Brazilian Agribusiness outlook in 2009/10


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Presentation on the current outlook for the key sectors of the Brazilian agribusiness. Presentation elaborated in November 2009

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Brazilian Agribusiness outlook in 2009/10

  1. 1. Brazilian Agribusiness Outlook2009/10<br />by Anderson Galvão<br />November, 2010<br />
  2. 2. Agenda<br />The business environment<br />The soybean sector<br />The corn sector<br />The cotton sector<br />The sugar & ethanol sector<br />
  3. 3. Soon after the world economic down turn, it was observed a speedy recovery in the Brazilian economy<br />Investment grade by Moody’s<br />Investment grade by S&P<br />Source: Brazilian Central Bank/Bovespa Elaboration: Céleres<br />
  4. 4. Brazilian Ag Trade BalanceThe agricultural sector plays a major role in the local trade surplus<br />In spite of a downturn in the world economy, the Brazilian agricultural sector will sustain the country trade balance<br />Even though, the net surplus in 2009 is going to be 4.5% lower than in 2008<br />Meats and timber products were the big losers in 2009<br />Ag trade balance in 2008 (US$ billion)<br />US$ 57.1<br />Brazilian trade balance (US$ billion)<br />Main changes in 2009 (Jan-Sep) x 2008<br />Source: Brazilian External Trade Secretariat Values in US$ billion<br />
  5. 5. Although a major agricultural producer, Brazil has a secondary position as consumer and producer of fertilizer, being a net importer<br />Under this condition, the country ends up being a price taker in the fertilizer and its raw material international market<br />N<br />(Amônia)<br />Phosphate<br />Rock<br />KCl<br />Source: IFA Elaboration: Céleres Base: 2008<br />
  6. 6. Brazilian nutrient supply and demand in 2008A strong dependence on the imported products and raw material<br />Source: ANDA Values of 2008 Elaboration: Céleres<br />
  7. 7. After record fertilizers inventories in 2008, lower imports will bring the 2009 inventories to an affordable level to the companies<br />Source: ANDA Elaboration and forecast: Céleres Values in million t<br />
  8. 8. A constrained income will limit a higher fertilizer consumption in 2009/10 crop year<br />Projection<br />Source: ANDA Elaboration and projections: Céleres Values in million t<br />
  9. 9. The farmer income presented a slightly recovery in the last couple of months but it is still 7.5% below its peak in late 2007<br />Source: Instituto de Economia Agrícola (IEA-SP)<br />Base 100: August/1994<br />
  10. 10. Investment in the Brazilian farming businessInstitutional investors resume their strategies in the Brazilian Ag<br />New crop land availability in Brazil<br />After the widespread disruption in FDI1/ business in the second semester of 2008, institutional investors are gradually resuming their activity in the Brazilian agricultural market place<br />They aim to capture the potential valuation of hard assets like farmland and timberland<br />Distressing situation might create opportunities for M&A deals among those players<br />Land value in Brazil (,000 R$/hectare)<br />Source: CONAB/Céleres 1/ Foreign direct investment<br />
  11. 11. Logistic investment has the ability to push agricultural production in the new agricultural areas of Brazil<br />Soybean planted area in Mato Grosso (value in million hectares)<br />Santarém<br />Cargill<br />1.0 M t<br />Source: CONAB/Céleres Elaboration: Céleres<br />
  12. 12. Yield improvement has been one of the main driver for the grain production growth in Brazil<br />Throughout the last twenty years, the Brazilian grain production grew at 4.6% per year<br />In the meantime, the planted area grew 1.2% per year, presenting significant improvement in the yield from the major crops<br />Assuming the same yield levels of the early 1990’s it will be required a total planted area of 94.6 million ha to assure the current grain production<br />Brazilian total grain production<br />Source: CONAB/Céleres<br />
  13. 13. Soybean production in BrazilSteady acreage due to income and credit constraints<br />Brazilian soybean production<br />The current crop is going to face income problems as the strengthening of the local currency will limit the profitability <br />On the farm side, the current crop condition is likely to provide reasonable yield levels in the main growing areas<br />A consolidation process is yet in course with individuals and corporations looking to increase their scale of production<br />Soybean Complex Exports (US$ billion)<br />Crush capacity in Brazil (,000 t/day)<br />144.7 <br />thousand t<br />Source: CONAB/SECEX/Céleres<br />
  14. 14. Corn production in BrazilLimited liquidity in the domestic market hit hard summer crop acreage<br />Brazilian corn production<br />The corn production growth in Brazil has been sustained by significant yield improvement <br />2009/10 crop year is the second crop with biotech corn being deployed by local farmers<br />The export market playsa key role in promoting a sustainable growth to the local production<br />Corn Exports in Brazil (million t)<br />Main buyers in 2008<br />6.4 M t<br />Source: CONAB/SECEX/Céleres<br />
  15. 15. Cotton production in BrazilLack of credit hurt the cotton production in the last two crop years<br />Brazilian cotton production<br />From the row crops cotton was the most affected due to the world economic down turn<br />Lack of credit for working capital resulted in the smallest planted area since 2003/04<br />The recovery in the international market will be determinant to bring back new investments in this crop<br />Cotton Exports in Brazil (,000 t)<br />Main buyers in 2008 (,000 t)<br />532.9 K t<br />Source: CONAB/SECEX/Céleres<br />
  16. 16. Sugar production in BrazilInternational prices have been helping brown field projects<br />Brazilian sugar production<br />Higher prices for sugar in both international and domestic market have being helping the brown field sugar cane projects<br />As a main consequence a new consolidation game is already in place among the key players<br />Everybody is looking for scale of production and competitiveness<br />Sugar Exports in Brazil <br />Main players (% of sugar milled in 2009)<br />Source: UNICA/SECEX/Céleres<br />
  17. 17. Ethanol production in BrazilDomestic market is still being the backbone of ethanol sector <br />Brazilian ethanol production<br />While the long run points to the overseas market the domestic market is the most important source of income to the ethanol companies in Brazil<br />Almost 100% of new car sales in Brazil are flex fuel cars which promote a long term demand for the ethanol locally<br />External markets still need a huge promotion across the world<br />Sugar Exports in Brazil <br />Car sales in Brazil<br />Source: UNICA/SECEX/Céleres<br />
  18. 18. The company<br />A local consulting company with a team with ten year experience in the analyze and advise of projects in the Brazilian agriculture<br />Through these year, we have done studies and analyzes in:<br />Agribusiness economic scenario<br />Project analysis for agroindustrial investments<br />Biotechnology economical and risk assessment <br />Business advisory and outsourcing in agribusiness deals related<br />We perform our analysis and studies with a agri food chain approach, with clients distributed along this value chain, from input companies up to final consumers<br />We are driven by complete dedication to our clients needs. Our activities are performed by an experienced team of advisors, under principles of integrity and discretion.<br />
  19. 19. Céleres has been providing consulting services to the key companies related to the local agribusiness<br />biomatrix<br />Alexander Farms, Inc. <br />
  20. 20. Contact<br />R. Eng. Hélvio Felice, 119<br />Uberlândia – MG – 38.411-114<br />:+55 34 3229-1313<br />: +55 34 3229-4949<br /><br /><br />Associada da Arcadia International<br />(Bruxelas, Bélgica)<br />Empresa associada<br />Membro do ISAAA<br />