Brazil and Argentina top the list for 2017
Of all the regions of the world U.S. row-crop producers should watch in 2017 because of export opportunities or competitive challenges, Brazil and Argentina top the list. That’s according to Sterling Liddell, vice president, Rabo AgriFinance.
“We’re really at a pivot point,” Liddell says. Brazil is expected to increase corn acreage about 5% to 10%, while soybean acres could contract between 1% and 3%.
As of late October, Brazil was ahead of schedule on soybean and first-crop corn plantings with 18% completion of soybeans compared to 13% a year ago and 60% planted for corn compared to a 45% historical average, says Daniel Whitley, deputy administrator for the Office of Global Analysis at USDA’s Foreign Agricultural Service. Total corn production for the 2016/17 season is estimated at 83.5 million tons, up 6% from a year ago, he says. Slightly more acreage is expected for the second-crop safrinha corn crop.
In Argentina, economic reforms continue with the reelection of President Mauricio Macri and could shape future trade. “Any change could be fairly big because most world stocks of soybeans are in Argentina,” Liddell says. Soybean planting begins in November with estimated production of 57 million tons. “These policy shifts have been favorable to production,” he says.
Meanwhile, the country’s corn planting is 32% complete compared to 28% this past year, Whitley adds, with 2016/17 production projected at 36.5 million tons. Liddell says Argentina is set to increase corn acres nearly 30% from a year ago.
What Does It Mean To Me?
• Corn production and policy changes are key issues in South America.
• Wheat quality is poor worldwide, meaning a good crop could bring premiums.
• Mexico continues to strengthen its agricultural trade position with the U.S.
The two South American countries are also important to the livestock industry. USDA announced Aug. 1 it will resume exports of U.S. beef to Brazil. Separately, USDA’s Food Safety and Inspection Service announced beef from Brazil may safely be imported into the U.S. because it meets food-safety standards. There’s also movement underway to begin importing beef from some Argentina regions that are free of foot-and-mouth disease.
Elsewhere in the world, issues such as crop quality, consumer demand and foreign relations will continue to shape the trade outlook for U.S. farmers. Here’s a look at some of the regions that will capture farmers’ attention in the year ahead.
Australia. Cotton producers have seen an abundance of rainfall in recent days, filling irrigation reservoirs. This will encourage dryland planting, which began in October, Whitley says.
Canada. Wheat quality is a primary concern in this country, as it is throughout much of the world for the 2016 crop. Quality overall has been fairly poor, Liddell says. If next year’s winter wheat crop comes off the field with higher protein and milling quality than the U.S. crop, it would put American farmers at a competitive disadvantage.
China. The country gets most of its corn and wheat out of the Black Sea region, but its decision to begin exporting its own corn for the first time in 10 years bears mentioning, Liddell says. China has large corn stocks, much of which likely are of limited quality. Pricing also is an issue. China’s corn costs $250 per metric ton on the global marketplace, compared to $165 per ton out of the Gulf of Mexico and between $170 to $185 per ton in other countries, Whitley says. “They’re really priced out of the market at those levels,” he says.
France and Germany. As in Canada, wheat quality in countries such as France and Germany has proven to be less than optimal this year. A substantial amount will be used in feed and blended away, Liddell says. “That will keep putting pressure on U.S. wheat types,” he says. “The hard red spring trade versus the hard red winter trade could get even stronger because of those issues.”
Indonesia. Consumer buying patterns are top of mind in this country, which has increased grain imports in recent years. The question now is whether those imports from countries such as Canada will grow or whether Indonesia will move to more of a protein-feeding model, Liddell says. “They take more and more grain off the market, which is why it’s important,” he explains.
Mexico. The U.S. neighbor is quickly becoming its most important agricultural trade partner, Liddell says. “They import a substantial amount of corn and wheat,” he says. “They will feed a substantial amount of wheat, and they also mill quite a bit of wheat.” Protein is also becoming an even more important part of consumers’ diets, particularly where pork and poultry are concerned. “Pork is quickly becoming the champion meat in Mexico,” Liddell explains. “It’s a little bit of substitution with beef because beef prices were high and their beef herd has been depleted, to some extent. Pork is a better substitute in their diet, but poultry continues to expand from
an economics perspective.”
South Africa. Corn production will be 65% higher compared to year-ago levels because the country is rebuilding after one of its worst droughts on record, Whitley says. Planted acreage is expected to improve from the past season, and yields will also improve.
Thailand. Planting of dry-season irrigated rice, which goes into export channels, begins in November. The Thai government has removed its ban on irrigation, Whitley says, and reservoirs have ample water. Acreage is expected to increase 130% from year-ago levels, bringing it up to the country’s five-year average for acreage.
Ukraine. Excellent soils sustain strong crops in Ukraine and other countries surrounding the Black Sea. Yet historically, several highly productive years are followed by some kind of setback, Liddell says. “That could be an issue as we become more and more dependent on the Black Sea globally,” he says. Ukraine has ramped up corn production. Its all-wheat crop for 2016/17 is expected to be its second-largest in the past 20 years at 20 million metric tons, Whitley adds. Neighboring Russia will have a record 72-million-ton wheat crop, while Kazakhstan will have its third-highest crop in that period at 16.5 million tons.
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