Turmoil in agribusiness: in June every day counts

There are periods when this monthly agricultural analysis presents numbers without great emotions... This month, every day counts due to the enormous turbulence! Let there be emotion... let's look at the analysis to try to help with decision-making.

The rise in temperature in trade relations between China and the USA has brought more uncertainty in maintaining the pace of global growth. The OECD estimates this at 3,2% with the decrease in trade flow. It could return to 3,4% in 2020, but dependent on tariffs not being escalated, mainly between China and the USA. The US is expected to grow 2,8% this year, China 6,2%, Japan 0,7% and the Eurozone 1,2%. ­

The lack of agreement with China is being very harmful to US producers, but the Government must make US$15 to 16 billion in aid available. Another problem in the USA that could have a positive impact on Brazilian agriculture is the threat, by President Trump, to tax Mexican products due to immigration problems. Mexico is a large importer of agricultural products from the USA.

Our harvest is going very well, the weather helped and the corn harvest will reach 69 million tons, 30% higher than last year. With this, we will have 95,3 million tons of cereal in total (18% more). CONAB even increased the estimate by 1 million compared to the last one. Around 31 million tons will be exported and 62,5 million tons will be consumed domestically.

According to CONAB, we will have 236,7 million tons of grains in this harvest, increasing 1,4 million in the April number and in total, 4% higher than the 2017/18 production. In soybeans, we will produce 4,2% less than last year, 114,3 million tons and we will export 68 million tons in 2019/20, 2 million less than the previous year. Rice is expected to fall 12,2%, reaching 10,6 million tons.

According to MAPA, the Gross Production Value of 2019 will be 597,8 billion, with an increase of R$ 9 billion over the projection made in April and 1,4% higher than the value of 2018, even with the drop of 12,7. 17,3% of the total value of soybeans. The value of corn will be 17,1% higher, cotton 15,1% and orange 21%. Coffee (4,4%) and wheat (199,4%) will fall. In livestock, the VBP will be R$3 billion, R$3 billion more than the last forecast and also 2018% above XNUMX. The VBP should increase in June with the reaction in grain and meat prices.

In April, our agricultural exports fell 2,4% when compared to April 2018, totaling US$8,6 billion (47,6% of everything sold by Brazil). Imports fell 12% to US$1,1 billion, leaving a balance of US$7,5 billion. Volumes sold grew 1,2%, but prices fell 6%. In the first 4 months of the year we exported US$30,42 billion, 0,2% more than the US$30,35 billion in the same period of 2018. We were able to sell 5,9% more products, as prices in overall decreased by 5,4%. Imports fell from US$4,91 billion to US$4,79 billion.

The five leading export chains, which represent 80% of the total sold in the first 4 months of this year, were: soybeans (37,9%); forestry products (15,8%); meat (15,3%); coffee (5,7%) and cereals, flours and preparations (5,1%). Soybean sales were US$ 11,52 billion (0,6% less) and 26,3 million tons of grains alone were shipped (12% more), a shame that the average price was 8% lower. We brought US$4,82 billion in paper and cellulose (3,7% more), with prices 5,8% higher. In meat we also grew 3%, reaching US$ 4,64 billion, driven by chicken with US$ 2,08 billion (quantity grew 0,6% and average price 4,2%), followed by beef with US$ 2,01 billion (+3,2%) and pork with US$ 414,12 million (+3,8%). Coffee brought in US$ 4 billion (+1,75%) in these 7,2 months, with a 32% growth in quantity, 722,5 thousand tons sold, and a sharp drop in prices, of 17,4%.

Finally, cereals, flours and preparations had 43% growth, bringing in US$ 1,55 billion, including US$ 1,23 billion (+54,8%) for corn, with almost 7 million tons sold (+40,9 .14,92%). We sold US$4 billion to Asia, 50% more, and this already represents practically 8,3% of our exports, followed by the Middle East, which has XNUMX% of the total.

We have had further developments on the important topic of African swine fever. It has been reported to be in Mongolia, Vietnam and Cambodia, since its first outbreak in August in China. In China, it is estimated that 40 million animals were slaughtered and many more will be, opening up space for meat imports. Great efforts are being made by the USDA to prevent the disease from reaching the US, a real threat.

In the biannual report published by FAO, the impacts of swine fever will cause China's soybean imports to fall again from 94 million tons imported in 2017/18 to 84 million. It will be a difficult period for American soybean producers, but better for pork producers, with Chinese imports 8 times greater. Another movement that can be observed, as there is a tariff on the USA, is Canada, selling more to China and importing from the USA into its market.

The five facts to follow now daily in June are:

1) The most important thing: planting the crop in the USA. It is estimated that more than 2,5 million hectares will no longer be planted with corn due to the rains, which has caused prices to rise to the highest value in 3 years and also increase in Brazil. The dates for planting and applying for insurance are closed and the most recent USDA report shows corn with only 67% of the planted area, compared to 96% in the previous 5 years, and soybeans with 39% compared to 79% of the five-year average , and may still have some recovery;

2) The impacts of the evolution of African swine flu in China on imports and prices of meat and grains;

3) Trade issues between China and the USA and more recently with Mexico and their impacts on trade flows;

4) The progress of reforms in Brazil and pressure on the exchange rate, which appreciated again;  

5) The impact of this isolated case of atypical BSE (mad cow) in an elderly animal on Brazilian livestock farming and its exports. We won't have any problems with the OIE, but exports to China were temporarily suspended by MAPA, but I believe for a short time. What a turbulent time for grains and meats. In June, every day counts!

In general, the international situation is favorable to Brazilian agriculture, what needs to gain speed is the internal situation, with an increasingly strong movement of organized civil society pressuring the political class for the presentation and approval of emergency reforms to correct errors, but also mainly of a strategic plan for the country.