The deal had been under negotiation for 25 years, and the announcement that a final agreement had been reached was made by European Commission president Ursula von der Leyen and by the presidents of Brazil, Luiz Inácio Lula da Silva, Argentina, Javier Milei, Uruguay, Luis Lacalle Pou, and Paraguay, Santiago Peña, during a Mercosur meeting in Montevideo.

Venezuela has been suspended from the bloc since 2016, and Bolivia is in the process of adhesion, so neither country is included in the agreement.

Most market participants heard by Fastmarkets believe the near-term effect of the agreement for South America’s agriculture and biofuel feedstock exports to Europe will be limited.

“I have not gone through the details of the agreement yet, but in principle I do not believe there will be a great increase in Brazil’s agriculture exports to Europe taking into account the resistance of Europeans to Brazilian products,” Daniele Siqueira, analyst at Brazilian consultancy Agrural, told Fastmarkets.

Siqueira said Brazil has serious problems with its global image, particularly in the environmental sphere, and added that the lack of competitiveness of European agriculture tends to push the region toward protectionist measures.

Several Argentinian sources, including analysts and brokers, said the final text of the agreement needs to be analyzed in detail but that it is still early to evaluate potential impacts and when those should be expected to kick in.

Independent analyst Javier Preciado Patiño said he is skeptical about the benefits the agreement could bring to Argentine agricultural exports, both because Europe is not the main market for most of Argentina’s products and because Europe could still use other protectionist means to block imports from South America.

Near-term impacts expected to be limited

Even considering the potential benefits the agreement can bring to Mercosur’s agricultural exports, near-term impacts are expected to be limited.

“The [agreement’s] timetable is divided into four stages unfolding in 10-years’ time. Vegoils will be included in year 7 and biodiesel in year 10, so there are no immediate impacts [in those markets],” Argentina’s oil industry chamber CIARA-CEC president Gustavo Idigoras told Fastmarkets.

The exceptions, according to Idigoras, are the soybean meal and corn markets. Soybean meal could see a zero import tariff implemented, and Mercosur will have a corn import quota of 1 million tonnes per year.

In 2023, the EU imported 3.8 million tonnes of corn from Brazil and just over 230,000 tonnes from Argentina.

The Brazilian Association of Vegetable Oil Industries (ABIOVE) said in a statement that the agreement promotes new opportunities for the domestic agroindustry and highlighted the importance of “rapid ratification” by the countries involved, so that the agreed trade preferences “can come into force as soon as possible, generating concrete benefits for production chains and expanding commercial relations between the blocs.”

Market participants in Argentina and Brazil, the main exporters of soybean meal, were still skeptical about the implementation and were waiting to see how importers would react.

Animal feed products, such as soybean meal, are already one of the main items exported by Mercosur to the EU.

Brazil and Argentina are the EU’s two main sources of soybean meal imports, having shipped a combined 13.3 million tonnes to the bloc in 2023 – 60% of EU’s total imports.

“The [Brazilian] market has not yet shown any reaction. The spot market is completely empty,” one market source in Brazil said, adding that for 2025 negotiations sellers are waiting for an increase in prices.

“There are still some bureaucratic steps left for [the free-trade deal] to be operational,” an Argentine broker said.

Brazil’s grain exporters association Anec told Fastmarkets that the trade agreement is “good news for the international export segment in general,” but for agricultural products Brazil will probably experience “more demands in the environmental area.”

In its Agriculture Fact Sheet about the agreement, the European Commission stressed that from the end of 2025, only deforestation-free products will be allowed to enter the EU market.

“This rule will also apply to imports under the EU-Mercosur partnership agreement, ensuring that products imported under this deal have not contributed to deforestation in Mercosur countries,” the Commission said.

The 1-million-tonne quota for corn and sorghum exports will mean zero tariffs once it comes into effect, but market participants are skeptical about big impacts on corn trade for Brazil and Argentina, the main producers and exporters of Mercosur.

“It’s unlikely that there will be an increase in European purchases from Brazil in the short term,” Daniele Siqueira told Fastmarkets.

In the case of Brazil, corn also has the aggravating factor of the country being less competitive in the international market.

“This year we’ve seen the EU increasing its purchases in the US, which is unusual, and reducing its purchases from Brazil. Given the increase in the domestic demand, Brazil will have to produce much more corn in the 2024/25 crop if the country wants to increase corn exports, whether to the EU or to other destinations,” Siqueira added.

Brazil’s food agency Conab pegged the country’s corn crop output at 119.8 million tonnes, up by 3.6% year on year. Meanwhile, exports are forecast at 36 million tonnes.

Domestic demand is forecast at 87 million tonnes in 2024, compared with last year’s 84.2 million tonnes.

The perception is the same in Argentina. “I really don’t think there will be a significant impact for corn. In Argentina, the focus is to start exporting to China,” Javier Preciado Patiño told Fastmarkets.

“We also have to look at the details of the agreement and see how the Europeans’ passion for imposing para-tariff rules, such as free deforestation, may play out,” the analyst said.

Animal protein

The EU-Mercosur agreement establishes a new quota for chicken meat exports of 180,000 carcass-equivalent tonnes, with zero tariffs for shipments to the EU.

This quota will be shared among Mercosur member countries over six years. After this period, the annual quota will be 180,000 tonnes.

The agreement also establishes a quota for pork of 25,000 tonnes, following the same gradual system as chicken meat over six years, with a tariff of €83 per tonne.

The agreement allows 99,000 tonnes of Mercosur beef to enter the EU market with a 7.5% tax. 55% of the quota consists of fresh or chilled meat and 45% of lower-value frozen meat.

The Mercosur agreement quota represents about 0.7% of Mercosur production, a tiny fraction of the region’s exports, according to European Commission data.

The Brazilian Animal Protein Association (ABPA) said the agreement opens up new opportunities for shipments to the European market under more favorable conditions than the existing quotas for Brazilian exports to the EU.

“The current quotas will remain in place, and the new ones established by the agreement are expected to be filled, particularly by Brazilian exports,” ABPA president Ricardo Santin said in a statement sent to Fastmarkets.

Insper Agro Global professor and coordinator Marcos Jank said the agreement is relevant for Brazil to access a very qualified market, but not in terms of volumes, since Europe represents only 15% of all Brazilian exports.

As for French farmers’ resistance to the deal, Jank said that although it includes preferential quotas for beef from Mercosur, the volumes would represent only 1.5% of the European consumer market. “Combined with other restrictions and high subsidies after ratification, it invalidates the argument of a potential ‘market flooding’ from South American meat.”

The agreement could also facilitate shipments of some Argentine agri-food products to the EU, although details of the deal should be carefully analyzed first, Javier Preciado Patiño told Fastmarkets.

“At first glance, it seems like good news for Argentine beef. However, the Argentine agri-food sector would need significant gains in competitiveness to match Brazil’s, which is better positioned,” Patiño added.

The Brazilian Agribusiness Association (ABAG) said in a statement that Brazil will contribute to meet the EU’s need for partnerships with “decarbonized and sustainable” production chains, essential to achieving emissions reduction targets.

“We will have new common agendas in the areas of new fuels and industrial process technologies, cooperating more than competing,” ABAG vice-president Ingo Plöger said in the statement.

The approval of the agreement, however, generated criticism across Europe, from biofuel producers and farmers to environmental agencies.

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This was the same figure projected by Rosario Grain Exchange (BCR) in its monthly report released last week, which raised its estimate from the 17.7 million ha projected in October, leading to the highest sowed area for the past six years in Argentina.

BCR also increased its estimate for Argentina’s soybean production to 53 million-53.5 million tonnes from the previous 50 million tonnes projection. SagyP has not released production estimates so far.

The increase in the sowed area forecast was driven by improved soil moisture conditions and an estimated lower acreage of late corn, according to Sagyp.

In November, soybean planting became widespread in Argentina, reaching 36% of the soybean projected area, 3% ahead of the same week last year.

“Planting accelerated after the rainfall recorded in recent weeks, while in the regions less benefited by the rains, farmers are waiting for improved moisture to move forward with planting,” Sagyp said.

Wheat

Sagyp projected Argentina’s wheat output would rise by 10.7% from 15.9 million tonnes the previous year in its first estimate for the 2024 crop production.

The estimate is lower than the 18.8 million tonnes forecast from BCR’s report last week, and down from the 19.5 million tonnes forecast in October. This is still estimated to be Argentina’s fourth biggest crop in the past 15 years.

SagyP’s sowed area estimate was unchanged at 6.3 million ha, up by 6.8% from 5.9 million ha last year.

The lower-than-expected production volume was due to low rainfall in the early stages of the crop in practically all of the production area except the northeastern, eastern and southeastern regions of Buenos Aires, along with the period of water shortage in the southeast of Buenos Aires.

Corn

SagyP has left its corn sowed area projection unchanged at 9.4 million ha in 2024-25, a 15.3% decline from the 11.1 million ha sowed area last crop year in Argentina.

The estimate is above the 7.8 million ha forecast from BCR; the exchange reduced its estimate from the previous 8 million ha in last week’s report.

To date, planting reached 45% of the projected area, 5% ahead of the previous year.

The rains at the beginning of October improved the soil condition, which led to greater progress in planting tasks.

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The calculation to estimate the impact of the moisture deficit in Argentine production considers the average productivity of the last five years, which BCR said is a conservative scenario.

The main driver for the growth under optimal conditions is soybeans, with a 5.1% increase in production, estimated at 52.6 million tonnes versus the 50 million tonnes from 2023-24, in a sowed area of 17.7 million hectares, up 7.5% from the previous crop year’s 16.46 million ha. The figure is within the previous projection of 52 million-53 million tonnes made on September 12.

But under less-than-ideal soil moisture conditions, Argentina’s soybean production could be 6.6 million tonnes lower than under average circumstances, reaching 46 million tonnes, an 8% year-over-year decline.

Corn and wheat production

Corn production was forecast at 52 million tonnes, up 5.1% from the previous crop year’s 49.5 million tonnes, but in a projected area of 8 million ha, 20.6% lower year over year. On September 12, BCR pegged the new crop year corn production at 51 million-52 million tonnes.

If the dry conditions continue, the corn output could drop to 47.6 million tonnes.

Wheat production was pegged at 20.4 million tonnes versus 14.5 million tonnes in the previous crop year, and slightly below the estimate of 20.5 million tonnes earlier this month. The planted area remained pegged at 6.7 million ha, up by 21% year over year.

The sowing of the 2024/25 wheat crop is complete, and crops now head to a critical period waiting for rains. If the rains do not reach the crops in the necessary volumes, production could fall to 18.5 million tonnes.

The estimates also consider sunflower, barley and sorghum production, with production projected at 4.2 million tonnes, 3.2 million tonnes and 5.2 million tonnes respectively for the new crop year.

But under less-than-ideal circumstances, the three crops combined could lose 1.6 million tonnes.

Grains and oilseeds exports

Argentina’s grain and soybean products exports are expected to reach 101.5 million tonnes in 2024-25, up 15% from the previous crop year’s 87.9 million tonnes and the highest in the past four years.

Despite the increase, the projected figure remains behind the record 104.1 million tonnes Argentina exported in the 2018-19 crop year.

The exports could bring $35.5 billion to Argentina’s economy, compared with $30.8 billion from 2023-24.

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The USDA raised its US soybean 2024/25 crop output estimates to 4.6 billion bu (124.9 million tonnes), up by 154 million bu (4.2 million tonnes) from 4.43 billion bu (120.7 million tonnes) in last month’s WASDE, citing a higher harvested area and yield.

The latest forecast was also above the average projection of 4.46 billion bu (121 million tonnes) shown by a Fastmarkets poll with traders and analysts.

The USDA’s soybean output estimate for 2024/25 surpasses the record 4.46 billion bu production from 2021.

The harvested area is forecast at 86.3 million acres, up by 1 million acres from July’s estimate of 85.3 million acres.

The soybean yield was forecast at a record 53.2 bu per acre, up by 1.2 bu per acre from last month’s WASDE, while the average estimate from market participants was 52.3 bu per acre.

US soybean exports were pegged at 50.35 million tonnes, up by 680,000 tonnes from last month’s forecast of 49.67 million tonnes, with the USDA citing higher supply and unchanged crush levels.

US ending stocks were forecast at 560 million bu (15.25 million tonnes) in August’s report, up by 125 million bu (3.4 million tonnes) from the July WASDE’s 435 million bu (11.85 million tonnes) and above the market projection of 471 million bu (12.8 million tonnes).

Soybean production estimates

Global soybean production estimates were increased by 6.9 million tonnes to 428.7 million tonnes from 421.85 million tonnes in the July WASDE on higher production expected for the US, Ukraine, Russia, India and Benin.

The forecast for global ending stocks was increased by 6.5 million tonnes to 134.3 million tonnes from 127.76 million tonnes in the July WASDE, above the average market projection of 128 million tonnes, with the USDA citing higher stocks for China, the US and Argentina, partly offset by lower stocks for Brazil.

Brazilian ending stocks were estimated at 35.75 million tonnes in the August WASDE, up from last month’s forecast of 28.75 million tonnes, while Chinese ending stocks were pegged at 45.68 million tonnes, up from 45.36 million tonnes in the previous report.

Forecasts for Brazil’s and Argentina’s 2024/25 soybean crop output were unchanged at 169 million tonnes and 51 million tonnes respectively.

Crop estimates for 2023/24

US exports in the 2023/24 crop year were pegged at 46.27 million tonnes, unchanged from the July forecast.

The USDA kept its forecast for Brazil’s soybean output unchanged at 153 million tonnes, while the average market estimate was 152 million tonnes.

Brazilian soybean export estimates were raised by 2 million tonnes in the August WASDE to 105 million tonnes, with the USDA citing a strong shipment pace through July.

The Argentine soybean crop projection was reduced to 49 million tonnes from 49.5 million tonnes in the July WASDE, while market participants estimated it would be increased to 50 million tonnes.

China’s soybean imports for 2023/24 were revised up once again by 3.5 million tonnes to 111.5 million tonnes from 108 million tonnes in the July WASDE, based on higher shipments by exporters.

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The restriction might affect the local corn and soymeal markets, which are heavily used in poultry feed.

On Thursday, July 18, Brazil imposed a self-embargo restricted to poultry meat and by-products from Rio Grande do Sul, where the case was reported in the city of Anta Gorda, on Wednesday, July 17. Shipments from the whole country were suspended only to Argentina and the EU.

Rio Grande do Sul is the third largest exporter of poultry meat in Brazil, behind Paraná and Santa Catarina, and has exported 354,000 tonnes in the first six months of the year, which represents 14.1% of the 2.52 million tonnes Brazil exported in the semester.

In a new decision, released on Friday, the suspension was extended to poultry products from all of Brazil for China, Argentina, Peru and Mexico.

The disease is caused by a virus and has mandatory notification to the World Organization for Animal Health. The self-embargo is usually implemented in agreement with the sanitary protocols between importers and exporters. It usually is a faster approach than waiting for the buyers to impose restrictions and allows for a faster resumption of sales.

Export restrictions for different countries

The measure was first communicated in official documents from the Department of Inspection of Products of Animal Origin of the Ministry of Agriculture, one regarding China specifically and the other concerning other markets.

“The certification for export is a bilateral agreement between partner countries, and for this reason the ministry of agriculture preventively reviewed the International Health Certificates (CSI) in order to meet the agreed guarantees and requirements,” the ministry said in a statement.

For countries such as Canada, South Korea, Israel, Japan, Morocco, Mauritius, Namibia, Pakistan, Tajikistan and East Timor, the restriction for exports of different poultry meats and products is from a radius of 50 km from the outbreak.

Exports for other 30 countries, including important markets such as Saudi Arabia, remain restricted to different poultry meat and products from the state of Rio Grande do Sul.

The ministry also stated that the suspension rules will be reviewed daily, “taking into account the ongoing negotiations with partner countries, in which all the actions being carried out to eradicate the outbreak are presented.”

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Soybean exports amounted to 5.2 million tonnes in the first two weeks of July, compared with 9.6 million tonnes exported in the entirety of July 2023.

So far this month, the average soybean shipment volume per working day was 525,689 tonnes, up by 13.9% from the daily average of 461,711 tonnes from the same month last year.

Brazilian grain exporters association Anec projected July’s soybean shipments at 10.3 million tonnes in its latest report released on July 9.

Corn exports

Brazilian corn shipments remained slow and totaled 848,558 tonnes in the first half of July. Exported amounted to 4.2 million tonnes in July 2023; shipments usually pick up in the second half of the year.

The average volume shipped per working day was 84,855 tonnes so far this month, down by 56% from July 2023’s daily average of 201,458 tonnes.

Anec has forecast corn shipments for July at 4 million tonnes.

View our corn prices

Soybean meal and oil exports

Soybean meal shipments amounted to 847,513 tonnes in the first two weeks of July, compared with 2.2 million tonnes exported in the full month of July 2023.

The average soybean meal export rate per working day was 84,751 tonnes so far this month, down by 19.8% from the average of 105,663 tonnes in July 2023.

Anec projected Brazil’s soybean meal shipments for July at 1.89 million tonnes.

Brazilian exports of vegetable oils and fats – mostly comprised of soybean oil – reached 103,266 tonnes in the first two weeks of July, compared with 227,935 tonnes in the whole month of July 2023.

So far this month, the average shipped volume per working day was 10,326 tonnes, down by 4.8% from the average of 10,849 tonnes from July 2023.

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The US Department of Agriculture (USDA) expected a similar soybean output at 50 million tonnes, with Argentina to increase its share in global soy meal exports to 34.8% in 2023-2024 from 30.8% in the previous crop year.

Brazil became the largest soy meal exporter in 2022-2023 amid production losses in Argentina, but this year, its share is expected to decrease to 29.4% from 31.7%, returning to second place, while the US market share is anticipated to increase to 20.5% from 19.8%, according to the USDA.

Argentina’s soybean crush industry intended to at least return to historical soybean crush levels of around 36 million tonnes in 2023-2024, leaving behind “one of the worst agricultural campaigns” in its history, Gustavo Idigoras, president of oil industry chamber Ciara-CEC, said in a recent webinar.

“The annual rate we used to have on soybean crush was around 36 million tonnes per year, and we, as an industry, are trying to work on that level for this year,” Idigoras said.

In 2022-2023, after losing 30 million tonnes of soybeans due to a drought, Argentina’s soybean crush levels fell to 27 million tonnes, down by 30% year on year.

Higher soybean crush volumes anticipated

Local analysts expected even higher crush volumes in 2023-2024.

Rosario Grains Exchange (BCR)’s latest estimate was 39.6 million tonnes, considering that soybean supply is higher and demand for Argentina’s soy meal “continues to be strong,” Guido D’Angelo, analyst at BCR, told Fastmarkets.

“We had a campaign last year [that should be] forgotten, so the international market is waiting for Argentina’s return,” D’Angelo said.

Export prices of Argentinian soy meal in Up River ports remained 1.3% higher than their Brazilian counterpart in the Port of Paranaguá for May loading and 0.5% higher for June loading, according to Fastmarkets’ latest assessment.

Argentinian soy meal prices were higher than in Brazil because of harvest delays due to excess rain in Argentina, according to D’Angelo.

Market sources said farmer selling has also been slower in Argentina compared with Brazil, where a recent devaluation of the Real led to increased soybean sales amid strong crushing demand for biodiesel blending.

That said, sources expected Argentinian soy meal prices to become more competitive once local harvest and sales pick up.

“Argentinian soy meal prices should come down versus Brazil,” one Argentina-based source said.

Independent market analyst Javier Preciado Patiño said he is also “more optimistic” than the local industry, estimating soybean crush around 40 million tonnes, but in a more competitive environment for soy meal exports.

“Everything suggests that it will be a complicated campaign, with supply putting downward pressure on prices, so there will be competition among the three origins in the international markets based on industrialization costs and the domestic soybean price,” Patiño told Fastmarkets.

“We are confident that the Rosario crushing hub is extremely competitive and the industry based in Argentina will be able to export without difficulty, despite competition from Brazil and the US,” Patiño said.

Argentina is expected to export 28.0 million tonnes of soy meal, up by 51% from the previous campaign and by 10% from the previous five-year average, according to BCR.

The figure is similar to Ciara-CEC’s estimates of 27-28 million tonnes for Argentinian soy meal exports.

“We will see if we can recover our position as the first [global] supplier, but that will depend a lot on US and Brazilian offers,” Idigoras said.

Soy meal supply to increase

The global oilseed crushing industry is growing due to increased demand for oils in the biofuel sector; Brazil and the US are competing for a larger share in typical import markets for Argentina’s soy meal, such as Vietnam, Indonesia and Malaysia.

One of Argentina’s strategies to differentiate itself from competitors is the Argentinian Gran Chaco Sectoral Vision (VISEC) program to certify that soybeans and soybean products come from areas that have been deforestation-free since December 2020, the cut-off date in new regulation from the European Union – the second-largest global soy meal importer region after Southeast Asia – set to enter into force on December 30, 2024.

The main threat for Argentinian soy meal is that, in Brazil and the US, domestic demand has not been growing as fast as crushing levels, leaving more soy meal to be exported instead, BCR said in a recent report.

Between the 2013-2014 and 2023-2024 campaigns, Brazil and the US increased their soybean meal production by just over 12 million tonnes per marketing campaign, according to BCR.

In Brazil, 50% of this soy meal production increase was destined for export; in the US, it was around 30%.

“With prospects that both countries will continue to increase their blending of biofuels and demand more soybean oil, it is feasible that soybean crush will continue to grow and competition will increase to place surplus soy meal on the international market,” the report said.

Argentina will face tougher soy meal export competition this year already, Scott Gerlt, chief economist for the American Soybean Association, told Fastmarkets.

With domestic soybean crush capacity expanding in the US, Gerlt expected increased exports out of the country.

“While the domestic market can absorb some more meal, much of it will likely be exported. We have seen upgrades to export terminals in the Pacific Northwest to be able to handle the additional meal,” Gerlt said.

But in the short term, US soybean meal stocks have been getting tighter amid seasonal downtime, and Argentina’s soy meal was expected “to undercut” US shipments until Argentinian supplies for export start to slow, Terry Reilly, senior agricultural strategist for Marex, told Fastmarkets.

“US soybean meal exports will not stop as long as crush plants run at high daily rates, but Argentina should become the number one exporter during the remainder of spring and summer months [of the Northern Hemisphere],” Reilly added.

Strong performance from the Brazilian market

In Brazil, soybean crush is expected to hit 54.5 million tonnes in 2023-2024, up year on year from 54.2 million tonnes, but soy meal exports are expected to decrease to 21.6 million tonnes from 22.5 million tonnes in the previous crop year, according to the Brazilian Association of Vegetable Oil Industries (Abiove).

“The decrease is mainly due to increased competition with Argentina, which is expected to grow its share of soy meal exports compared with the previous year,” Daniel Furlan Amaral, director of economics and regulatory affairs at Abiove, told Fastmarkets.

Nonetheless, Brazil started the year at a strong export pace, having shipped 5.4 million tonnes of soy meal abroad in the first quarter, up by 15% year on year from 4.7 million tonnes, and the country is diversifying its export destinations.

“The Middle East is a destination that has been growing significantly in purchasing Brazilian soy meal,” Amaral said.

Shipments to Middle Eastern countries increased by 138% year on year in January-March, although Southeast Asia and the EU remained the main importers for Brazilian soy meal.

A strong dip in Brazil’s soy meal shipments is unlikely, considering that foreign consumption is expected to grow, Francisco Queiroz, analyst at Itaú BBA’s Agribusiness Consulting, told Fastmarkets.

“The outlook is for global meal production to increase, and the growth in soy meal supply should keep prices very competitive on the international market, favoring increased demand,” Queiroz added.

Global soy meal production is expected to grow mainly because of a strong economic outlook for Southeast Asia – the largest soy meal importer region – with rising meat production and consumption leading to higher soy meal imports, BCR’s Guido D’Angelo said.

The USDA forecast global soy meal imports at 67.41 million tonnes in 2023-2024, up by 7.1% year on year, with Southeast Asian countries expected to show a 6.2% increase in imports.

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Most of the producers who requested the protection, 35 are “big producers.”

“The number of judicial recoveries seems small when we consider the number of rural properties in Brazil, but the speed at which these requests have been growing quarter by quarter is worrying,” Marcelo Pimenta, Head of Agribusiness from Serasa Experian said in a statement.

Climate and economic challenges

In addition to climate issues, which have caused crop failures in various regions and increased management challenges, the economic scenario, both domestic and international, has made it difficult to maintain financial stability, he added.

The rise in requests was expected due to difficulties in accessing credit and rising interest rates while farmers were leveraged and optimistic after successful harvests in previous crop years.

“It’s not surprising to have some producers in need of [bankruptcy protection], a lot of producers will have to turn to that mechanism this year whether due to management problems or crop failures. The surprise is the volume, the speed and the timing of their appearance – even before the harvest is over,” André Pessôa, president of local consultancy Agroconsult, told Fastmarkets Agriculture.

According to the bankruptcy protection monitor developed by the Brazilian consultancy RGF Associados, in the last quarter of 2023, 53 soybean producers had received bankruptcy protection, seven producers less than the 60 farmers who received bankruptcy protections in the third quarter of 2023

Among corn producers, the number was steady at 10 producers over the past three quarters of 2023.

“The index of bankruptcy protection in the soybean and corn sectors should remain at a high level because the sectors have a relatively high rate of companies in recovery compared to others, therefore the scenario should not change so quickly as to reach the national average,” Roberta Gonzaga, a consultant specializing in restructuring at RGF, said, noting the number of cases will remain high in the first and second quarters of 2024.

Bankruptcy rate has been decreasing over the last three quarters

In Brazil, for every 1,000 companies active in all economic sectors, 1.85 are under bankruptcy protection, while for every 1,000 companies active in soybean production in Brazil, 9.7 were in bankruptcy protection in the last quarter of 2023.

Although high, this rate has been decreasing over the last three quarters, Gonzaga said.

Back in 2019, a similar pattern happened and since then, the law regarding bankruptcy protection requests has changed so that a document called a Cédula de Produto Rural (CPR), in which the producer agrees to deliver a determined amount of product to a buyer and to get credit to pay for production costs in return, is not required.

A CPR is the main private instrument to finance agribusiness in the country.

However, some producers are filing suits requesting these financial securities to be considered as part of the bankruptcy protection, allowing them not to deliver the products traded.

“As margins have fallen and are likely to remain lower, the risk for credit givers is likely to be higher, which naturally restricts the credit market. If you add the trivialization of the use of this tool, you increase the risk factor even more and therefore restrict credit even more”, Pessôa added.

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In the same month last year, soybean exports amounted to 13.2 million tonnes.

The average shipment volume per working day was 605,881 tonnes last week, up 5.2% compared with the 575,712 tonnes seen a year earlier.

Brazil’s grain exporters association Anec has pegged soybean shipments at 12.5 million tonnes in March.

Wheat exports

Brazilian wheat exports reached 416,656 tonnes in the first week of March, while in the same month last year, exports amounted to 607,935 tonnes.

Anec projects wheat shipments at 613,973 tonnes this month.

The daily average shipment rate amounted to 69,442 tonnes last week, 162.7% above the 26,324 tonnes registered in March 2023.

Corn exports

Brazil exported 173,714 tonnes of corn in the first week of March, while in the same month last year shipments totaled 1.3 million tonnes.

The estimate is already higher than the 146,783 tonnes Anec projected for the whole month of March.

Average daily shipments of corn reached 28,952 tonnes in the past week, 50.1% below the 58,054 tonnes seen in the whole month in 2023.

Soybean meal and soybean oil exports

Brazil’s soybean meal exports reached 616,752 tonnes in the first week of this month, while March 2023 exports amounted to 1.9 million tonnes.

The average export rate per working day was 23.4% higher last week at 102,792 tonnes versus the 83,268 tonnes average for the whole month last year.

Anec expects Brazil’s soybean meal exports to hit 1.2 million tonnes in March. 

The country’s vegetable oils and fats shipments, composed mostly of soybean oil, reached 14,607 tonnes in the first week of the month compared to 243,550 tonnes exported in March 2023.

The average shipment pace per working day was 2,618 tonnes,  down 79.5% from the 10,589 tonnes average from March last year. 

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In January, Conab forecasted the soybean crop at 155.2 million tonnes, while corn output was estimated at 117.6 million tonnes.

The new estimates landed within the market estimates, which ranged from 147.4 -153 million tonnes for soybeans, but were lower than expected for corn, as the market participants projected then at 116.3 – 117.8 million tonnes.

“The weather in the main producing regions, especially for soybeans and summer crop corn, has been negatively affecting crops, and the delay in soybeans sowing is likely to have an impact on planting the second corn crop,” Conab said.

That said, the country’s total oilseeds and grain production dropped by 2.2% to 299.7 million tonnes, from last month’s 306.4 million tonne estimates.

The figure is 6.3% lower than the 319.8 million tonnes record crop harvested in 2022/23.

The country’s planted area was slightly reduced to 78.3 million tonnes from the 78.7 million hectares projected in January, a 0.6% monthly decline and 0.3% below the 78.5 million hectares sown in 2022/23.

Soybean production

Brazil’s soybean output estimate is 3.4% lower than 2022/23’s 154.6 million tonnes record crop.

The figure dropped 7.8% when compared to the initial 162 million tonnes forecast.

“The delay in the start of the rains in the Center-west, Southeast and Matopiba regions, followed by irregular and poorly distributed rains, records of dry periods for more than 20 days, as well as high temperatures, are hurting crop development,” Conab said.

The country’s planted area projection dropped by 0.4% to 45 million hectares from last January’s 45.2 million hectare forecast.

Still, the sown area is 2.3% higher than the 44.1 million hectares from 2022/23.

Yield estimates were trimmed by 3.4% on the month to 3,314 kilos per hectare from the previous 3,431 kilos per hectare projection, a 5.5% year-over-year decline.

Conab trimmed Brazil’s 2024 soybean export estimates to 94.1 million tonnes from January’s 98.45 million tonnes forecast, which represents a 4.3% year-on-year drop.

Brazil’s 2024 soybean crushing estimates were also cut by 1 million tonnes to 53.3 million tonnes when compared to the previous report forecast.

Despite the reduction, the estimates remain above the 52.1 million tonnes crush from 2023.

The soybean meal production forecasts for Brazil also declined to 41 million tonnes versus the 41.1 million tonnes projection from the January report.

In 2023, soybean meal output amounted to 40.6 million tonnes.

Soybean meal 2024 exports forecast remained unchanged at 21.5 million tonnes, down from 22.6 million tonnes in 2023.

Conab also kept its soybean oil output estimates unchanged at 10.7 million tonnes in 2024, versus last year’s 10.5 million tonnes.   

Soybean oil 2024 export estimates were also unchanged at 1.5 million tonnes while in 2023 shipments totaled 2.3 million tonnes.

Corn production

Conab’s new estimates for Brazil’s corn crops output are 13.8% lower than last year’s 131.9 million tonnes record crop.

The summer crop production is now seen at 23.6 million mt, down 3.2% from January’s 24.38 million tonne forecast and 13.8% below the 27.37 million tonnes harvested in 2022/23.

“Summer corn crop, which accounts for 20.8% of total production, faced adverse situations such as high rainfall in the south of the country and low rainfall in the center-west, accompanied by high temperatures, among other factors”, Conab said.

Second crop safrinha production was also trimmed to 88 million mt, a 3.4% drop from the 91.2 million tonnes estimates from January.

That is a 13.9% decline when compared to the 102 million tonnes harvested in the last crop.

Brazil’s total corn crop area was cut by 2.7% to 20.4 million hectares from last month’s 21 million hectares estimates, an 8.2% drop from 2022/23’s 22.26 million ha.

The summer crop area was slightly reduced to 3.9 million ha, a 0.9% loss from the previous estimate, but down 11.5% from 2022/23’s 4.4 million ha.

The second corn crop safrinha is now seen at 15.8 million mt, a 3.3% decline from last month’s 16.4 million hectare forecast and 7.6% lower than the 17.2 million hectares sown in 2022/23.  

Brazilian 2024 corn export estimates were cut to 32 million tonnes from last month’s 35 million tonnes projection, compared to a record 55.5 million tonnes shipment in 2023. 

“That is explained not only by the update in the output estimates but is also influenced by the higher supply on the international market, amid the good North American harvest,” Conab said.

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