World Grain - March 2014 - 74

JUNE 2 - 4, 2014
KRAKOW, POLAND

FEATURE: brazil facing logistic issues

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to corn. If trend line yields are met, the
nation's yield will be 3 tonnes per hectare for a harvest of 91 million tonnes,
according to the Rabobank report.
Most producing regions in Brazil experienced a moderate drought between
November and December. However, a
reduction in yields of up to 15% is only
expected in about 30% of the crop in
that region. The weather improved in
January and provided good recovery to
the remaining late-maturing crops.
Global soybean production is expected to surpass consumption by 16 million
tonnes, the highest margin in five years,
according to estimates from the U.S.
Department of Agriculture (USDA).
Production is estimated to increase by
7% to 286 million tonnes, while consumption is expected to increase 4.9%
to 271 million tonnes.
As a result, prices in the first quarter of 2014 are expected to reach near
$12.50 per bushel, but gradually dropping to $11 per bushel in the fourth
quarter, with pressure from the 2014-15
U.S. crop.
A sharp revision in the soybean-tosoy oil price ratio in 2013 pressured local crushing gross margins. They ended
2013 at $50 per tonne compared to the
five-year average of $65 per tonne.
Increased competition in the global
vegetable oil market, especially from
palm oil, has caused crush margins to
drop. With palm investments increasing

worldwide, Rabobank said the pressure
is likely to continue into the near future.
However, an increase in the mandatory
biodiesel blending level could help alleviate the erosion on crushing margins, the
report said. An increase in the blending
level from 5% to 7% could increase demand for soy oil by 15 million tonnes. Soy
oil accounted for 75% of the feedstock
used in biodiesel production in 2013.
Brazil's biodiesel industry is dependent on the domestic market for further
expansion because exports are minimal.
The higher costs associated with a cumbersome tax structure and higher logistical costs have prevented the Brazilian
biodiesel industry from effectively competing in the international market in the
short term.
The national blending target has been
stagnant at 5% since early 2010, resulting in domestic demand of about 2.3
million tonnes, about 35% of the total
installed capacity.
Competition is fierce among producers, according to the Rabobank report.
Production was up 9% in 2013, but prices were 12.7% lower than the average
in 2012.
The Brazilian Biodiesel Union has requested an increase in the blend requirement as well as setting a goal of reaching B20 by 2020. Efforts have been hindered by the wariness of food inflation,
the report said.
"Meanwhile, the Brazilian biodiesel

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World Grain - March 2014

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