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JP Morgan_Farming_Sep_2010



Brazil's Soybean Farming Outlook 2010/11

Brazil's Soybean Farming Outlook 2010/11
Presentation at the JP Morgan Latam Agribusiness Conference in São Paulo -
Sep, 2010.



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JP Morgan_Farming_Sep_2010 Presentation Transcript

  • 1. Brazil’s Soybean Production Almanaque Aprosoja Outlook September, 2010
  • 2. Government Policies
  • 3. Brazilian Environmental Legislation Parks and Indian Reservations Private Farms APP Legal Reserve Indian Reservation State Park National Park Impact of Preservation Policies in Brazil 1- Parks and Indian Reservations 2.294.343 km2 27% 2- Legal Reserve 2.685.542 km2 32% 3- Permanent Preservation Areas (APPs): 1.442.544 km2 17% TOTAL PRESERVED AREA: 6.059.526 km2 71% TOTAL REMAINING AREA -BRAZIL 2.455.350 km2 29% 8.514.876 km2 100% Source: Embrapa
  • 4. New Forestry Code – Key Points Area Proposal Legal Forest Reserves % of 80%, 35% and 20% remains unchanged Small farms (up to aprox 300 hectares) exhempted (% of Tree cover in Areas of permanent preservation can count as legal forest Farms) reserves Riparian vegetation, steep slopes and hill tops remain preserved APPs (Areas of Area of APP will now count to form % of legal forest reserves Permanent Reduces from 30m to 15m requirements of riverbank cover in Preservation) small rivers Farmers who cleared farms before Jul/08 will not need to replant in Regularization of the same area. They will be able to use collective areas/parks. current farms Farmers who cleared land when it was allowed will be legal now Moratorium 5 year moratorium in forest clearing for agriculture Land registry reform and state zoning are also priorities that will contribute to a better business environment and preservation.
  • 5. Farm Credit – Opex Financing Credit limits need to be different for regions with different scales of production (2009/10) % Area Average Area Cost of State Official Credit Limit Planted with (hectares) Production Rural Credit Paraná - PR R$ 450.000,00 300,00 R$ 1.161 129% Mato Grosso - MT R$ 450.000,00 1.200,00 R$ 1.483 25% Soybean Operational Exp Funding - PR Soybean Operational Exp Funding - MT Banks Banks 11% 42% Source: Aprosoja/ Agroconsult 2009/10
  • 6. Summary – Public Policies Positive Negative - New Forestry Code - Credit access and cost of credit - Minimum price program (PEP, PEPRO) - Farm Debts problem unsolved for cotton and corn - Rural Insurance still not effective - Biotechnology approvals (RR2BT) - Bureaucracy in infrastructure investments - Capex Funding (BNDES) - Exchange Rate –Overvalued BRL - PAC (Infrastructure) - Restrictions to foreign investment of land - Biodiesel program - Land registry and documentation - Kandir Law
  • 7. Soybean Production in Mato Grosso
  • 8. Cost of Production COST OF PRODUCTION - SOYBEANS Land Use in Brazil Land Use in Brazil SEP 2010 SEASON 09/10 10/11 % Total % Change 1. INPUTS (R$/ha) R$ 956,97 R$ 768,38 61% -19,7% Seeds R$ 123,61 R$ 116,00 -6,2% Fertilizers R$ 482,31 R$ 387,50 -19,7% Chemicals R$ 351,05 R$ 264,88 -24,5% 2. FARM OPERATIONS (R$/ha) R$ 186,34 R$ 176,30 14% -5,4% 3 - OTHER COSTS (R$/ha) R$ 360,30 R$ 315,17 25% -12,5% TOTAL COST R$ 1.503,61 R$ 1.259,85 -16,2% (ex. Land and Depreciation) USD 729,91 USD 707,78 -3,0% Exchange Rate crop 09/10 @ R$ 2,06/US$ and crop 10/11 @ R$ 1,78/US$ Source: iMEA
  • 9. Hedge Position as of September 15, 2010 Soybean Comercialization Status – Mato Grosso PLANTING HARVEST Source: IMEA – Elaboration - Aprosoja
  • 10. Farm Financial Summary – Projeto Referência (R$/ha) Data from the PROJETO REFERÊNCIA of Aprosoja 47 Farms Monitored 80 k Hectares of Soybean 23 k Hectares of Corn 2nd Crop This project is not aimed to be the average of the state, but a reference to farmers and researchers. Source: Projeto Referencia - Aprosoja
  • 11. Farm Financial Summary – Projeto Referência (R$/ha) Gross Margin Soybeans EBITDA Gross Margin Corn 2nd Crop 38% SG&A For the season 2010/11 it is predicted an increase of 61% of the EBITDA due to both price increase and direct cost reductions Source: Projeto Referencia - Aprosoja
  • 12. Points to Watch in the 10/11 Season La Niña. Planting in Mato Grosso delayed for 3 weeks at least. This Weather Risk could effect 2nd crop yields and also transportation costs. Concern for drought later in the season in the south of the country (RS), where weather yields have been good for last two years. Around 56% of Brazils corn will be GM this season only in the third season after approval and 75% of RR soybeans. Corn has 9 GM events GM Technology with approved cultivars, while soybeans so far only have RR, even though there are 5 events approved, including the recently BTRR2 Restrictions on New interpretation of an old law (Lei n° 5.709/71) is creating uncertainty in Foreign Ownership of the market. This interpretation states that brazilian companies with foreign Land ownership should be treated as foreign co. The 20 largest producers in Mato Grosso planted 3 million acres (up Consolidation Trend from 1.3 mln acres five years ago) and were responsible for 20% of soybean output. (Source: IMEA)
  • 13. Soybeans - Area and Production Projections in Brazil Brazil Mato Grosso CAGR 2.44 % CAGR 4.92% Source: Agroconsult (Brazil) and IMEA (Mato Grosso)
  • 14. Biotechnology GMOs Approved in Brazil Adoption of Biotech-enhanced Soybean Seedstock 99% 91% 80% 72% Soybeans GMO soybeans planted before 2005 were brought into Brazil illegally from Argentina. Source: CTNBio, Soystats 2010, Agroconsult (Brazil data)
  • 15. Biotechnology GMOs Approved in Brazil Adoption of Biotech-enhanced Corn Seedstock 99% 91% 80% 72% Corn Source: CTNBio, GMO Compass, Agroconsult (Brazil data)
  • 16. Pasture Conversion - Source of Area Growth There are 170 MM hectares of Pastures n Brazil Pasture Conversion Incentive Index – Mato Grosso Bags (60kg) / hectare 170 Million hectares Cattle Opportunity Cost Convertion Costs (20%) Operational Costs (ex Inputs) Input Costs Source: Aprosoja
  • 17. Socio-Environmental Responsibility
  • 18. Marcelo Duarte Monteiro CEO marcelo@aprosoja.com.br