farmgate: Brazil May Be Consuming More And Exporting Less
Over the past 30-plus years US soybean growers, have watched their dominance in the world market slowly erode to the benefit of the Brazilian farmers. Demand for US beans typically dries up in March when Brazilian soybeans are available to the world market. Soybean production exploded in Brazil in the past several decades, surpassing that of the US. But buried deep in a new report about socioeconomic shifts occurring in Brazil is an item that will warm the hearts of soybean producers across the US.
All farmers will remember the markets of 2007 and 2008 that took corn and soybeans to historic highs, not only with the help of the weak dollar, but also with the help of growing economic power in developing countries. Such nations as China, India, Russia, and Brazil were seeing more money in the pockets of their consumers, who were demanding more and better food. It was a go-go economy, until the screeching halt midway through 2008. But with Brazil being one of the higher populated nations on the planet, and with extraordinary natural resources, its GDP was expanding at an average annual rate of 12% from 1996 to 2008. Income growth, increased urbanization, and a growing demand for food made it one of the worlds leading consumers of many types of food products, according to the latest issue of Choices magazine, an electronic publication. Constanza Valdez, a USDA economist, and two ag economists in Brazil report that rapid socioeconomic shifts are underway in Brazil and are challenging the farm sector with shifts in demands for commodities and subsequent changes in economic signals. And reading between the lines, those could have a significant importance for US agriculture.
The specialists on the Brazilian ag economy report Brazilian farmers will be challenged to sustain productive growth to meet the increasing domestic demand for food and remain a major world supplier of grains and oilseeds. And they add that the growth of the biofuels industry in Brazil, which is fueled by sugar cane, could affect the availability of grain and oilseeds for both domestic and export markets.
Currently the Brazilian economy is a train that would be hard to slow, according to recent statistics. Per capita income has increased 14% from 2004 to 2007; income distribution is moving toward equality; and in the past four years the middle class has expanded from 42% of the population to 54%. The result has been increased food consumption, based on caloric value, which puts Brazil above the average for upper middle income countries. The economists say domestic consumption of red meats and poultry will rise and require more livestock feed, and there will be increased consumption of wheat and rice. In other words the Brazilians are eating better, have more money to pay for better food, and expect their farmers to supply more and better food instead of exporting the bulk of it. Sugar will shift from a food product to a fuel feedstock, since flex fuel cars have become popular with increased wealth in the country.
For Brazil, the bottom line will be the need to produce 7% more grain and 43% more oilseeds to meet the domestic and foreign demand, not including the demand for biofuels. While Brazilian food output has expanded fourfold since the 1970’s, future growth will slow unless there are solutions to the financial constraints for farmers, the food supply chain, and environmental issues. Additionally, the expansion of biofuels will eat into the volume of commodities that Brazil exports. The economists say, “Demand for soybeans as a raw material for biodiesel will likely increase use of Brazil’s excess crushing capacity and dampen the recent boom in soybean exports. Planned increases to Brazil’s biodiesel mandate from the current 3% of transportation fuel would likely reduce soybean oil exports.”
The Brazilian specialists conclude that Brazil will be able to meet the challenges for domestic markets, but its export potential will depend on its policy toward the expansion of the biofuels industry.
Summary:
For several decades Brazil has nibbled away at the US dominance of global soybean trade. However, economic advances in that nation have allowed domestic demand for food and fuel to increase to the point that more of Brazils agricultural production will be used domestically, and there will be less available for export.
Posted by Stu Ellis on July 23, 2009 12:17 AM to farmgate