Feb 26 / Pedro Schicchi

Crop Forecast: Soy Brazil - 2024 02 26

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"Update on hEDGEpoint's numbers for Brazilian soybeans crop"

Brazil Soybeans - Crop Estimates Update

Right to the point

Another month and further cuts were made to the Brazilian production of soybeans. This time, however, it seems like the changes are getting smaller on a month-over-month basis.

One important divergence remains in the market. While USDA maintains a high number 156M ton (-1M ton MoM), Conab has trimmed its estimates to 149.4M ton (-6M ton MoM), which is more in line with other players. Following these important reports, we aim to update our crop number and show a bit of what is behind it. Let us give you the good stuff first: hEDGEpoint’s February crop number is 150.1M ton, down from 153.4M ton January.

One of the reasons was further consolidation of losses due to a poor start to the crop. However, weather conditions were better in January, which helped to stanch the bleeding.

Brazil Soybean - Area, Yield and Production (M ha, ton/ha, M ton)

Source: Conab, hEDGEpoint

Phenology

Soybean Brazil - Phenology in Feb-18

Source: Conab,  hEDGEpoint

During last month’s revision, we were right at the “eye of the storm”. This time, though we are not out of the woods just yet, the number of fields that already reached maturity or harvested is much greater.

Still, there is a significant share of crops in the reproductive stages. This is especially true for producing states in the extremes (Rio Grande do Sul and MATOPIBA), which plant and harvest later than others.

The consequence is that, as less crops are “at risk”, the changes in new revisions of the crop numbers should start to diminish.

Weather

Temperature Anomaly (°C from normal average)

Precipitation (mm/day on average)

Source: NOAA,  hEDGEpoint. 1H = First half

Climatic conditions in January represented an improvement over December in most regions, arguably helping to prevent further losses at the national level.

Temperatures were milder during the month, and precipitation was higher on average, though not in all regions.

As we move into February, precipitation remains favorable, though not everywhere. Amongst the two regions with the highest share of crops “at risk”, average rainfall levels through the month are better in MATOPIBA, vs Rio Grande do Sul. Hotter-than-normal temperatures continue to be the norm in this cycle.

On average, a soybean plant needs ~8 mm/day of rainfall to thrive in the reproductive stages of its development.

NDVI

Finally, the last input considered in our models is the Normalized Difference Vegetation Index (NDVI). NDVI is used to quantify vegetation greenness and is useful in understanding vegetation density and assessing changes in plant health (USGS). Though not perfect, the measure has a good correlation with yields.

Several important blocs of states in Brazil, despite being worse than last year, have remained close to the 20Y average throughout the season. Examples are Mato Grosso, Goiás, Minas Gerais, and Mato Grosso do Sul, São Paulo, and Paraná. Of course, this is true in the aggregate, but may not be true when speaking of specific regions within these states.

The extremes (MATOPIBA and Rio Grande do Sul) had a very poor start to the season but recovered once we approached January and weather conditions improved.

NDVI - Mato Grosso, Goiás, Minas Gerais

NDVI - Mato Grosso do Sul, São Paulo and Paraná

Source: NASA, hEDGEpoint

NDVI - MATOPIBA

NDVI - Santa Catarina, Rio Grande do Sul

Source: NASA, hEDGEpoint

In Summary

The gist of it is that, in our opinion, numbers are continuing to fall, and not without reason. However, better conditions have stanched the bleeding to some extent and, with a smaller share of production at risk, changes to the estimates should start to get smaller as we move forward.

Weekly Report — Grains

Written by Pedro Schicchi
pedro.schicchi@hedgepointglobal.com
Reviewed by Victor Arduin
victor.arduin@hedgepointglobal.com
www.hedgepointglobal.com

Disclaimer

This document has been prepared by hEDGEpoint Global Markets LLC and its affiliates ("HPGM") exclusively for informational and instructional purposes, without the purpose of creating obligations or commitments with third parties, and is not intended to promote an offer, or solicitation of an offer, to sell or buy any securities or investment products. HPGM and its associates expressly disclaim any use of the information contained herein that may result in direct or indirect damage of any kind. If you have any questions that are not resolved in the first instance of contact with the client (client.services@hedgepointglobal.com), please contact our internal ombudsman channel (ouvidoria@hedgepointglobal.com) or 0800-878-8408 (for clients in Brazil only).

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