São Paulo – The economies of the regions that produce grain are heated due to the high prices of soy and maize. Soy should result in revenues of R$ 67 billion (US$ 25 billion) to Brazil in 2012, R$ 10 billion (US$ 3.8 billion) more than last year, and maize should generate R$ 34 billion (US$ 13 billion), R$ 8 billion (US$ 3 billion) more. The injection of capital is noticed in the Midwest and South of Brazil, where the main producers of these commodities may be found, and those benefited are the machinery and fertilizer industries, as well as the civil construction and trade sectors of the cities that produce.
Among the states, Mato Grosso is one of the most favoured, as the South of Brazil faced drought early this year and, thus, did not have significant availability of grain. “Prices have climbed to unimagined levels, which has resulted in joy to the sector in the state,” said the vice president of the Association of Producers of Soy and Maize in the state of Mato Grosso (Aprosoja-MT), Ricardo Tomczyk. According to him, there is greater business in trade, civil construction and in some sectors of industry, like transportation.
“There is normal heating, mainly in the interior,” said Tomczyk. He recalls that the state has 70% of its Gross Domestic Product (GDP) connected to agribusiness and a good part of its jobs in the area, thus, the improvement is reflected in retail. Producers, according to the vice president, are also investing more in machinery, fertilization of crops and purchases of new machinery. The soy cultivation area in the state should grow 10% for the next crop, taking over some of the space turned to cotton and also areas degraded by cattle raising.
Producers of agriculture equipment and machinery are feeling the effects of income that soy and maize are bringing to farmers. Up to the end of the year, the sector hopes for growth of 15% in revenues, boosted mainly by both cultures, according to the president of the Agricultural Machinery and Equipment Sector Chamber at the Brazilian Machinery Manufacturers Association (Abimaq), Celso Casale. In the accumulated result of the year up to July, nominal revenues in the sector are R$ 6.5 billion.
Casale explains that the greatest income is due to the purchase of products like seeders and harvesters, but that acquisitions are not solely turned to the soy and maize cultures. As farmers also tend to cultivate cotton, sorghum or even to raise cattle, and also tend to invest in other sectors. Despite having more cash in hand, farmers continue opting for financing instead of buying with their own funds. According to Casale, farmers need turning capital to increase production and end up financing capital goods.
An expensive shot
Wheat also has high process, but the product is not so strong in Brazilian agribusiness. Soy and maize represent 85% of Brazil’s grain production, said the director at the Brazilian Agribusiness Association (Abag), Luiz Antonio Pinazza. “The soy chain is at a spectacular moment due to the drought in the United States,” said the director. The USA has now started picking soy and maize sowed between May and June and had a crop reduction, increasing global prices of commodities.
There were also maize crop reductions in South America in 2011/2012, recalls Economics professor Eugênio Stefanelo, from Federal University of Paraná (UFPR). When added to wheat, which had problems in Eastern Europe and Australia, there is a 210 million tonne reduction in crops worldwide due to climate problems, says the economist, who is also a technician at the National Food Supply Company (Conab). There should be 40 million tonnes of reduction in the soy crop, 140 million tonnes in the maize crop and 30 million tonnes less in wheat.
Stefanelo says that despite the slower growth in consumption, the reduction of this offer affected prices of these products. Two weeks ago, soy reached the value of US$ 17.95 per bushel at the Chicago Mercantile Exchange. Pinazza recalls that Brazilian exports of the commodity should reach US$ 30 billion this year. “Once again, it will be responsible for 100% of Brazil’s trade balance,” said Stefanelo.
Future
The professor at UFPR believes that soy and maize should remain highly priced until the end of the year. “I would say that up to the end of 2012 soy should remain priced above the US$ 15.50 per bushel in Chicago,” said Stefanelo. Next year prices should be lower. “If South America picks 150 to 154 million tonnes next year and the United States increase their soy coverage, the price should be between US$ 12 and US$ 15 per bushel,” he said. The soy of South America, grown in coming months, is picked starting in February.
Maize, in turn, should have lower cultivation next year due to soy, which has been showing itself more attractive to producers, but it may have a greater second crop, a period in which the crop does not compete with maize. If the United States increases its cultivation of maize and has a normal crop, the price of maize should drop gradually starting next year.
Climate problems in maize, wheat and soy crops next year, however, warns Stefanelo, may be catastrophic for global supply, reflected in the meat and dairy chains and stunting poorer countries from maintaining animal husbandry.
*Translated by Mark Ament
