The South America Crop Report for February 20, 2017
By Patrick Archer and Eduardo Blasina
The Argentina Crop Report
The Argentine press is reporting today that high-ranking Mexican officials have confirmed they will travel to South America next week to begin discussions regarding increased Mexican purchases of corn and soybeans from Argentina and Brazil. La Nación confirms that Mexican Secretary of Agriculture José Calzada will travel to both countries next week accompanied by major Mexican grain importers. “This is not a trip to explore trade relations and goodwill, this is a trip to close deals,” said Calzada in an interview with Reuters. “We have a lot of interest in showing our producers the opportunity to import grains from Argentina, and just yesterday I spoke with the ambassador from Brazil.” Mexico relied on grain imports from the U.S. for years under NAFTA, but now that the future of the agreement is uncertain, Mexico is looking for new markets. Last year alone, Mexico imported 13 million tons of yellow rice used primarily for feed, of which 12.75 million tons (98.07%) came from the U.S. In sharp contrast, Mexico only imported 97,000 tons from Argentina and 54,000 tons from Brazil last year. Apparently that is about to change…big league. (La Nación)
Now that increased corn exports to Mexico look like a fait accompli, Argentina is looking to gain market share with other exports to Mexico and simultaneously increase corn exports to other South American neighbors, says the Argentina Secretary of Agroindustrial Markets, Marisa Bircher. “Other sectors where we have a chance to grow market share in Mexico include poultry, beef, citrus, and wine. Also dairy because Mexico currently buys 90% of their dairy products from the U.S.,” Bircher told Reuters in a phone interview. Bircher says Argentina, the world’s second-largest exporter of corn behind the U.S., is also negotiating to boost corn exports to Colombia, Peru and Ecuador. “There is a high priority for Latin America, not only from the government, but also from the private sector, due to issues like proximity, preferences, costs and competitiveness,” said Bircher. Last week, the presidents of both Argentina and Brazil expressed a desire to expand their economic ties into Mexico and other countries in Latin America. (El Financiero)
Argentina’s 2016/17 soybean crop is entering a critical phase that will determine final yields, and the rainfall of the past few days is helping boost humidity levels in the majority of the country’s growing regions. At the national level, the Buenos Aires Grains Exchange (BCBA) is estimating a little more than half of the country’s crop is entering into R3 and R4, while another 14% is entering R5 and R6. The BCBA’s weekly crop report (PAS) reaffirmed its projection for 54.8 million tons of soybeans in Argentina and left the door open for an increase in final production numbers if the weather conditions remain favorable for soybean development. “In general terms, the majority of the area planted with first harvest soybeans in Cordoba, Santa Fe, Entre Rios and the northern and western sections of Buenos Aires are developing pods (R3 and R4), but there are even some lots that are now developing seeds (R5 and R6). (InfoCampo)
The Brazil Crop Report
The Brazilian press is trumpeting the recent free fall of the dollar against the Brazilian real and forecasting a continued fall below the critical R$3 support level. The dollar has now fallen 26% against the real since its peak of R$4.16 last January. Analysts Aren’t Rejecting A Dollar Below R$3 is the headline of Rennan Setti’s analysis in O Globo which points to May 2015 as the last time the dollar fell below R$3. “There are two fundamental issues at play moving the currency over the past few months. First is renewed optimism in Brazil, and the belief that the country is finally emerging from the worst recession in over a century. The second is the recent rise in commodity prices including iron ore, soybeans and cellulose which are all important exports for Brazil, says Santander chief economist Maruicio Molan. Molan says Brazil’s country risk is now back down to May 2015 levels when the country lost investment grade status. Other analysts consulted by Setti are forecasting the dollar will soon break the R$3 level and fall much further to R$2.80. (O Globo)
Brazil Ag Minister Blairo Maggi says the country is very close to expanding corn exports to Mexico. “Mexico is looking for a new supplier, or new suppliers,” said Maggi who confirmed that the visit by Mexican officials originally scheduled for next week in São Paulo has been pushed back to March 20. “We are going to reach sanitary agreements, and we need the Brazilian and Mexican legislatures to cooperate with each other in order to achieve these new corn exports.” In Mexico, senator Armando Rios Piter, the leader of the Foreign Trade Commission in Congress, says that he will promote a bill to suspend corn imports from the United States and shift those purchases to Brazil and Argentina. According to the USDA, Mexico is one of the world’s main corn importers with annual consumption of 38.6 million tons but only 26 million tons of domestic production.” (Canal Rural)
Brazil’s government is finalizing a project that would loosen restrictions on the sale of Brazilian farmland to for foreign companies and investors. The topic, which was never a consideration under the failed government of Dilma Rousseff, is now advancing and expected to win congressional approval after the Carnaval holidays. The 2010 announcement by China’s Changqing Grain Group that it planned to spend US$300 million to acquire 250,000 acres of land in western Bahia to produce soybeans sparked widespread national fear of a foreign invasion and restrictions on foreign purchases of land soon followed. The new bill in Congress proposes foreign investors could purchase up to 250,000 acres of Brazilian land and simultaneously rent up to 250,000 acres giving any individual group control of 500,000 acres of productive land. The bill’s sponsor, Newton Cardoso Junior, believes the new law could attract over US$15 billion in new investment to the country. (Istoe Dinheiro).
The Uruguay Crop Report
Uruguay president Tabaré Vázquez was in Helsinki this week to meet with his Finnish counterpart and to discuss several topics of mutual interest including the proposed UPM pulp mill which would be UPM’s second and Uruguay’s third billion-dollar pulp mill, writes El Observador’s Martín Natalevich. “In the meeting UPM officials reiterated their determination to continue the process that they have been working on with the Uruguay government and to stick to the timeline,” writes Natalevich. Key issues include how much UPM will invest to build the new plant and how much Uruguay will invest in needed infrastructure. “Upon our return to Montevideo we will have a meeting with my entire cabinet and also with UPM officials to begin work on the second phase of the project,” said the Uruguay president. “Up to now we have advanced on all topics. We’ve reached agreement on several points, and others that are developing but I should say—and I am also sharing the opinion of UPM—that these have been very positive meetings. We are working hard to resolve all aspects of this project, and we have a firm belief that this investment will take place in our country,” said Tabaré Vázquez. (El Observador)
Uruguay soybean producers are viewing the current crop with optimism given the recent rainfall which has left good humidity levels in the country’s main growing regions, writes FarmsUY co-founder Eduardo Blasina. “We are maintaining our forecast for high yields in the 2016/17 campaign with prices that are clearly a welcome improvement over a year ago. This is allowing local producers the opportunity to go ahead and lock in sales at current levels.” Blasina points to regional developments including excess rainfall in key growing regions of Brazil and Argentina, as well as the recent fall of the dollar against the Brazilian real which are impacting prices locally, while strong demand for U.S. soybeans is putting upward pressure on global prices. At the Port of Nueva Palmira, Uruguay producers were selling soybeans in a narrow range of US$374 to US$375 per ton. (Blasina & Associates)
Uruguay’s democracy ranks #1 in Latin America and in the top 20 worldwide, according to The Economist’s 2016 Democracy Index. The annual ranking considers a variety of factors including the electoral process, government function, political participation and civil liberties. Uruguay ranked #1 in Latin America with a final score of 8.17 and #19 worldwide edging out the United States with 8.05 points. The ranking coincides with the most recent Transparency International ranking which named Uruguay the least corrupt country in Latin America. Costa Rica was the #2 country in Latin America followed by Chile in third place. The Economist says Latin America is emerging from a populist hangover with several countries now following Uruguay’s lead and shifting to center-right governments while implementing free market reforms. (República)
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