Luzi Ann Javier, Whitney McFerron – Bloomberg Businessweek, 03/12/2013
Soybeans fell in Chicago from the highest close in more than four weeks as the harvest speeds up in Brazil, expected to produce a record crop of the oilseed.
Brazilian farmers collected about 48 percent of the harvest as of March 8, against 46 percent a year earlier, researcher Safras & Mercado said in a report yesterday. Brazil, expected to overtake the U.S. as the world’s biggest exporter, may produce a record 83.5 million metric tons of soybeans, the U.S. Department of Agriculture said March 8. U.S. soybeans inspected for export in the week to March 7 slid 58 percent from a week earlier to 17 million bushels, the USDA said yesterday.
Slowing U.S. export inspections are “a sign that Brazilian beans may be starting to extract market share,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, wrote in a report today.
A landholder and power broker in the country’s capital, Katia Abreu has heard all the warnings about ranches and soybean farms carving up Brazilian forests.
But as she rides a chestnut mare across fields of sorghum and corn — her 12,355-acre spread here in the soft hills of north-central Brazil — Abreu insists Brazilian farmers should be commended, not demonized. Big Agro has transformed this country into a breadbasket to the world, she said, one that’s poised to feed billions.
“We are not ashamed of anything,” Abreu said. “What’s important is that Brazil increase production.”
It’s been over a decade since Brazil, the world’s #2 soybean producer, has had to import the country’s “King” commodity from the United States. That streak could end as early as this year because of South America’s worsening crop shortages.
Due to a drought in the first months of the year, southern farmers in Brazil rushed to sell their soybean stock to China to compensate for their losses by taking advantage of excellent international prices.
Nearly 80% of the country’s soybean crop has already been exported this season, according to independent estimates. The percentage is 20% higher than the same month of 2011. The Brazilian government denies any type of “rationing,” but says that in the future – perhaps next year – the nation could import soybeans from other sources, including the U.S.
In 2009, China overtook the US as Brazil’s largest trading partner. The United States had been Brazil’s main trading partner for about 80 years but a surge in Chinese demand for Brazilian agricultural and mineral commodities, such as soybeans and iron ore , dislodged the Americans.
Brazil is so dependent on China that some traders even describe Brazil as a “derivative” of China. Derivatives are contracts whose prices depend on the value of another asset. This expression shows to what extent the performance of Brazilian market is linked to China.
If the crisis in the United States and Europe hits China, Brazil will agonize. After the collapse of Lehman Brothers in 2008, Brazil has become more and more dependent on the Chinese giant. Brazil was one of the countries that suffered the less during the 2008 global crisis mainly because Chinese appetite supported high prices of agricultural and mineral commodities during global recession. In 2008, China absorbed 6.7% of Brazilian exports. In the first half of this year, the Asian giant represents 17%, as the demand from rich countries fell. In 2008, Vale, Brazil’s mining giant, sales of iron ore to China represented 28% of total; in the second quarter of this year, sales for Chinese represented 41.9% of the total.
Brazil has for centuries been known as a leading producer and exporter of the world’s breakfast foods — orange juice, coffee, sugar and cocoa.
But over the past two and a half decades since the opening of the economy to foreign investment, Latin America’s largest economy has also become a leading producers of important grains and meats, through investments in technology and land.
Following is a list of most of Brazil’s main agricultural products and exports: