Production: BRADESCO
10
SU
GA
R
AN
D
ET
HA
NO
L
Sugar and Ethanol – Although sugar production in the current harvest has been stable, it is set to be the second highest ever for Brazil. That, combined with expected production surpluses around the globe, has caused the supply outlook to surge, which should keep prices at low levels. Ethanol prices are expected to fall as the harvest moves to market
Fundamentals
The USDA released its biannual report with the first forecast for the 2017/18 sugar harvest. The report forecasts stable consumption and a 5.2% rise in production. The biggest output increases will come from the following producers: India (17.7%), European Union (12.7), Thailand (12.3%) and Brazil (1.3%). After four consecutive harvests of production deficits, the current harvest is expected to create a surplus of 8 million tons of sugar.
In April, Conab released its first forecast for the 2017/18 harvest, which is just now getting underway. The report calls for a 2.3% decline in planted acreage. In São Paulo, the largest producing state, the area is expected to shrink by 4.5%, as several companies face financial hardship, despite the recent improvement in market conditions. Sugar cane production is estimated at 647.6 million tons, or 1.5% lower than the previous harvest. Yields are expected to rise 0.9% as the weather improves in the Northeast. Reflecting the high returns for sugar, the harvest will once again be used primarily for sugar production, and should total 38.7 million tons, the same volume as the previous harvest. Meanwhile, ethanol production is expected to drop 4.9%. Production of anhydrous ethanol (mixed with gasoline) is expected to rise 2.8%, while hydrated ethanol should drop 10%.
Unica released its first estimate for the 2017/18 harvest. Sugar cane production in the Center-South region is expected to reach 585 million tons, down 3.7% from the previous harvest, which came in at 607 million tons. Sugar production is forecast at 35.2 million tons (1.2% lower), while ethanol is at 24.7 million tons (a 3.7% drop).
Gasoline sales grew 6.6% in the first quarter of 2017, after rising 4.6% in 2016. In the same comparison, hydrated ethanol sales have fallen 20.0% year-to-date, after an 18.3% drop in 2016. Ethanol prices fell 20% until April 2017, reflecting lower demand and higher exports. Ethanol imports reached 722 million liters in the first quarter, nearly matching the total volume imported in 2017 (818 million tons).
International sugar prices are on a downward trend since February, reflecting the sale of long positions by investment funds and the news that global production is likely to improve from the last harvest, contributing to a decline in global production deficits.
The probability of an El Niño event taking place this year has become less likely, as the a neutral weather pattern seems to be taking shape for 2017, with more rain than in 2016. This forecast reduces the chances for weaker-than-expected harvests in Asia and Australia, which in turn will keep sugar prices at low levels.
Despite the decline in production forecast by Unica and the stability expected by Conab, the current crop will be the second largest in the country’s history. In addition, the USDA has forecast production surpluses around the globe. With an improved supply outlook, prices should stay at low levels. Ethanol prices are expected to remain on a downward trend, as the harvest moves into full swing in the Center-South of Brazil.
Macroeconomic Research Department
1.291
1.025
1.354
1.076
1.316
1.148
1.842
1.285
1.840
1.925
1.505
1.626
920
1.020
1.120
1.220
1.320
1.420
1.520
1.620
1.720
1.820
1.920
2.020
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
abr/1
7m
ai/1
7ju
n/17
jul/1
7ag
o/17
11
Source: BMF BOVESPA Production: BRADESCO
International sugar prices 20 in US$
Cents/ Lb
Source: Bloomberg Production: BRADESCO
Hydrous Ethanol Prices 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
22,9
16,316,3
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
Sugar in ´000 tons Ethanol in ´000 liters
Source and estimate: Conab Production: BRADESCO
11.700
19.380
38.16838.691
38.702
12.692
10.518
26.682
23.640
27.957 30.462
27.808 26.451
8.000
15.000
22.000
29.000
36.000
43.000
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
17/1
8*
SUGAR
ETHANOL
Macroeconomic Research Department 12
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
Source: Bloomberg Production: BRADESCO
Source: Bloomberg Production: BRADESCO
Source: Bloomberg Production: BRADESCO
884,75-93386
-160
-120
-80
-40
0
40
80
120
160
200
240
280
800
900
1.000
1.100
1.200
1.300
1.400
1.500
May
-14
Jun-
14Ju
l-14
Aug
-14
Sep-
14O
ct-1
4N
ov-1
4D
ec-1
4Ja
n-15
Feb-
15M
ar-1
5A
pr-1
5M
ay-1
5Ju
n-15
Jul-1
5A
ug-1
5Se
p-15
Oct
-15
Nov
-15
Dec
-15
Jan-
16Fe
b-16
Mar
-16
Apr
-16
May
-16
Jun-
16Ju
l-16
Aug
-16
Sep-
16O
ct-1
6N
ov-1
6D
ec-1
6Ja
n-17
Feb-
17M
ar-1
7A
pr-1
7M
ay-1
7
Soybean prices
Non-connercial positions
16-ju
n-
356
-73302
-300
-200
-100
0
100
200
300
300
350
400
450
500
550
May
-14
Jun-
14Ju
l-14
Aug
-14
Sep-
14O
ct-1
4N
ov-1
4D
ec-1
4Ja
n-15
Feb-
15M
ar-1
5A
pr-1
5M
ay-1
5Ju
n-15
Jul-1
5A
ug-1
5Se
p-15
Oct
-15
Nov
-15
Dec
-15
Jan-
16Fe
b-16
Mar
-16
Apr
-16
May
-16
Jun-
16Ju
l-16
Aug
-16
Sep-
16O
ct-1
6N
ov-1
6D
ec-1
6Ja
n-17
Feb-
17M
ar-1
7A
pr-1
7M
ay-1
7
Corn pricesNon-commercial positions
117,75
-1980
-40
-20
0
20
40
60
80
100
120
140
160
180
200
220
240
May
-14
Jun-
14Ju
l-14
Aug
-14
Sep-
14O
ct-1
4N
ov-1
4D
ec-1
4Ja
n-15
Feb-
15M
ar-1
5A
pr-1
5M
ay-1
5Ju
n-15
Jul-1
5A
ug-1
5Se
p-15
Oct
-15
Nov
-15
Dec
-15
Jan-
16Fe
b-16
Mar
-16
Apr
-16
May
-16
Jun-
16Ju
l-16
Aug
-16
Sep-
16O
ct-1
6N
ov-1
6D
ec-1
6Ja
n-17
Feb-
17M
ar-1
7A
pr-1
7M
ay-1
7
Coffee prices
Non-commercial positions
Macroeconomic Research Department
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
Macroeconomic Research Department
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
Snapshot of the market
14
Macroeconomic Research Department
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
Snapshot of the market
15
Macroeconomic Research Department
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
Snapshot of the market
16
Macroeconomic Research Department
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
Macroeconomic Research Department
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
Economists: Ana Maria Bonomi Barufi / Andréa Bastos Damico / Constantin Jancso / Daniela Cunha de Lima / Ellen Regina Steter / Estevão Augusto Oller Scripilliti / Fabiana D’Atri / Igor Velecico / Leandro Câmara Negrão / Marcio Aldred Gregory / Myriã Tatiany Neves Bast / Priscila Pacheco Trigo / Regina Helena Couto Silva / Thomas Henrique Schreurs Pires
Internships: Alexandre Stiubiener Himmestein/ Bruno Sanchez Honório / Christian Frederico M. Moraes / Felipe Alves Fêo Emery de Carvalho / Felipe Yamamoto Ricardo da Silva / Mariana Silva de Freitas / Rafael Martins Murrer
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