Brazil's Soy Frontier at Middle Age

Transcription

1 Brazil's Soy Frontier at Middle Age Evento Auster Nutrição Renato Rasmussen Animal DTN Ag Summit 2015 Renato Rasmussen December, 2015

2 Rabobank Brazil Balsas MA Querência MT Palmas TO Barreiras BA Lucas do Rio Verde MT Brasília DF Tangará da Serra MT Patos de Minas MG Cuiabá MT Uberlândia MG Rondonópolis MT Varginha MG Chapadão do Sul MS Ribeirão Preto SP Araçatuba SP São Paulo SP Rio Verde GO Animal Protein Beverages Clean Tech Dairy Farm Inputs Food Fruit, Veg & Flowers Grains & Oilseeds Non-food Sugar, Cotton, Coffee & Cocoa

3 Rising... More food will be needed in the first half of this century, than it was consumed in the last 7,000!!! Per capita income Urbanization Population 3

4 Brazil is doing its part Brazil: agriculture export Others Soymeal [Billion USD] World ranking, production World ranking, exports Exp. Value (USD bln 2014) Orange juice Coffee Ethanol Sugar Soyoil Soybeans Pork Poultry Sugar 1 st 1 st 9,4 Corn Beef Coffee 1 st 1 st 6, FCOJ 1 st 1 st 2, Ethanol 2 nd 2 nd 0,9 49 Beef 2 nd 1 st 7, Soybeans 2 nd 1 st 7,0 31 Poultry 3 rd 1 st 7,9 25 Soy Oil 4 th 2 nd 1, Source: MAPA, USDA, 2015.

5 Over the past 15 years, soy prod. & exports more than doubled Total soybean production (million metric tons) Brasil EUA Argentina Outros Share in soybean exports (%) Brasil EUA Argentina Outros 7% 14% 29% 7% 12% 40% 50% 41% 2015 Source: USDA, 2015.

6 as did the Corn production [Million tons] Production Source: Brazilian Ministry of Development, Industry and Foreign Trade (MDIC), 2014; Rabobank, 2014; United States Department of Agriculture (USDA), 2014; ABIMILHO, 2014.

7 as did the Corn production & exports [Million tons] Production Exports FSI Feed & Residual Source: Brazilian Ministry of Development, Industry and Foreign Trade (MDIC), 2014; Rabobank, 2014; United States Department of Agriculture (USDA), 2014; ABIMILHO, 2014.

8 given the strong synergies between the two crops Corn area (million hectares) Summer Safrinha 7 8 Safrinha area as a % of the soybean area Not all areas are suitable for double-cropping, mainly due to weather & lack of short cycle varieties Source: Brazil's national supply company (CONAB), Image by Press,

9 given the strong synergies between the two crops Source: Press, 2014.

10 thanks to Brazil s outstanding agricultural conditions Soils Low natural fertility, but good structure Research to optimize fertility has created potential for high yields Rainfall distribution Climate & rainfall Most agricultural production regions have rainfall between 1,200 and 2,200 mm/year Mild winters allow year-round production, with double-cropping possible in many regions [mm/year] ,250-1,350 Topography Landscape is flat and favorable for mechanization in key agricultural regions 2,150-2,250 2,750-2,850 Source: Rabobank, 2015.

11 Water utilization Source: Harvard Business School 11

12 Water availability Source: Harvard Business School 12

13 And the future is promising!

14 Brazil still has considerable scope to expand agriculture [Million hectares] 496 Source: Sparovek, Gerd, et al. "The revision of the Brazilian Forest Act: increased deforestation or a historic step towards balancing agricultural development and nature conservation?." Environmental Science & Policy 16 (2012). 14

15 Brazil still has considerable scope to expand agriculture [Million hectares] Source: Sparovek, Gerd, et al. "The revision of the Brazilian Forest Act: increased deforestation or a historic step towards balancing agricultural development and nature conservation?." Environmental Science & Policy 16 (2012). 15

16 Brazil still has considerable scope to expand agriculture [Million hectares] Source: Sparovek, Gerd, et al. "The revision of the Brazilian Forest Act: increased deforestation or a historic step towards balancing agricultural development and nature conservation?." Environmental Science & Policy 16 (2012). 16

17 Brazil still has considerable scope to expand agriculture [Million hectares] Total: 851 Source: Sparovek, Gerd, et al. "The revision of the Brazilian Forest Act: increased deforestation or a historic step towards balancing agricultural development and nature conservation?." Environmental Science & Policy 16 (2012). 17

18 Specially over underused pasturelands Area (Million Hectares) Volume (Million Tons) % Cornitermes cumulans % Fonte: IBGE, Rabobank, Imprensa, 2014.

19 Brazil: Stocking Rates for Cattle Production Current Potential 1411 Source: B.B.N. Strassburg et al. / Global Environmental Change 28 (2014)

20 Increased land turnover: attainable with innovative models i.e.: Integrated Livestock/cropping/forestry model Source: Embrapa,

21 However, we still have many challenges ahead

22 the fast growth highlighted the weaknesses in infrastructure Source: Press,

23 the fast growth highlighted the weaknesses in infrastructure Source: Press,

24 Logistics has a direct impact on soybean price formation in Brazil Soybean Basis as % impact on spot prices - Annual average ( ) -13.1% to -12.3% -12.2% to -10.6% -10.5% to -9% -8.9% to -7.5% -7.4% to -6.1% -6% to -4.6% -4.5% to -3.2% -3.1% to -2.1% -2% to -1% -0.9% to 0.4% 0.5% to 1.8% 1.9% to 2.5% Source: Conab, IBGE. Rabobank Analysis. 24

25 ...and lacking storage capacity aggravates the problem Storage Deficit Storage Surplus Source: Conab, IBGE. Rabobank Analysis. 25

26 ...and lacking storage capacity aggravates the problem Source: Press,

27 The Brazilian Cost High taxes Complicated tax system Culture of bureaucracy - Source: Gasques et. al. (2012), Política Agrícola 27

28 The Brazilian Cost - High taxes Complicated tax system Culture of bureaucracy Research Credit availability Access to markets + Source: Gasques et. al. (2012), Política Agrícola

29 Investments in infrastructure and logistics are essential.. Group 3 3% 3% Group 2 13% 13% Group 1 84% 84% Source: Rabobank Analysis. Secex,

30 Where are changes taking place? Road Railway Waterway Port Major grain region Current Future Rio Branco Porto Velho Itacoatiara Madeira 364 Amazonas Tapajós Lucas do RV Paraguai Santarém Miritituba 163 FICO Cascavel Vila do Conde 158 Ferroban Ferroeste FNS Palmas Uruaçu Açailândia 363 EFC Rondonópolis Anápolis Alto Araguaia Ferroban São Simão Três 163 Lagoas Tiete 277 Balsas LEM Paranaguá Itaqui FIOL Santos Pecém Salgueiro Suapé Transnordestina 242 Cotegipe Ilhéus Vitória SF Rio Grande Source: Rabobank Analysis. 30

31 2018 outlook - grain export by port Itacoatiara 2 5 Santarém Vila do Conde 0 Itaqui/ São Luis Salvador X Grain exports 2013, million tonnes Vitória X Possible grain exports by 2018, million tonnes Paranaguá Santos 70 São Francisco do Sul 60 Rio Grande Source: Rabobank Analysis. 31

32 However Source: Press,

33 In the short term Rising government debt Tax increases/ spending cuts Political deadlock GDP growth Low consumer & business confidence High interest rates High inflation Weak exchange rate

34 Exchange rate in Brazil [BRL/USD] 4,00 3,60 3,20 2,80 2,40 2,00 1,60 1,20 Jul/10 Oct/15 0,57 USD/BRL Devaluation 0,26 USD/BRL ~55% 0,80 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Source: Bloomberg,

35 Farm inputs prices should increase in BRL as a result Fertilisers Ag. Chemicals Seeds Operations Others* R$2.500 R$2.000 R$1.500 R$1.000 R$500 R$- 2009/ / / / / / /16 (e) 2009/ / / / / / /16 (e) Soybeans Second crop Corn Source: Imea (2015). *Others: Technical assistance, transport, storage, processing, administrative expenses, insurance, and maintenance.

36 However, the higher the exchange rate, the lower the breakeven price $8,00 Breakeven Lowest price outlook Highest price outlook $7,75 Prices in Chicago (US$/bushel) $7,50 $7,25 $7,00 $6,75 $6,50 $6,25 7,28 7,22 7,16 7,10 7,05 7,00 6,90 6,86 6,82 6,78 $6,00 R$3,50 R$3,60 R$3,70 R$3,80 R$3,90 R$4,00 R$4,20 R$4,30 R$4,40 R$4,50 Currency rate (R$/US$) Source: Imea (2015); Rabobank (2015).

37 Drivers of future growth 1 Expansion of planted area in frontier regions, such as MATOPI 5 2 Conversion of underused pasture land to arable land 3 Improved yields as a result of technological innovation (better seeds & better crop management) 4 Increased production of poultry and pigs in major grain-producing regions 6 5 Greater use of feedlots for cattle production 6 Greater use of integrated agricultural systems for crops and pasture/livestock for cattle production

38 Thank you! FAR - Food & Agribusiness Research and Advisory Renato Rasmussen renato.rasmussen@rabobank.com 12/2015