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How much of Brazil’s grain production washed away?

Ag Marketing IQ: Flooding in Brazil dropped 2023-’24 production and June WASDE and Conab reports may flow decreases into 2024-’25 grain estimates as well.

Cesar Cruz, Director of research

June 4, 2024

4 Min Read
Map of Brazil with flag
Getty Images/iStockPhoto

Unprecedented rains affected Rio Grande do Sul (RS), the southernmost state in Brazil, in April and May, and have already caused losses in 96% of the municipalities in the state (475 out of 497). According to state government data, as of June 3, nearly 2.4 million people were affected by floods and landslides, almost 600,000 were displaced, and 172 had died.

Figure 1 shows historical precipitation in Santa Maria, a city located in the central part of Rio Grande do Sul, a region highly affected by floods and an important agricultural producing area. Each boxplot represents monthly cumulative precipitation in Santa Maria since 2000. Each part of the boxplots indicates precipitation quantiles for each month during 2000-‘24 (including minimum, 25%, 50%, 75% and maximum).

In May 2024, cumulative rainfall in the city was 617.1 mm (24.3 inches), which is more than four times the average for the month, a record high.

Graph of Brazil precipitation

Soybean and livestock production disrupted

The problem in Rio Grande do Sul is still recent and seems to have a higher impact on soybean and livestock production. With that said, market participants have been discussing the consequences of the flood in RS and how it will affect Brazil’s corn and soybean supply and demand.

As Brazil is one of the largest corn and soybean exporters in the world, will the tragedy impact trade flows and international prices?

It seems a bit early to fully answer any questions, as the extent of the damage is still uncertain. It may take several more weeks or months before the local government and other agencies complete their loss calculations for soybean bushels as well as hogs, chickens, beef and dairy cattle, etc.

The water level is still retreating in Porto Alegre, the state capitol, but a regional affect on the country’s balance sheet is very likely to occur. Possible impacts on trade and international prices also are possible, given the importance of the state for Brazil’s agriculture.

According to Conab, Rio Grande do Sul is the second-largest soybean producer in Brazil, only behind Mato Grosso. In its May supply and demand report, Conab estimated RS’s soybean production at 21.43 MMT in 2023-‘24, which is 14.5% of the country’s expected production, and nearly half the production in the southern states. RS is also the main biodiesel-producing state in Brazil, with a high use of soybean oil and animal fats (Abiove and ANP).

Soybean harvest progress in RS was 60% complete during the week ending April 28 (Conab). In the same week, the National Institute of Meteorology issued an alert of severe thunderstorms in the state, and weather conditions worsened significantly after that.

Impacts on grain production

Considering Conab’s May production estimates for the 2023-‘24 market year, on May 5, nearly 1.7 million hectares were still left to be harvested in RS, which corresponded to 5.3 MMT of soybeans (211 mbu).

Initial estimates in early May suggested a possible 1.50 MMT (59.05 Mbu) soybean production loss in the state. A few weeks later, market participants had already doubled their estimates to 3 MMT (118.1 Mbu), which also included losses in storage facilities and quality.

Even though those numbers do not seem impressive compared to Brazil’s estimated production for 2023-‘24 (Conab at 147.7 MMT, and USDA at 154 MMT), production losses and logistics issues in Rio Grande do Sul will likely affect the country’s domestic supply and demand dynamics, and potential effects may spill over into other markets.

Additionally, the impact of recent weather issues in RS may also affect the state’s corn, rice, soybean, wheat and livestock production next year. Due to several restrictions (financial, equipment losses, unutilized land, etc), several producers in the state may not be able to fully recover before planting begins in springtime in Brazil, which is late September and early October.

This may cause cuts in Brazil’s estimated corn and soybean production and exports in the 2024-‘25 marketing year.

Conab and the USDA will face several challenges trying to measure the current and future impacts of the floods in Rio Grande do Sul on Brazil’s production and how that will potentially affect prices and trade flows. Both agencies may show new numbers in their June monthly reports to be released next week, with the WASDE scheduled for June 12, and Conab for June 13 (Conab already reduced its 23/24 soybean production estimate in RS by 0.457 MMT (18 Mbu) last month).

In the meantime, we all hope that the population of Rio Grande do Sul will recover well from this tragedy.  

Contact Advance Trading at (800) 747-9021 or go to www.advance-trading.com.

Information provided may include opinions of the author and is subject to the following disclosures:

The risk of trading futures and options can be substantial. All information, publications, and material used and distributed by Advance Trading Inc. shall be construed as a solicitation. ATI does not maintain an independent research department as defined in CFTC Regulation 1.71. Information obtained from third-party sources is believed to be reliable, but its accuracy is not guaranteed by Advance Trading Inc. Past performance is not necessarily indicative of future results.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress.

Read more about:

BrazilWeather

About the Author(s)

Cesar Cruz

Director of research, Advance Trading Inc.

Prior to joining ATI in January of 2022, Cruz spent 15 years working in the university setting as an Economics Professor, Research Scholar and University Consultant. As a University Consultant, he worked closely with agricultural producers. During his tenure as a professor, he taught undergraduate and graduate courses in fundamental subjects associated with Risk Management at the Federal University of Sao Carlos and the University of Illinois at Urbana-Champaign. Cruz earned a PhD in Applied Economics from the University of Sao Paulo, a Master of Science in Applied Economics and Bachelor of Science in Economics from the Federal University of Vicosa.

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