MercoPress. South Atlantic News Agency

Brazil expects record crop but profit margins are down

Brazilian Agriculture Minister Reinhold Stephanes anticipated a “record 2008/09 grain crop” close to 144.5 million tons which would mark a new record, and discarded that the global financial crisis would have an impact on agriculture on the short term.

Stephanes made the announcement during the presentation of the latest Brazilian Supplies Company report, which depends from his ministry. "The crop will be between 142.03 and 144.55 million tons, compared to 143 million in 2007/08". "In six months time, when crops will be harvested we'll have a more clear scenario about the crisis and international prices, meantime we will continue to sow and if credit is short we'll provide it", Stephanes emphasized before the Agriculture and Supply Congressional Committee. "This administration is determined to ensure agriculture continues to expand, so the money needed for loans will be available" he added recalling that recently the Brazilian government extended 2.5 billion US dollars in credit farms. According to the report the area with soybeans will expand 1.3% to 2.3% (anywhere between 21.585.400 and 21.999.300 hectares) while corn and cotton will suffer reductions. Soy crop will therefore be in the range of 60.106.400 to 61.274.500 tons compared to 60.017.400 in the last season. The report also points out that because of increased costs and difficulties to obtain credit "farmers are making a more rational use of inputs, trying to take maximum advantage of the technological equipment to keep production at levels of the last few years". More over grain brokers argue that the recent devaluation of the Real helps to increase the area planted with soy, but at the same time falling commodity prices is not positive. "As in Argentina production costs have soared; many inputs such as fertilizers were acquired when prices were very high. Since then there has been a dramatic slide in grain prices which has completely modified the production equation", said Adrian Seltzer from Granar S.A. a grains broker. Seltzer also warns that "it's possible Brazil may plant more soy, since as in Argentina it's cheaper than sowing corn, but it is also highly probable that prices won't be enough to fertilize as they should or apply sufficient fungicides as they should, so a greater area does not necessarily mean a larger crop".