PROJECTIONS OF AGRIBUSINESS

Transcription

1 PROJECTIONS OF AGRIBUSINESS Brazil 2014/15 to 2024/25 Long-Term Projections Ministry of Agriculture, Livestock and Food Supply

2 Ministry of Agriculture, Livestock and Food Supply Strategic Management Office PROJECTIONS OF AGRIBUSINESS Brazil 2014/15 to 2024/25 Long-Term Projections Brasília DF July 2015

3 2015 Ministério da Agricultura, Pecuária e Abastecimento. All rights reserved. Reproduction permitted provided the source is acknowledged. Responsibility for copyright texts and images of this work is the author. 6th edition. year 2015 Circulation: copies Preparation, distribution, information: MINISTRY OF AGRICULTURE, FISHERIES AND FOOD SUPPLY Strategic Management Office General Coordination of Strategic Planning Block D, 7th floor, room 752 CEP: Brasília / DF.: Tel (61) : Fax (61) age@agricultura.gov.br Customer Service: Editorial coordination: AGE / Mapa Impresso no Brasil / Printed in Brazil Catalogação na Fonte Biblioteca Nacional de Agricultura - BINAGRI

4 Chief of Strategic Management Office Tânia Mara Garib TEAM: AGE/Mapa SGE/Embrapa José Garcia Gasques Eliana Teles Bastos Geraldo da Silva e Souza Eliane Gonçalves Gomes Marco Antonio Azevedo Tubino TECHNICAL PARTNERS: Alcido Elenor Wander (Embrapa) Antônio A. Amaro ( IEA ) Aroldo Antônio O. Neto (Conab) Daniel Furlan Amaral (Abiove) Dirceu Talamini (Embrapa) Djalma F. de Aquino (Conab) Eledon Oliveira (Conab) Elieser Barros Correia (Ceplac) Erly Cardoso Teixeira (UFV) Fabio Trigueirinho (Abiove) Francisco Braz Saliba (Bracelpa) Francisco Olavo B. Sousa (Conab) Glauco Carvalho (Embrapa) Gustavo Firmo (Mapa) Joaquim Bento S. Ferreira (Esalq) Kennya B. Siqueira (Embrapa) Leila Harfuch (Agroicone) Leonardo Botelho Zilio (Abiove) Lorildo Aldo Stock (Embrapa) Lucílio Rogério Aparecido Alves (Esalq) Luis Carlos Job (Mapa) Luiz Antônio Pinazza (Abag) Marcelo M. R. Moreira (Agroicone) Milton Bosco Jr. (Bracelpa) Tiago Quintela Giuliani (Mapa) Wander Sousa (Conab)

5 SUMMARY 1. INTRODUCTION 2. SCENARIOS OF PROJECTIONS 3. METHODOLOGY 4. RESULTS FOR BRAZIL a. Grains b. Coton Lint c. Rice d. Bean e. Corn f. Wheat g. Soybean Complex h. Coffee i. Milk j. Sugar k. Orange and Orange Juice l. Meat m. Pulp and Paper n. Tobacco o. Fruits 5. RESULTS OF REGIONAL PROJECTIONS 6. SUMMARY 7. BIBLIOGRAPHY ANNEX 1 - Methodological Note ANNEX 2 - Results Tables

6 LIST OF ACRONYMS ABIOVE - Associação Brasileira da Indústria de Óleos Vegetais ABRAF- Associação Brasileira de Produtores de Florestas Plantadas AGE - Assessoria de Gestão Estratégica BRACELPA- Associação Brasileira de Celulose e Papel CECAT - Centro de Estudos Estratégicos e Capacitação em Agricultura Tropical CNA - Confederação da Agricultura e Pecuária do Brasil CONAB - Companhia Nacional de Abastecimento CEPLAC - Comissão Executiva de Planejamento da Lavoura Cacaueira EMBRAPA Gado de Leite - Empresa Brasileira de Pesquisa Agropecuária FAO - Food and Agriculture Organization of the United Nations FAPRI - Food and Agricultural Policy Research Institute FGV - Fundação Getúlio Vargas IBGE - Instituto Brasileiro de Geografia e Estatística ICONE - Instituto de Estudos do Comércio e Negociações Internacionais IFPRI - International Food Policy Research Institute IPEA - Instituto de Pesquisa Econômica Aplicada MAPA - Ministério da Agricultura, Pecuária e Abastecimento OECD - Organization for Economic Co-Operation and Development ONU - Organização das Nações Unidas SGE- Secretaria de Gestão Estratégica UFV - Universidade Federal de Viçosa UNICA - União da Indústria de Cana-de-açúcar USDA - United States Department of Agriculture

7 6 1. INTRODUCTION This report is an update and revision of the study Agribusiness Projections - Brazil 2013/14 to 2023/24, Brasília - DF, September 2014, published by the Strategic Management Office of the Ministry of Agriculture, Livestock and Supply (AGE/Mapa). The study aims to indicate the directions of development and provide subsidies to policy makers about the trends of the main products of agribusiness. The results also seek to answer to a large number of users of various sectors of national and international economy to which the information now disclosed are of enormous importance. The trends will identify possible trajectories and structure visions of the future of agribusiness in the global context for the country to continue growing and conquering new markets. Agribusiness Projections Report - Brazil 2014/2015 to 2024/2025, is a prospective view of the sector, the basis for the strategic planning of MAPA - Ministry of Agriculture, Livestock and Supply. For its preparation were consulted studies Brazilian and international organizations, some of them based on projections models. Among the surveyed institutions stand out the work of the Food and Agriculture Organization of the United Nations (FAO), Food and Agricultural Policy Research Institute (FAPRI), International Food Policy Research Institute (IFPRI), Organization for Economic Cooperation and Development (OECD), United Nations (UN), United States Department of Agriculture (USDA), Policy Research Institute / Ministry of Agriculture, Forestry and Fisheries, Japan (PRIMAFF), Confederation of Agriculture and Livestock of Brazil (CNA), Getulio Vargas Foundation (FGV) Brazilian Geography and Statistics (IBGE Institute), Institute for International Trade Negotiations (ICONE) Applied Economic Research Institute (IPEA), National Supply Company (Conab), Embrapa Dairy Cattle, Research Company Energy (EPE), Union Cane Sugar Industry Association (UNICA), Forest Producers Association of Brazilian Planted (ABRAF), Federation of São Paulo State Industries (FIESP), STCP Consulting, Engineering and Management, Brazilian Association Pulp and Paper (BRACELPA), Brazilian Association of Vegetable Oil Industries (ABIOVE) and the Brazilian Agribusiness Association (ABAG).

8 7 The study was conducted by a group of experts from the Ministry of Agriculture and Embrapa, which cooperated in the various preparation stages of this. It benefited also from the valuable contribution of people / institutions who analyzed the preliminary results and reported his comments, views and ideas on the results of projections. About 30 people have collaborated with the analysis and critique of the results obtained in the models. Observations related to these collaborations were included in the report, without nominate employees, but the institutions they belong to. 2. SCENARIO OF PROJECTIONS The setting of the projections, found in this year 2015 and next ten years, shows a trend in agricultural prices situated below the average for the period 2008 to 2014, but above the average prices observed before the year 2007 (OECD-FAO, 2015). The projected years , show the real prices standing at different levels with respect to its growth: Soybean prices are the ones who must stand at the highest levels in relation to prices until Then, lie meat prices, then milk and finally the grain prices. But when the OECD-FAO (2015, p.43) examine the secular trend in real prices since the year 1908 to 2024, there is a downward trend in prices. The real agricultural prices in Brazil for the major grains and meat show up in 2015, below the historical average for corn, soybeans, wheat and chicken. Prices of live cattle and pig housing are the major highlights in relation to their historical levels. Featured higher for cattle where the price per bushel increased in 2015, about 30.0% over the historical price (July / 1997 to February / 2015). As usual in the work of long-term projections as OECD-FAO (2015), USDA (2015), the results are based on assumptions that affect supply, demand, trade and prices of commodities, as sectoral policies and macroeconomic policies.

9 8 Table 1 Prices received by Farmers in Brazil Product Unit Historical price Rice R$/sc 50 Kg Corn R$/sc 60 Kg Wheat R$/t Soybean R$/sc 60 Kg Bovine R$ /@ Pork R$/kg Chicken R$/Kg Source: Source: Cepea/USP, Position at 02/2015 Rice Price* , Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 R$*/sc Source: Cepea/USP *bag of 50kg (R$/sc), deflated by IGP/DI.

10 9 Corn Price* R$*/sc ,3 22, jan/05 jul/05 jan/06 jul/06 jan/07 jul/07 jan/08 jul/08 jan/09 jul/09 jan/10 jul/10 jan/11 jul/11 jan/12 jul/12 jan/13 jul/13 jan/14 jul/14 jan/15 Source Cepea/Usp *bag of 60kg (R$/sc), deflated by IGP/DI. Wheat Price* R$*/sc ,9 505 jan/05 jul/05 jan/06 jul/06 jan/07 jul/07 jan/08 jul/08 jan/09 jul/09 jan/10 jul/10 jan/11 jul/11 jan/12 jul/12 jan/13 jul/13 jan/14 jul/14 jan/15 Source: Cepea/USP * tons, deflated by IGP/DI

11 10 Soybean Price * R$*/sc ,9 60,2 Source: Cepea/USP * tons, deflated by IGP/DI. Pork Price* ,2 5,2 0 jul/10 out/10 jan/11 abr/11 jul/11 out/11 jan/12 abr/12 jul/12 out/12 jan/13 abr/13 jul/13 out/13 jan/14 abr/14 jul/14 out/14 jan/15 jan/05 jul/05 jan/06 jul/06 jan/07 jul/07 jan/08 jul/08 jan/09 jul/09 jan/10 jul/10 jan/11 jul/11 jan/12 jul/12 jan/13 jul/13 jan/14 jul/14 jan/15 R$*/kg Source: Cepea/USP *R$/Kg, deflated by IGP/DI.

12 11 Bovine Price* , , R$*/sc 0 Source: Cepea/USP *bushel of Bovine, deflated by IGP/DI. Chicken Price* 5 4 3,6 3 3, jan/05 jan/06 jan/07 jan/08 jan/09 jan/10 jan/11 jan/12 jan/13 jan/14 jan/15 jan/05 jul/05 jan/06 jul/06 jan/07 jul/07 jan/08 jul/08 jan/09 jul/09 jan/10 jul/10 jan/11 jul/11 jan/12 jul/12 jan/13 jul/13 jan/14 jul/14 jan/15 R$/Kg Source: Cepea/USP *The average price of chicken slaughtered is disclosed including ICMS ( a tax charged in the states ) for payment between 14 and 21 days, put in the meat packing. prices deflated by IGP/DI

13 12 3. METHODOLOGY The period of the projections covers 2014/15 to 2024/25. In general, the basis of the period of projections covers 20 years. Taking advantage of previous years experience, it has been used as a basic reference period the information after The period from 1994 until today, as we know, has introduced an economic stabilization and this enabled a reduction in uncertainty in those variables. The projections were performed using specific econometric models. They are time series models that have great use in forecasting series. The use of these models in Brazil, for the purpose of this kind of study, is unprecedented. We are not aware of studies published in the country who have worked with these models. With slight modifications, is adopted this year, the same methodology as last year. Three statistical models were used - Exponential Smoothing, Box & Jenkins (Arima) and State Space Model. There is a methodological note (Appendix 1) where the main characteristics of the three models were presented. This report presents some differences compared to last year. Other products were introduced in the fruit section due to richness of fruits that the country has. There were also a few changes in the number of regions where extra regional projections were made. The projections were carried out for 29 agribusiness products: corn, soybeans, wheat, oranges, orange juice, chicken, beef, pork, sugarcane, sugar, cotton, soybean meal, soybean oil, fresh milk, beans, rice, potatoes, cassava, tobacco, coffee, cocoa, grape, apple, banana, Mango, Melon, Papaya, pulp and paper. In the report, however, we did not discuss all products, but their data are in the tables at the annex. The choice of the most likely model was made as follows: 1. Consistency of results; 2. International comparisons of production data, consumption, export, import and trade of the country and the world; 3. Trend of data; 4. Growth potential; 5. Consultations with experts.

14 13 Projections were carried out in general for production, consumption, export, import and acreage. This year, were carried out some tests with productivity of some crops. The tendency was to choose more conservative models and not those indicated bolder growth rates. This procedure was used for selecting the most selected results. Projections presented in this report are nationals, where the number of products studied is comprehensive, and regional, where the number of analyzed products is restricted and have specific interest. Projections are accompanied by prediction intervals that become larger with time. The greater magnitude of these intervals reflects the higher degree of uncertainty associated with more distant forecasts of the last year of the series used as the basis of the projection. 4. RESULTS OF PROJECTIONS FOR BRAZIL a. Grains Grain projections refer to the 15 products surveyed monthly by Conab, as part of their crop surveys. (See: conteudos.php?a=1252&t=2) As this update of projections already have the data for the survey of harvest (May survey), and this survey gives a good approximation, the predictions of crop of 2014/15, these estimates were used as the first information to grains. Thus, the projections for this report these products start in 2015/16. The grain production estimates point to a harvest between and million tons in 2015/16, an area planted between 58.1 and 61.0 million hectares.

15 14 Table 2 Planted area and Production of Grains Year Production (thousand tons) Planted Area (thousand hectares) Projection Up limit. Projection Up limit. 2014/15 200,682-57, /16 206, ,542 58,077 60, /17 212, ,849 58,880 64, /18 218, ,670 59,736 66, /19 224, ,630 60,598 69, /20 230, ,390 61,465 71, /21 235, ,875 62,333 73, /22 241, ,187 63,201 75, /23 247, ,345 64,069 77, /24 253, ,380 64,938 79, /25 259, ,308 65,806 80,806 Source: AGE/Mapa and SGE/Embrapa with Conab information Models used: State space. *cotton, peanuts, rice, oats, canola, rye, barley, beans, sunflower, castor, corn, soybean, sorghum, wheat and triticale. Variation % 2014/15 to 2024/25 Production 29.4% Area 14.8%

16 15 Fig. 1 Planted area and Production of Grains 300, , , , ,000 50, /15 200,682 57,332 65, /16 Area (thousand hectares) 2016/ /18 *cotton, peanuts, rice, oats, canola, rye, barley, beans, sunflower, castor, corn, soybean, sorghum, wheat and triticale Source: AGE/Mapa and SGE/Embrapa GRAINS* 2018/ /20 Production (thousand tons) 2020/ / / /24 259, /25 Projections for 2024/25 are of a grain crop at about million tons, corresponding to a 29.4% increase over the current crop which is estimated at million tons. This increase corresponds to an annual growth rate of 2.6%. In the upper limit, projection indicates an output of up to million tons in 2024/25. The grain area is expected to increase 14.8% between 2014/15 and 2024/25, from 58.1 million in 2014/2015 to 65.8 million in 2024/2025, corresponding to an annual increase of 1.4 %. Table 3 and fig.2 provide a first indication for the coming years regarding the behavior of grain in Brazil. Looking back to 2005, it shows how this variable has been behaving in recent years and the projections to the coming years.

17 16 Table 3 Brazil: Planted Area with Five Main Grains (thousand hectares) 2005/ / / / / / / / / /15 Rice 3,018 2,967 2,875 2,909 2,765 2, ,400 2,373 2,344 Bean 4,224 4,088 3,993 4,148 3,609 3, ,075 3,366 3,174 Corn 12,964 14,055 14,766 14,172 12,994 13, ,829 15,829 15,166 Soybean 22,749 20,687 21,313 21,743 23,468 24, ,736 30,173 31,504 Wheat 2,362 1,758 1,852 2,396 2,428 2, ,895 2,210 2,758 Total 45,317 43,554 44,799 45,368 45,263 46,947 48,075 50,936 53,951 54, / / / / / / / / / /25 Rice 2,247 2,149 2,052 1,954 1,857 1, ,564 1,467 1,369 Bean 3,089 2,960 2,849 2,730 2,615 2, ,266 2,149 2,033 Corn 15,210 15,254 15,299 15,343 15,387 15, ,520 15,564 15,608 Soybean 32,533 33,550 34,515 35,479 36,433 37, ,293 40,246 41,198 Wheat 2,612 2,665 2,718 2,771 2,824 2, ,983 3,036 3,089 Total 55,691 56,579 57,432 58,277 59,116 59,953 60,790 61,626 62,462 63,298 Source: AGE/ Mapa And SGE/ Embrapa Fig. 2 Brazil: Planted Area with Five Main Grains * Planted Area 75,000 thousand hectares 60,000 45,000 30,000 15, ,317 63, / / / / / / / / / / / / / / / / / / / /25 Source: AGE/Mapa and SGE/Embrapa. *Rice, Bean, Corn, Soybean and Wheat.

18 17 Productivity should be the main factor driven the growth of grain production in the next ten years. The average should rise from 3.5 t / ha in 2014/15 to 3.95 t / ha in 2024/25. It was seen above that while production is expected to grow 2.6%, the area should expand 1.4% per year. This percentage is slightly lower than that observed in the last ten years (2004/05 to 2013/14) which was 1.69% (Conab. 2015). Among grains higher productivity gains should occur in rice, corn and cotton. The average soybean yield should stay at 3.0 t/ha in 2024/25. Table 4 Brazil - Grains Productivity Tons/Ha Grains Corn Soybean Rice Cotton 2014/ / / / / / / / / / / Source: AGE/Mapa and SGE/Embrapa *cotton, peanuts, rice, oats, canola, rye, barley, beans, sunflower, castor, corn, soybean, sorghum, wheat and triticale

19 18 b. Cotton Lint Cotton production is concentrated especially in the states of Mato Grosso and Bahia, who respond in 2014/15 by 86.2% of production in the country. Mato Grosso has the leadership with 57.4% of national production, followed by the state of Bahia with 28.8% of Brazilian production. COTTON LINT National Production Harvest Year 2014/2015 (Thousand tons) Major producing states % 1, MT 57.4 MS 3.6 GO 3.6 BA 28.8 Mato grosso Bahia Mato Grosso do Sul Goiás Total 1, Source Conab - survey may/2015

20 Projections for cotton lint indicate production of 1.5 million tons in 2015/16 and 2.2 million tons in 2024/25. This expansion corresponds to a growth rate of 3.6% per year over the projection period and a variation of 43.1% in production. Some analysts noted that the projected production is rather high. What has been argued is that with the emergence of new technologies is possible to obtain higher yields. However, one has checking is that research has reached a stage where progress in productivity levels has proved to be slow or stagnant. The projections OECD-FAO (2015) 2024 design for a cotton lint production of 2.3 million tons and an annual growth rate of 4.6%. The results are therefore very similar to this report. Consumption of this product in Brazil should not grow in the next ten years standing at 838,000 tons. According to the OECD-FAO (2015) this should highlight the importance of the international market for the sector s growth in the coming years. Exports are forecast strong growth, 58.4% between 2014/15 to 2024/25. This variation corresponds to an annual growth of 4.5%. In 2024/25 cotton in Brazil should account for about 14.0% of world trade in the product, according to estimates of this report, and also the USDA (2015) and OECD-FAO (2015). 19

21 20 Table 5 - Production, Consumption and Export of Cotton Lint (thousand tons) year Production Consumption Export Projection Up limit. Projection Up limit. Projection Up limit. 2014/15 1, /16 1,496 1, , /17 1,788 2, , /18 1,794 2, , , /19 1,719 2, , , /20 1,862 2, , , /21 1,976 2, , , /22 1,955 2, , , /23 2,006 2, ,126 1,032 1, /24 2,119 2, ,144 1,071 1, /25 2,160 2, ,160 1,109 1,816 Source: AGE/Mapa and SGE/Embrapa with Conab information * Models used: production - State Space, consumption - PRP and export - ARMA. Variation % 2014/15 to 2024/25 Production 43.1% Consumption 0.4% Export 58.4%

22 21 Fig. 3 - Production, Consumption and Export of Cotton Lint Production Consumption Export 2,500 2,160 2,000 thousand tons 1,500 1, , , / / / / / / / / / / /25 Source: AGE/Mapa and SGE/Embrapa c. Rice Although rice is a common crop in most of the country, most of the production occurs in 5 states. Rio Grande do Sul, dominate the rice production. It concentrates 68.1% of the production of 2014/15, Santa Catarina, 8.5%, Mato Grosso, 4.7%, Maranhão, and Tocantins with 4.6% 4.8% of national production. In the Northeast, especially in the state of Ceará rice is irrigated and focuses on irrigation schemes. A small amount is also produced in the states through which the Rio São Francisco, as Bahia, Sergipe, Alagoas and Pernambuco. These areas also receive irrigation.

23 22 MA 4.6 RICE Harvest Year 2014/2015 (Thousand tons) % MT 4.7 TO 4.8 National Production Major producing states 12, Rio Grande do Sul 8, Santa Catarina 1, Tocantins Mato Grosso RS SC Maranhão Total 11,249 90,7 Source Conab - survey may/2015 Projected rice production for 2024/25 is 13.3 million tons and a consumption of 12.2 million tons. Projected to increase 7.2% in rice production over the next 10 years. This increase in production will occur especially through the rice yield. The projected increase in production is apparently low, but it is equivalent to the projection of consumption in the next 10 years. The relative stabilization of the projected rice consumption at 12.2 million tons in 2024/25, is consistent with the supply in the past six years, around 12 million tons in 2014/15 (Conab, 2015). The annual growth projected of consumption is 1.5%. The OECD-FAO (2015) projects for the next decade per capita rice consumption of 40.0 kg. Estimates for the planted rice area projection shows that area reduction should occur in the coming years, although the projected drop seems exaggerated to researchers at Embrapa consulted. The projections may fall to 2.3 million hectares in 2014/15 to 1.4 million

24 hectares in 2024/25. According to the technical from Conab, the reduction of area is not likely to occur. The same is shared by researchers at Embrapa Rice and Beans. In Rio Grande do Sul, now standing at just over 1.0 million hectares should remain or even decrease because rice is suffering competition from soybeans. Productivity should be the main variable in the behavior of rice in coming years. The forecast indicates a 9.7 tons per hectare productivity in 2024/25, well above the current 5.3 tons / hectare. As seen, the rice is concentrated in Rio Grande do Sul areas where the current yield is 7.5 tons per hectare (Conab, 2015). In this state productivity over the past decade it grew by 20.0% and average Brazil, 37.0%, influenced mainly rice planting in new areas as the state of Tocantins. However, we consider high the estimate obtained for the period of the projections. The rice consumption in the coming years is expected to grow 0.1% per year. According to technicians from Embrapa, the projected consumption seems appropriate to the current reality, although the calculations of apparent consumption per capita have shown declines in recent years. To change this long-term trend, only if Brazil can develop new ways to use and consumption of rice (product made from rice grains, which depends on R & D and especially the industry is interested in the subject, which did not can be seen today). 23

25 24 Table 6 - Production, Consumption and Rice Import (thousand tons) year Production Consumption Import Projection Up limit. Projection Up limit. Projection Up limit. 2014/15 12,397-12, /16 12,486 14,988 12,036 12, , /17 12,575 16,114 12,036 12, , /18 12,665 16,998 12,072 13, , /19 12,754 17,758 12,072 13, , /20 12,843 18,438 12,108 13, , /21 12,932 19,061 12,108 13, , /22 13,022 19,641 12,144 13, , /23 13,111 20,188 12,144 13, , /24 13,200 20,706 12,180 14, , /25 13,289 21,201 12,180 14, ,820 Source: AGE/Mapa and SGE/Embrapa with Conab information * Models used: production State space, production and consumption - PRP and import - ARMA. Variation % 2014/15 to 2024/25 Production 7.2% Consumption 1.5% Import -50.2%

26 25 Fig. 4 - Production, Consumption and Import of Rice Production Consumption Import thousand tons 14,000 12,000 10,000 8,000 6,000 4,000 2, ,397 13,289 12,000 12, / / / / / / / / / / /25 Source: AGE/Mapa and SGE/Embrapa d. Bean The geographical distribution of the country s main bean producers can be seen on the map. The product is fairly distributed across several states, although the main are Paraná, Minas Gerais, Mato Grosso and Bahia, which currently produce 62.8% of national production. Other states as Ceará. Goiás. São Paulo and Santa Catarina, currently produce 19.2% of national production. Summing this with the previous group has a total of 82.0% of domestic production represented by eight states. Such as rice, beans are part of the basic basket of Brazilians. It is the product that most have adjusted production to consumption, a trend that should continue in the coming years. Imports are always to supply a small difference between production and consumption (Santiago, C. Embrapa, Conab 2013 and 2015).

27 26 CE 37.5 BEAN National Production Paraná Minas Gerais Harvest Year 2014/2015 (Thousand tons) Major producing states 742 % 3, MT 15.2 PR 21.7 GO 6.1 SP 5.0 MG 16.3 BA 9.6 Mato Grosso Bahia Goiás Total 2, Source Conab - survey may/2015 Bean production is related to rice due to eating habits in our country. Beans have an annual growth rate of the production of 0.2% between 2014/15 and 2024/25. This is to keep the end of the period of projections, practically the same current production, which is 3.4 million tons in 2014/15. According to technicians of Embrapa Rice and Beans, each year increases the discussions focused on producing exclusively for the domestic market. Today we have some varieties of beans that can be used for export. If this new opportunity to consolidate the projection of production have to be adjusted upward.

28 Annual growth rate of consumption is projected at 0.2% for the next decade, an amount equal to the increase in production. The average annual consumption has been 3.5 million tons, requiring small amounts of imports, which have been between 100 and 300 thousand tons per year. If the production projections are confirmed, there should be need for bean imports in the coming years. (Conab, 2015). According to technicians of Embrapa Rice and Beans, the results of bean consumption, reflect what has been observed in recent years: a slight increase in apparent consumption per capita. Even if we have an increase in animal protein intake, beans represents the primary source of vegetable protein. With consumption habits change, it is believed that an increasing share of the population will be seeking healthier foods, will be valuing the consumption of foods like beans. Opinions of the Conab and Embrapa technicians are that there may be significant changes in the beans in the coming years. Productivity is expected to increase from current levels as soybean and corn producers are producing beans for export destined to China, India and some African countries. The Northeast, although major producer of that product has imported beans from other states in times of drought. Currently, Ontario has produced beans for export. 27

29 28 Table 7 - Production, Consumption and Bean Imports (thousand tons) year Production Consumption Import Projection Up limit. Projection Up limit. Projection Up limit. 2014/15 3,400-3, /16 3,363 4,022 3,357 3, /17 3,334 4,267 3,364 3, /18 3,345 4,290 3,371 4, /19 3,355 4,313 3,379 4, /20 3,366 4,335 3,386 4, /21 3,376 4,358 3,393 4, /22 3,387 4,380 3,400 4, /23 3,397 4,403 3,407 4, /24 3,408 4,425 3,414 4, /25 3,418 4,447 3,421 4, Source: AGE/Mapa and SGE/Embrapa with Conab information * Models used: production - ARMA, consumption and import - PRP. Variation % 2014/15 to 2024/25 Production 0.5% Consumption 2.1% Import -1.9%

30 29 Fig. 5 - Production, Consumption and Bean Imports Production Consumption Import thousand tons 4,000 3,500 3,000 2,500 2,000 1,500 1, ,400 3,418 3,350 3, / / / / / / / / / / /25 Source: AGE/Mapa and SGE/Embrapa e. Corn National production of corn in 2014/15, is distributed in the Midwest regions, with 43.9%, South, 30.6%, and Southeast, 13.7%. The main producing states, Mato Grosso, Paraná, Mato Grosso do Sul, Goias, Minas Gerais, Rio Grande do Sul and São Paulo, accounting for 83.5% of national production. In the Midwest, leadership is of Mato Grosso, followed by Mato Grosso do Sul, in southern leadership is of Paraná and. Southeast of Minas Gerais. These are currently the major corn producers in the country.

31 30 National Production Mato Grosso Paraná CORN Harvest Year 2014/2015 (Thousand tons) Major producing states 17,782 % 78, , Mato Grosso do Sul 8, Goiás 8, MT 22.6 MS 10.4 PR 18.7 RS 7.8 GO SP 5.0 SC MG 8.6 BA 3.6 Minas Gerais 6, Rio Grande do Sul 6, São Paulo 3, Santa Catarina 3, Bahia 2, Total 71, Source Conab - survey may/2015 Corn production forecast in Brazil this year 2014/15, is estimated at 79.0 million tons (Conab, 2015). Of this total, about 48.0 million tons corresponds to the second-crop corn (Corn de segunda - safra). For 2024/25 the projected production is 99.8 million tons. In Mato Grosso and Paraná, the largest producers, soybean areas release space for planting corn. In Mato Grosso usually plant to soybeans around 15 September and harvest in January to then start the second crop corn. The limit for this planting is February because the risks of losses from the dry season are great and above that period. The corn planted area should have an increase of 2.9% between

32 2014/15 and 2024/25, from 15.2 million hectares in 2014/15 to 15.6 million, reaching 21.4 million hectares in 2024/25. There is no need of new areas for growth of this activity, because the soybean areas release most of the areas required for corn. The projected area increase of 2.9% is well below growth occurred in the last 10 years, it was 17.3%. But in recent years Maize has high productivity gains resulting in less need for additional areas. Domestic consumption of corn in 2014/15 is 69.6% of production but must be reduced in coming years to 65.3%. Corn exports are expected to move from 21.0 million tons in 2015 to 31.7 million tons in 2024/25. To keep the projected domestic consumption of 65.2 million tons and ensure a reasonable volume of ending stocks and the projected level of exports, the projected production is expected to be at least 99.8 million tons in 2024/25. According to staff working with this crop area should increase more than is being designed and may be closer to the upper limit of growth is 21.4 million hectares (see Figure 8). 31

33 32 Table 8 - Production, Consumption Corn Export (thousand tons) Production Consumption Export year Projection Up limit. Projection Up limit. Projection Up limit. 2014/15 78,985-55,000-21, /16 81,062 95,045 56,071 57,787 22,327 30, /17 83, ,914 57,102 60,046 23,333 33, /18 85, ,435 58,120 62,131 24,403 37, /19 87, ,259 59,132 64,062 25,452 39, /20 89, ,637 60,142 65,879 26,504 42, /21 91, ,698 61,150 67,607 27,554 45, /22 93, ,520 62,157 69,267 28,603 47, /23 95, ,151 63,165 70,875 29,653 49, /24 97, ,627 64,172 72,440 30,703 52, /25 99, ,974 65,179 73,970 31,752 54,409 Source: AGE/Mapa and SGE/Embrapa with Conab information * Models used: production - PRP, consumption and export - State Space. Variation % 2014/15 to 2024/25 Production 26.3% Consumption 18.5% Export 51.2%

34 33 Fig. 6 Corn Production Projection Up limit. 160, , , ,000 thousand tons 100,000 80,000 60,000 40,000 78,985 99,756 20, / / / / / / / / / / /25 Source: AGE/Mapa and SGE/Embrapa Fig. 7 Corn Consumption Projection Up limit. 80,000 73,970 70,000 60,000 50,000 40,000 30,000 20,000 55,000 65,179 10, / / / / / / / / / / /25 thousand tons Source: AGE/Mapa and SGE/Embrapa

35 34 Fig. 8 Planted Area of Corn Up limit. Projection 21,400 thousand hectares 15,166 15,608 Projection variation (%) 20014/15 to 2024/25 2,9 to 41,1% 2014/ / / / / / / / / / /25 Source: AGE/Mapa and SGE/Embrapa Cana - Variação 25,4 % f. Wheat Wheat production in the country is concentrated in the South, and Paraná and Rio Grande do Sul the are the main producers. Paraná expect to produce in the current harvest, 2014/15, 52.2% of national production and the Rio Grande do Sul, 38.3%. The participation of other states is around 9.5%. This participation is distributed among São Paulo and Minas Gerais, mainly.

36 35 WHEAT Year 2015 (thousand tons) % National Production 7, Major producing states Paraná 3, Rio Grande do Sul 2, Total 6, Source Conab - survey may/2015 PR 52.2 RS 38.3 Wheat production in the 2014/15 crop is being estimated by Conab at 7.0 million tons and by IBGE in 7.8 million. This would be the largest crop that Brazil has already achieved. The projected production for 2024/25 is 8.9 million tons. This value is slightly higher than projected by the OECD-FAO, 7.8 million in Domestic consumption is projected at 13.4 million tons. Expected to grow at an annual rate of 1.4% between 2014/15 to 2024/25. According to Conab (2015), wheat consumption has increased in Brazil - from 10.2 million tons in 2010 to 11.7 million tons in Domestic supply will require imports of 6.9 million tons in 2024/25. In recent years, imports has been between 6.0 and 7.0 million tons, and the most frequent volume of imports has been around 6.0 million tons. In 2014, Brazil imported according to Conab (2015), are 6.7 million tons of wheat. Although wheat production is projected to increase by about 27.0% in coming years, driven by producer prices, even so Brazil should remain as one of the largest importers. The USDA report estimates in 2024/25 Brazilian imports of wheat of about 7.0 million tons (USDA, 2015).

37 36 Table 9 - Production, Consumption and Imports of Wheat (thousand tons) Production Consumption Import year Projection Up limit. Projection Up limit. Projection Up limit ,045-11,837-6, ,678 9,964 12,014 13,239 6,717 8, ,913 11,146 12,191 13,692 6,751 9, ,076 12,036 12,369 14,101 6,784 9, ,774 12,346 12,546 14,482 6,818 10, ,001 12,713 12,723 14,844 6,852 10, ,227 13,076 12,900 15,192 6,885 10, ,454 13,434 13,077 15,527 6,919 11, ,681 13,790 13,254 15,853 6,953 11, ,907 14,142 13,431 16,170 6,986 11, ,134 14,491 13,609 16,481 7,020 12,165 Source: AGE/Mapa and SGE/Embrapa with Conab information *Models used: production, consumption and import - PRP. Variation % 2015 a 2025 Production 29.7% Consumption 15.0% Import 5.0%

38 37 Fig. 9 - Production, Consumption and Imports of Wheat Production Consumption Import 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 13,609 11,837 9,134 7,045 6,684 7, thousand tons Source: AGE/Mapa and SGE/Embrapa g. Soybean Complex Soybean Soybean production for 2014/15 is estimated between 94.0 and 96.0 million tons. The production is led by Mato Grosso, with 29.3% of national production; Parana with 18.0%; Rio Grande do Sul with 15.4%; Goiás, 9.2%; Mato Grosso do Sul, 7.4% and Bahia 4.5%. But, as shown on the map, soybean production is also evolving into new areas in Maranhão, Tocantins, Piauí and Bahia, which in 2014/15 accounted for 11.0% of the Brazilian grain production, which corresponds to a production 10.4 million tons of soybeans. This is a region located in the center northeast of country, which has been showing sharp grain production potential, called Matopiba. It is located in the four states mentioned. Although its infrastructure deficiencies, land prices are still attractive, the climate, implementation of possibility of large areas and favorable relief, have been some factors that have motivated investments in the region.

39 38 SOYBEAN Harvest Year 2014/2015 (Thousand tons) % National Production 95, Major producing states MT 29.3 MS 7.4 GO 9.2 BA 4.5 Mato Grosso Paraná 27, , PR 18.0 Rio Grande do Sul 14, Goiás 8, RS 15.4 Mato Grosso do Sul 7, Bahia 4, Total 79, Source Conab - survey may/2015 Productions of soybeans for 2024/25 is million tons. This represents a 33.9% increase in the production of 2014/15. But it s a percentage that is below the growth occurred in the last 10 years in Brazil, which was 72.8% (Conab, 2015). Domestic consumption of soybeans is expected to reach 54.3 million tons at the end of projections period. Consumption is projected to increase 22.9% by 2024/25. This estimate is below the growth in the number of processed soybean informed by ABIOVE (2015), 39.2% for the last 10 years. Conab reports for the last 6 years an increased consumption of soybean of 17.0%. There must be an additional consumption of soy against 2014/15 order of 10.0 million tons. As is known, soybeans are an essential component in the manufacture of animal feed and becoming increasingly important in human nutrition.

40 Soybean area is expected to increase 9.7 million hectares over the next 10 years, coming from 31.5 million hectares to 41.2million hectares. It is the crop that most will expand the area in the next decade, followed by sugarcane with about 2.0 million additional hectares. It represents a 30.8% increase on the area we have with soybeans in 2014/15. According to ABIOVE due to increasing pressure to prevent advances in native areas, soybean area expansion in the coming years should take place in a conservative scenario, with an average annual growth rate of 1.0%. The projections in this report indicate an average annual rate for the next ten years of 2.7%. Although high, this rate is well below the average rate observed in the last ten years, which was 4.6%. Soybean yield is considered by ABIOVE as a major challenge in the coming years. This concern is evidenced by the fact that the projections of productivity show a relative stagnation, whose national average is around 3.0 tons per hectare. Soybeans should expand through a combination of border expansion in regions where there is still land available, grazing land occupation and the replacement of crops where there is no land available to be incorporated. But the trend in Brazil is that the expansion mainly occurs on pastures land (Conab, 2014). Figure 10 illustrates the area of expansion projections in sugarcane and soybean, which are two activities that compete for the area in Brazil. Together, these two activities should present in the coming years an increase of 12.0 million hectares, with 9.7 million hectares of soybeans and 2.3 million hectares of sugarcane. The other crops should have little area change in the coming years. But it is estimated that this expansion should take place in areas of great productive potential, such as areas of understood clenched in what is now called Matopiba for understanding land located in the states of Maranhão, Tocantins, Piauí and Bahia. Mato Grosso should lose steam in this expansion process in direction of new areas, mainly due to land prices in this state that are more than double the crops of land prices in the states of Matopiba (FGV-FGVDados). As the developments in these new regions include large extension areas, the land price is a deciding factor. 39

41 40 Fig. 10 Soybean and Sugar Cane Area Soybean Sugar cane** million milion hectares 31,504 9,004 Sugar cane - Variation 25,4 % / / / / / / / / / / /25 Soybean - variation 30,8 % Cana - Variação 25,4 % Area with Soybean and sugar may increase 12 million hectares. Source: AGE/Mapa and SGE/Embrapa **refers to sugar - cane intended to production of alcohol and sugar. In the new areas of Brazil s center northeast, comprising the Matopiba region, the soybean area is expected to grow (Conab, 2014). This information along the same lines of the results obtained in this report. In this study, the planted area of grains in this region should expand by 18.7% over the next 10 years. This equates to achieve an area of 8.7 million hectares, which in its upper limit could reach 11.4 million hectares. Grain production in the states comprising the region should rise from 19.4 million tons in 2014/15 to 22.5 million in 2024/25. In its upper limit production at the end of the period could reach 27.9 million tons of grain. Soybeans exports for 2024/25 are projected 66.5 million tons. Representing an increase close to 20.0 million tons compared the quantity exported by Brazil in 2014/15.

42 41 The predicted change in 2025 relative to 2014/15 is an increase in the quantity of soybeans exports of the order of 42.1%. The soybean export projections of this report are slightly lower than those of the USDA, released in February They predicted 69.0 million tons of Brazilian exports of soybeans at the end of the next decade Table 10 - Production, Consumption and Export of Soybean (thousand tons) Production Consumption Export year Projection Up limit. Projection Up limit. Projection Up limit. 2014/15 94,281-44,200-46, /16 95, ,363 46,797 51,253 48,740 54, /17 100, ,740 45,308 51,609 50,710 58, /18 103, ,434 46,436 52,964 52,679 61, /19 106, ,977 47,565 54,312 54,649 65, /20 109, ,193 48,693 55,653 56,619 68, /21 113, ,274 49,822 56,988 58,589 71, /22 116, ,195 50,951 58,317 60,559 74, /23 119, ,013 52,079 59,641 62,528 77, /24 122, ,734 53,208 60,960 64,498 80, /25 126, ,380 54,336 62,274 66,468 83,427 Source: AGE/Mapa and SGE/Embrapa with Conab information * Models used: production - State Space, consumption - ARMA and exports - PRP. Variation % 2014/15 to 2024/25 Production 33.9% Consumption 22.9% Export 42.1%

43 42 Fig. 11 Soybean Production Projection Up limit. 160, , ,000 thousand tons 120, ,000 80,000 60,000 40,000 94, ,223 20, / / / / / / / / / / /25 Source: AGE/Mapa and SGE/Embrapa Fig. 12 Soybean Consumption Projection Up limit. 70,000 62,274 60,000 50,000 40,000 30,000 20,000 44,200 54,336 10, / / / / / / / / / / /25 thousand tons Source: AGE/Mapa and SGE/Embrapa

44 43 Fig Soybean Export Projection Up limit. 90,000 83,427 80,000 70,000 thousand tons 60,000 50,000 40,000 30,000 20,000 10, , / / / / / / / / / /24 66, /25 Source: AGE/Mapa and SGE/Embrapa Meal and Soybean Oil Meal and soybean oil show moderate dynamism of production in the coming years. The soybean meal production should increase 26.2% and the 21.1% oil. These percentages are slightly larger than has been observed in the last decade for both products. However, the meal consumption will have a stronger growth soybean oil, 34.6% and 30.6%, respectively. Meal exports are expected to increase 17.4% between 2014/15 and 2024/25, and the oil should fall by 6.5%. Domestic consumption should be in the coming years the main factor driving the soybean oil production, which is expected to grow at the end of the decade about 30.6% over the 2015 consumption.

45 44 Table 11 - Production, Consumption and Soybean Meal Export (thousand tons) Production Consumption Export year Projection Up limit. Projection Up limit. Projection Up limit. 2014/15 31,570-14,800-14, /16 32,767 35,222 15,363 16,028 15,591 17, /17 33,682 36,810 15,831 16,749 15,932 18, /18 34,073 37,975 16,305 17,383 15,932 19, /19 34,920 39,005 16,824 18,044 16,182 19, /20 35,949 40,490 17,351 18,718 16,379 20, /21 36,592 41,473 17,868 19,366 16,598 21, /22 37,451 42,612 18,375 19,987 16,801 21, /23 38,210 43,704 18,889 20,609 16,967 22, /24 39,013 44,748 19,406 21,227 17,191 22, /25 39,850 45,870 19,919 21,838 17,380 23,227 Source: AGE/Mapa and SGE/Embrapa with Conab information *Models used: production, consumption and exports - State Space Variation % 2014/15 to 2024/25 Production 26.2% Consumption 34.6% Export 17.4%

46 45 Table 12 - Production, Consumption and Soybean oil Export (thousand tons) Production Consumption Export year Projection Up limit. Projection Up limit. Projection Up limit. 2014/15 7,995-6,500-1, /16 8,475 9,198 6,699 7,250 1,341 1, /17 8,067 9,090 6,898 7,677 1,332 2, /18 8,269 9,306 7,097 8,051 1,324 2, /19 8,471 9,522 7,296 8,398 1,315 2, /20 8,672 9,737 7,495 8,727 1,306 2, /21 8,874 9,953 7,694 9,044 1,297 2, /22 9,076 10,168 7,893 9,351 1,289 2, /23 9,278 10,384 8,092 9,650 1,280 3, /24 9,479 10,599 8,291 9,944 1,271 3, /25 9,681 10,814 8,490 10,232 1,262 3,297 Source: AGE/Mapa and SGE/Embrapa with Conab information * Models used: production - ARMA, consumption and exports - PRP Variation % 2014/15 to 2024/25 Production 21.1% Consumption 30.6% Export -6.5%

47 46 Fig Production, Consumption and Soybean Meal Export Production Consumption Export thousand tons 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, ,570 14,800 14, / / / / / /20 39,850 19,919 17,380 Source: AGE/Mapa and SGE/Embrapa Fig Production, Consumption and Soybean oil Export Production Consumption Export 12,000 10,000 8,000 6,000 4,000 2,000 9,681 7,995 8,490 6,500 1,350 1, / / / / / / / / / / / / / / / /25 thousand tons Source: AGE/Mapa and SGE/Embrapa

48 47 Domestic consumption of soybean oil projected for 2024/25 is estimated at 8.5 million tons. Most of the oil is intended for human consumption and the other part has been designed to produce biodiesel. According to ABIOVE, in 2015 the average of soybean oil to biodiesel use, should be 3 million tons. This represents 46.0% of soybean oil production in the 2014/15 year, which is 6.5 million tons. For soybean meal, the next decade, about 50.0% of the production will be directed to domestic consumption, and 44.0% for exports. h. Coffee COFFEE National Production 2,543, Major producing states Minas Gerais Year 2014/2015 (Thousand tons) 1,354,404 % 53.2 MG 53.2 BA 8.8 ES 23.6 Espírito Santo 600, Bahia 223, Total 2,178, Source Conab - survey may/2015 Estimates for 2015 indicate a crop of 45.3 million bags of 60 kg, the same value obtained in the year (DCAF-CONAB-ABIC - MDI / SECEX-OIC-CEPEA / ESALQ / BM & F, 2015). Of the total production, 74.0% is concentrated Arabica coffee in Minas Gerais and 26.0% of Canephora where the main producer is the Holy Spirit.

49 48 The projections show that production must rise 2024/ % over 2014/15. This change is equivalent to an annual growth rate of 2.0% Consumption is estimated to grow 30.7% by 2024/25, reaching 27.0 million bags of 60 kg, on an annual growth rate of 2 6%. The graph shows the harvested area and coffee production in the period 2001 to Note that the area has remained between 2.3 million and 1.9 million hectares. But in the last three years has accentuated droughts affected the main producing regions such as Minas Gerais and Espirito Santo, resulting in reduced harvested area and production. Fig. 16 Harvest Area and Coffee Production 4,000 3,500 3,000 2,500 2,000 1,500 1, Coffee - harvested area (ha) and production (Tons) 3,639 Production (thousand tons) 2,336 Area (thousand ha) 2,544 1, Source: IBGE Consumption estimated by the Ministry of Agriculture in 2015 is 21.0 million bags. It has grown at an average annual rate of 4.8% according to the ICO - International Coffee Organization, while the world average rate has been 2.7% per year. The ABIC- Brazilian Association of Coffee Industry estimated that in 2014 the domestic per capita consumption was 6.12 kg or 4.89 as raw coffee as roasted and ground coffee. Coffee exports are projected for 2024/25 at 45.0 million bags of 60 kg. This projected volume represents an increase of 22.7% compared to exports of 2014/15, representing an average annual rate of 2.2%. It is expected the country to continue as the world s largest producer and leading exporter and keep the usual buyers in 2014 were the main European Union (52.0%), USA (19.5%) and Japan, 8,2%.