"Sowings of corn and wheat in Argentina may prove far lower than many commentators had expected, thanks to poor profitability, undermined by a regime which one researcher says takes 94% of farm sector profits.
The US Department of Agriculture bureau in Buenos Aires said that its “contacts” were expecting corn and wheat area for 2015–16 “to decline by 1.5m hectares”.
That appears to be a bigger drop than many observers expect, with the bureau itself in its latest report, in July, foreseeing a combined drop of 1.0m hectares, on a harvested basis.
The USDA itself sees a combined fall of 630,000 hectares, mainly in wheat, in harvested area, while the Buenos Aires grains exchange, whose data are much respected by the market, sees the drop at about 1.2m hectares.
The discrepancy in part reflects assumptions of wheat sowings last year, with these commentators assuming a far lower area than the official estimate of 5.26m hectares from Argentina’s farm ministry, which has forecast a sharp drop in sowings this year to 4.0m hectares.
Forecasts for Argentine wheat area, 2015–16 and (2014–15 estimate)
- Agriculture ministry: 4.0m hectares, (5.26m hectares)
- Buenos Aires grains exchange: 3.70m hectares, (4.20m hectares)
- USDA attache: 3.70m hectares, (4.20m hectares)
- USDA: 3.67m hectares, (4.20m hectares)
The ministry has yet to make a forecast for corn seedings, which are still in their early stages, just 13% complete as of last week, according to the Buenos Aires grains exchange.
However, the bureau also flagged the “low profitability” of farming thanks, thanks to “economic constraints” which have left many farmers facing losses, especially those burdened with land rents.
Besides lower global prices, Argentina growers also face country specific factors, such as provincial taxes and export duties which the Fundación Agropecuaria para el Desarrollo de Argentina farm (Fada) research institute estimated last month take 94% of agricultural net income.
In wheat, for instance, Fada estimated that the country’s export duty leaves farmers receiving 58% of the world price."
By Darlene Santiago
"The Brazil soybean-planting season began in mid-September but has progressed slowly due to a lack of moisture. Farmers in Mato Grosso, where more than 30% of Brazil’s soybeans are grown, are waiting for rain in order to avoid replanting.
Normally by this time, more than 1 million acres of soybeans have been planted in Mato Grosso, but this year only 378,071 acres of soybeans have been planted, according to the Mato Grosso Institute of Agricultural Economics. In Mato Grosso, farmers are predicted to plant more than 22 million acres of soybeans.
However, it looks like the moisture problem will soon be solved. “It is true that we have had slower planting, but the situation will normalize soon,” says Thiago Robles, meteorologist of the Somar Meteorologia. “From the second half of October, we will have a gradual return of the rains. The rains will be sustained, with volumes well distributed over the months.”
The National Institute of Meteorology agrees that heavy rains will soon fall in the states of Mato Grosso, Rondônia, and Rio Grande do Sul.
In Mato Grosso do Sul, a state close to Mato Grosso, weather has been normal, and planting is progressing at a closer to normal rate. According to the Association of Soy Producers of Mato Grosso do Sul, 6.4% of the area has been sown. This Brazilian state will plant just under 6 million acres of soybeans.
In the southern areas of Brazil, the climatic conditions are favoring soybean planting. In Paraná, the second-largest state producer of soybeans, abundant rains have helped replenish soil moisture, allowing the advancement of grain planting.
According to Paulo Sentelhas, professor of meteorology for agribusiness in the Agricultural School Luiz de Queiroz at the University of São Paulo, the current situation is caused by the El Niño phenomenon. Warming in the Pacific Ocean changes the rainfall in various regions of Brazil.
“The Midwest and part of Southeastern Brazil are located in a climate transition zone, where it is difficult to predict the consequences of El Niño. It may rain above or below normal. The degree of uncertainty is very large,” says Sentelhas. “We can only say that there is a trend of above-average rainfall in the South and drier climate in the Northeast.”
For Robles, the phenomenon is positive. “El Niño brings out the best setting for the first Brazilian crop,” he says. “The phenomenon will ensure a good distribution of rains in the main producing areas of grain.”
However, he says that nobody knows what will be the effects of it next year. “El Niño may lose strength and impair the second crop of corn,” he explains."
"Economic reforms have generated impressive results in the Vietnamese agricultural sector, as farm production more than tripled over the 1990–2013 period, lifting rural incomes, reducing poverty, combatting under-nourishment and sending agro-food exports soaring. Viet Nam should now seek to build on these achievements while addressing long-term challenges posed by slower rates of production growth, declining commodity prices, limited land for further expansion and increasing evidence of negative environmental impacts from farming, according to a new OECD report.
The OECD Review of Agricultural Policies in Viet Nam highlights progress in the farm sector since the Doi Moi reform programme launched in the mid–1980s. Production growth saw the proportion of undernourished people fall from 46% of the population over the 1990–92 period to just 13% over the 2012 14 period, one of the strongest improvements worldwide.
Parallel to this accomplishment, Viet Nam radically boosted its place in global agro-food markets, becoming the world’s largest exporter of cashews and black pepper, the second largest exporter of coffee and cassava and the third largest exporter of rice and fisheries.
“Viet Nam’s agricultural transformation over the past two decades has been nothing short of remarkable,” OECD trade and agriculture director Ken Ash said during a launch event in Hanoi with Vietnamese Vice Minister of Agriculture and Rural Development Le Quoc Doanh “Going forward, Viet Nam needs to improve its policy environment, to enable investments that will allow the farm sector to continue to adapt to the opportunities created by rising demand and the challenges of climate change and limited resources. Rising labour costs will open opportunities to adopt new technologies and encourage larger farms, but they may also reduce the sector’s overall competitiveness, particularly if newer labour-saving techniques are not readily accessible or adaptable to the dominant small-scale farming,” Mr Ash said.
The OECD Review highlights the need to reduce constraints on private investment, including land fragmentation, which limits economies of scale, and various restrictions on land use rights, which raise costs. Large investors can have difficulty accessing long-term financing, while small-scale producers continue to rely mostly on informal credit.
Basic rural infrastructure has significantly improved over the past decade, but investment has not kept pace with economic growth, resulting in serious infrastructure bottlenecks.
The level of support to farmers – as measured by the share of the policy-driven transfers from consumers and taxpayers in gross farm revenues (percentage Producer Support Estimate, %PSE) – has varied widely from year-to-year since 2000, reflecting the government’s efforts to stabilize domestic prices while balancing the interests of producers and consumers in the context of price volatility on international markets.
Support to farmers averaged 7% of farm incomes over the 2011–13 period, which is relatively low, but nevertheless the transfers supporting agriculture are equivalent to 2.2% of GDP, which is one of the highest across all countries covered. This demonstrates that for a developing country with a large agricultural sector and low GDP, even low levels of agricultural support can have relatively high costs for the economy.
“Our analysis shows the high potential burden of Viet Nam’s current policy mix on public finances, and reinforces the need to ensure that the money is spent effectively,” Mr Ash said."
“Dairy markets still have a ”mountain of milk“ blocking the way to a sustained recovery in prices, Rabobank warned, as it pushed back well into 2016 expectations for a ”substantial" revival.
While milk prices have rebounded strongly over the past two months, recovering 63% at GlobalDairyTrade from their August lows, Rabobank cautioned against expecting an extension to the strong recovery.
The recent rally represented a correction, after an “overshoot on the way down”.
“It is difficult to see any tectonic shift in the market fundamentals that explains the sharp improvement in dairy commodity prices from mid-August to late September,” the bank said.
Milk production has “continued to outpace weak consumption growth”, said Rabobank.
Rabobank whole milk powder price forecasts, (change on previous)
- Q4 2015: $2,500 per tonne, (unchanged)
- Q1 2016: $2,500 per tonne, (-$400)
- Q2 2016: $3,000 per tonne, (-$450)
- Q3 2016: $3,200 per tonne, (n/a)
Forecasts for Oceania prices, FOB
Milk output is slowing in New Zealand, with the bank forecasting a 7–10% decline, a steeper drop than estimated by Bank of New Zealand last week, and foreseen by Fonterra, the Auckland-based dairy giant.
“A contraction of milk production of this magnitude would reduce New Zealand milk exports by around 10%—wiping around 1.5bn litres of product off the international market in a 12-month period,” Rabobank said.
But supplies from other regions have remained strong, particularly in Europe where the end of milk quotas supported production.
Meanwhile on the demand side, dairy markets are still working through the repercussions of a Chinese buying spree in 2013, which created a backlog of milk powder still being worked through.
Import demand has also been undermined by strong domestic mill production growth, which Rabobank pegged at 5.5% in the first half of 2015, up from a previous forecast of 4%, and compared with demand growth of 2%
“Despite reduced imports, Chinese processors appear to have made few inroads into reducing stocks,” Rabobank said.
Indeed, even in the first half of 2016, China’s imports “will only stabilise, not increase.”
"France’s Vilmorin confirmed on Tuesday it would look at Syngenta’s vegetable seeds business if the Swiss company were to sell but stressed that the benefits were not obvious and the price might be too high.
Vilmorin, the world’s second-largest vegetable seeds producer, is facing pressure to say whether it will bid for Syngenta’s equivalent business.
The Swiss group, whose main business is making pesticides, needs to offer tangible rewards to shareholders after it turned its back on a $47 billion bid from Monsanto.
Vilmorin had said in July it would consider Syngenta’s seed assets after Monsanto said it would divest them to win regulatory approval for its proposed takeover.
“Vilmorin’s history has shown that we can be bold when it’s worth it but that we don’t do just anything,” Vilmorin CEO Emmanuel Rougier told reporters.
“We are speaking about investment levels that are so high that potential obstacles need to be lifted before we dare go for it.”
These obstacles include a lack of clarity on assets Syngenta would put up for sale, a difference in structure between the two companies that would complicate integration and a risk of dominant positions on several markets, he said.
Analysts have put the value of Syngenta’s vegetable seeds business at between $1.6 and $2.5 billion. That would make it a big deal for Vilmorin which has a market capitalisation of only 1.4 billion euros ($1.6 billion).
Chief Financial Officer Daniel Jacquemond did not rule out a capital increase were it needed.
However, Rougier noted that both companies had their main markets in Europe and North America, reducing the benefits of a merger.
“If we look tomorrow where we could expand, it’s in Asia and Africa and it’s not Syngenta which will bring us this because they are not better there than we are,” Rougier said.
Vilmorin expects operating margin to remain stable next year after posting poor performances for 2014/15 on Monday due to sharp losses in its grain business, hit by lower maize sowings and difficult economic conditions in Ukraine and Russia.
The company sees a 5 percent rise in its vegetable activities in the next fiscal year from 615 million euros, while grains would “maybe” remain stable at 595 million euros although the company pointed to still uncertain markets in the Black Sea region."