South America Ready to Become 'Export Powerhouse'

November 7, 2016 01:42 PM

South America’s massive increase in soybean and corn production and yields has turned the region into an export powerhouse that is helping to set the price of commodities, according to analysts.

“South America produces one and one-half times more soybeans than the U.S. It is the hemisphere that makes the [soybean] market,” says South American grains analyst Michael Cordonnier, with Soybean and Corn Advisor.

Depending on the year, Brazil or Argentina is now the world's No. 2 or No. 3 corn exporter, he observed.

Soybean production has soared 260% in Brazil and 450% in Argentina over the last 20 years, according to a study by the University of Illinois at Urbana-Champaign.

“Yield and production in those two countries have become increasingly important in determining the price of corn and soybeans as production and exports have expanded rapidly,” commented the authors of the study, written by economists Darrel Good, Todd Hubbs and Scott Irwin.

Brazil and Argentina’s corn production jumped 120% and 80%, respectively, over the same time period.

South American yields also have soared for both crops.  

Brazil soybean yields rose from 31.1 bu. per acre to 43.3 bu. per acre, while Argentina’s increased from 32.9 bu. per acre to 43.4 bu. per acre over the last 20 years, according to USDA. Brazil and Argentina corn yields soared from 37.8 bu. per acre to 66.8 bu. per acre, and from 65.5 bu. per acre to 127.5 bu. per acre, respectively, over the same time period, USDA figures showed.

The increase in South American production is “almost all due to increased acreage," according to  Cordonnier.

The acreage growth appears to be slowing, however. Brazil soybean acreage, for example, went up 2% this year, compared to past years when it increased by as much as 10%, Cordonnier says.

Less than 1% of increased soybean acres come from illegally cleared land in the Amazon rain forest because of a ban by grain processors on purchasing those soybeans, according to Cordonnier.

Argentine farmers have switched rotations and turned former pasture  land into corn and soybean acres, he says. They also are expanding corn acres in northern Argentina, he says.

“The vast majority of increased production is driven by Brazilian and Argentine farmers,” Cordonnier says. “There is a very small amount of foreign investors."

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