By Reese Ewing
SAO PAULO, July 3 (Reuters) - Hopes in Brazil's distressed
poultry and pork industry that record-high corn prices will lure
farmers to sow more of the feed grain may be squashed by soaring
soybean prices, potentially prolonging the crisis and boosting
prices for longer.
Farmers will increase acreage dedicated to corn in the
September planting season for the first time in almost a decade,
but soybeans will account for the bulk of Brazil's grain
expansion, an informal poll of nine analysts, traders and
agronomists by Reuters showed.
Summer corn acreage will rise only 3 percent next season to
5.6 million hectares when planting starts in September. On
average, acreage has contracted by 6 percent over the past five
years.
But experts estimated that Brazil's soybean area will grow
by 3.5 percent to 34.3 million hectares, according to the
results of the survey.
In the winter planting season in early 2017, acreage for
corn will increase by 771,000 hectares, or 7.5 percent, to 11.05
million.
While it's still early before the summer planting season and
farmers may tweak plans, the meager increase in corn acreage may
not be enough to help replenish domestic supplies that have
almost run out this year as exporters have shipped more abroad.
That will likely keep corn prices elevated at nearly record
highs, even as global prices languish amid a growing glut,
increasing stress on big meat companies like BRF SA BRFS3.SA ,
JBS SA JBSS3.SA and Marfrig SA MRFG3.SA . Many have curbed
output or closed plants due to soaring feed prices.
For big rival exporters like Argentina and the United States
though, it offers a much-needed chance to sell excess grain to
Brazil's hungry livestock industry.
Even though corn prices remain near record highs at above 30
reais ($9) a bag, a nearly 3-percent increase in production
costs due to higher seed prices in Brazil's top grain state of
Mato Grosso will erode the crop's appeal, experts said.
Production costs for soybeans, however, have fallen nearly 5
percent, Aedson Pereira, grain analyst at Informa FNP, said.
Higher forward sales of the 2016/17 crop suggest farmers are
preparing to sow a bigger soy harvest too.
By May, producers had sold an estimated 18 percent of the
2016/2017 soy crop, surpassing the previous 2012/13 record of 15
percent. On average, producers sell less than 7 percent of the
coming soy crop by May.
Brazil was forecast earlier in 2016 to harvest a record 58
million tonnes of winter corn that's currently being harvested,
but dry weather has reduced output to just under 50 million,
down from 54 million last year. Some regions suffered crop
losses of 60 to 70 percent.
The soy crop was also expected to approach a record 100
million tonnes, but came in lower than last year at 95.6
million, down nearly 1 percent.
Adding to the uncertainty for grain farmers will be a shift
in global weather patterns to La Niña, which is associated with
the cooling of Pacific surface temperatures and tends to mean
drier weather on Brazil's grain belt, Phillipe Mello at the
logistics, storage and trading firm NovaAgri said.
"In the face of greater unknowns, and especially the
weather, farmers tend toward default decisions, which in our
case is soybeans," Mello said.
POLL: BRAZIL'S SOY AND CORN AREA EXPANSION AS PCT
2017/2016* 2015/2016 5-YR AVG
SOYBEAN CROP 3.5 3.4 6.5
AREA
CORN AREA 3.0 (11.0) (5.7)
SUMMER CROP
CORN AREA 7.5 7.6 7.0
WINTER CROP
* ESTIMATE OF MEDIAN BY NINE ANALYSTS, AGRONOMISTS, TRADERS
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Graphic on Brazil's corn crisis http://tmsnrt.rs/1WgDNwB
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