The South America Crop Report for January 30, 2017

By Patrick Archer and Eduardo Blasina


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The Argentina Crop Report

US$1 = 15.888 ARS

Donald Trump has only been in office for one week, but one of the earliest and clearest indicators of the new rules of the trade game can be seen in Argentina where the local citrus industry is reeling from the USDA’s decision to delay entry of Argentine lemons (approved in December) for 60 days. La Nacion’s Cristian Mira writes that California Citrus Mutual (CCM) strongly supports the move which is meant to “protect the North American citrus industry” from “the negative impacts that could come from lemons imported from Argentina.” CCM president Joel Nelson says his agency will continue working with the USDA on “a work plan that will better protect the domestic citrus industry from the multitude of plagues and diseases that we know are present in northwest Argentina.” In their defense, Mira says the Argentine government and local producers insist that the phytosanitary conditions in Tucumán, the country’s main growing region, are ideal…or at least that was what APHIS officials said when the visited the country last year. (La Nación)

Argentina will harvest 53.5 million tons of soybeans in the current 2016/17 campaign compared to 56 million tons last year, according to new numbers this week from the Buenos Aires Grains Exchange (BCBA). The downward revision was blamed on crop damage caused by excessive rainfall over the past three weeks, writes Reuters’ Maximiliano Rizzi. “With an estimated 770,000 hectares (1.902 million acres) of affected soybeans, the risk of loss are concentrated on 400,000 hectares and the remaining 370,000 hectares have a slightly lower risk of loss,” according to the BCBA report. Argentina’s Ministry of Agroindustry estimates that the total area planted with soybeans in the 2016/17 campaign fell from 20.6 million hectares last year to 19.8 million hectares this year. The Rosario Grains Exchange is estimating 19.2 million hectares this year with a total harvest projection of 52.9 million tons. Argentina is the world’s largest exporter of soybean meal and soybean oil, and the third largest exporter of unprocessed soybeans. (Reuters/UOL)

One out of every three dollars that Argentina earned from exports in 2016 came from the sale of soybeans and sunflower, according to a new report from the Rosario Grains Exchange (BCR). “Argentina sales of pellets and soybean meal were the main exports (17%) in the soybean complex which accounted for one-third of the country’s exports,” writes Cronista’s Veronica Dalto. “The importance of farm commodities and their derivatives can be seen in the fact that almost half of sales abroad (46%) came from the sale of grains, flour, pellets, biodiesel and other products worth US$26.504 billion. Argentina’s corn industry generated export revenue of US$4.236 billion last year and corn accounted for US$4.129 billion of the total with value-added derivatives only accounting for US$107 million. Exports from the country’s wheat industry generated sales of US$2.071 billion, a number which should increase significantly this year as wheat production is forecast for 14.9 million tons this year vs. only 10.9 million tons in 2016. (Cronista)


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The Brazil Crop Report

US$1 = 3.152 BRL

Brazil’s 2017 soybean harvest officially began this week with the annual Abertura Nacional da Colheita 2017 (National Harvest Opening) celebration. This year’s kickoff event, organized by Projeto Soja Brasil, was held at the vast Jotabasso farm in Ponta Porã, Mato Grosso do Sul (MS). “Yes, it was raining soybeans,” writes Canal Rural’s Daniel Popov adding, “It was a party at the height of the harvest season with seven harvesters in the fields and many government officials including the interim Minister of Agriculture Eumar Novacki aboard the lead machine.” Addressing the crowd, Novacki emphasized the importance of Brazil’s farm industry: “This sector is responsible for contributing 22% of GDP, generating 1 in every 3 jobs in the country, and contributing almost half of our exports. We want to stimulate growth by reducing bureaucracy and opening access to the Ministry,” said Novacki. Brazil’s National Supply Company (CONAB) is forecasting Brazil’s soybean harvest will top 103 million tons in the 2016/17 campaign. (Canal Rural)

Brazilian grain and meat exports stand to benefit from two major announcements this week in Washington. Exiting TPP and Renegotiating NAFTA Create An Ideal Scenario For Brazilian Exports is the headline of Notícias Agrícolas article featuring a 34-minute interview with Cerealpar analyst Steve Cachia. “TPP won’t have a direct influence on our agribusiness, but in case there is retaliation on the part of participating countries, a trade war could begin creating market space for Brazil given that uncertainty. Mexico could also end up being an important destination, because it is the world’s second-largest consumer of corn. Threatened by the possible construction of a border wall dividing the two countries, (Mexico) could open its doors to other countries. In conclusion, Cachia says Brazil needs to be more aggressive on the trade front showing the world what it has to offer. “Demand is strong and world population is only growing, creating an ideal scenario for a surge in our exports.” (Notícias Agrícolas)

There is a much improved outlook for Brazilian beef with the U.S. officially exiting TPP. Gazeta de Povo‘s Giuliano Gomes writes that Brazilian officials were cheering the news considering that U.S. participation in the agreement would have made Brazilian beef more expensive compared to U.S. beef in key Asian markets like Japan. The same can be said for Brazilian soybeans, orange juice, and sugar among other exports to Asia. In a related story, Pork World says Brazil is sending 87 companies to this week’s Gulfood in Dubai which is the premier food and drink expo in the Middle East. The Brazilian Agency for Investments and Export Promotion (Apex-Brasil) which is leading the delegation expects to exceed the US$728 million in new business that Brazilian companies closed at Gulfood 2016. Brazil exports to six Middle East countries (Saudi Arabia, UAE, Kuwait, Qatar, Bahrain, and Oman) topped US$6.04 billion last year compared to imports of only US$2.66 billion. In 2017, Brazil expects to build on its already impressive trade surplus of US$3.38 billion with these countries. (Pork World)


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The Uruguay Crop Report

US$1 = 28.207 UYU

Agriculture Could Spur A Regional Comeback is the headline of Eduardo Blasina’s op-ed in El Observador analyzing the status quo in Uruguay with neighboring Argentina and Brazil facing similar challenges. “Both Argentina and Brazil will have record grain harvests thanks to both soybeans and corn. Argentina will have the added benefit of wheat rebounding from 8 million tons in the final Kirchner year to 16 MT this year. If there are no climate disasters, agriculture will be a strong driving force in both countries. Building an environment of confidence and stability in Latin America could be a great opportunity. If Brazil and Argentina can find the course, it will be much easier to find the growth portion of their economic cycles. But it’s a race against the clock, as the governments of both countries face approaching deadlines. On the one hand they need their economies to grow after a very bad 2016. On the other hand, elections for Macri (2019) and Temer (2018) are another year closer with the looming threats of the return of Peronism in one and the return of Lula in the other.” (El Observador)

Finland’s UPM issued a press release this week in an attempt to counteract “speculation by the international financial markets” regarding a possible announcement the company will build the third billion-dollar pulp mill in Uruguay, writes El Pais’ Pablo Fernández. The company’s press release spoke of a “possible cellulose plant” which would require serious “infrastructure developments” on the part of the federal government. The 11:10 Helsinki missive (6:10 Montevideo time) caught the Executive Branch off guard. “Considering that there is going to be a very important meeting next Monday, we don’t understand why we are receiving this news over breakfast,” a government source told El País. Expectations of the announcement of a second UPM cellulose mega-plant in Uruguay prompted global investors to buy up shares of the Finnish company, and UPM responded with the press release which generated a lot of nervous feelings in both Uruguay political and business circles. As far as the government is concerned, Fernández writes, “nothing has changed” and next Monday will be “a pivotal day.” (El País)

And finally, a follow-up to last week’s feature story for Uruguay from FarmsUY co-founder Eduardo Blasina. Uruguay Ambassador Carlos Gianelli says he believes bone-in sheepmeat will enter the U.S. this year, because U.S. production is not sufficient to meet local demand, and the volume that Uruguay can ship does not represent a threat to the U.S., compared to a country like Australia. According to Trademap, the U.S. imports 32% of its sheepmeat from Australia, 12% from New Zealand and 8% from Canada. In contrast, Latin American countries only account for a very small percentage of the total including Nicaragua (2%), Chile (0.2%) and Mexico (0.1%). For Uruguay sheepmeat producers and exporters, the value of gaining access to the U.S. with bone-in sheepmeat (boneless is already approved) has less to do with volume and much more to do with diversification and the much higher value per shipment of bone-in product to one of the world’s most demanding markets. Currently, the bulk of Uruguay sheepmeat exports go to Brazil (58%), China (24.7%), the Netherlands (3.8%) and Hong Kong (2.6%). (FarmsUY)

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-Patrick Archer

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