To help feed the world’s growing population, Brazil has its eyes set on much higher grain yields. Through genetically engineered seeds, double cropping, market changes, and exchange rates, Brazil could emerge as one of the top exporters of corn and other grains.
Brazil’s current corn crop production is about 1/10th the size of the U.S. Of the corn produced, 80% is kept for domestic use and the other 20% is exported. After the approval of genetically engineered seed last year in Brazil, farmers will be able to produce much higher yields and broaden Brazil’s export market.
Genetically engineered corn seeds made up about 30% of Brazil’s corn crop this past year while next year, 50% of the crop could be GE corn. Genetically modified corn should boost yields by an average of 15-20% while lowering chemical costs, making way for more fertilizer. Higher fertilizer use could boost yields even higher.
Brazil will also produce more corn is as more are planted. Brazil’s second crop planting area is expanding to increase production. About one third of the normal crop area could be double cropped. This year, the areas that are double cropped are 50% greater than last year.
The Asian rust disease, Ug99, made this all possible. Because of Asian rust, Brazilian farmers plant shorter cycle soybeans which allow for another corn season to fit into their rainy season from September to May. Double cropping is a risky operation though. The risk increases for drought, frost, and poor grain prices; which could make or break an entire crop.
Brazil will also gain market share of corn exports as Argentina is producing significantly less corn due to droughts. According to Steve Cachia, analyst for Cerealpar, “Argentine farmers are seen shifting away from corn even more next season as capital is scarce. Brazil could gain even more space on the international market as many importers no longer trust Argentine supply.” Brazil’s export market is expanding to Asia as well, which has eased the pressure from European producers.
The final reason lies in the exchange rate of the Brazilian Real. Currently the exchange rate is at roughly 1.75:1 with the US Dollar. If the Real weakens, exports will be hurt, but if the Real strengthens, corn exports may increase even more.
Brazil’s grain future is very bright. While their current yields are significantly lower than US yields (50 bushels per acre versus roughly 160 bushels per acre in the U.S.), Brazil’s yields will increase substantially as more genetically engineered seeds are used. Once technology is caught up in Brazil, their yields and exports will undoubtedly increase.
Read more about farmland and agriculture at Farmland Forecast.
Disclosure: No Positions