Drop in margins will be the biggest concern for producers in 2024 – 11/23/2023 – Vaivém

The prospects for Brazilian agricultural production in 2024 remain good, although the final result depends on the evolution of the climate, which, in recent years, has been having a major impact on the sector.

The next harvest presents itself, however, with great concern for producers regarding margins. Production costs have fallen, but current commodity prices are far from the peak recorded since 2020.

When evaluating the prospects for agribusiness in 2024, Rabobank analysts predict a reduction in input pressure on production and continued demand for these products.

With the drop in input prices this year, soybean and corn production costs for the 2023/24 harvest fall by 16% and 5%, respectively, in Mato Grosso, the main producing state.

Relief will also come to coffee producers, sugar cane and citrus growers. The cost of fertilization in these sectors will be between 35% and 39% below those of the previous harvest, according to the bank’s analysts.

The drop in fertilizer prices will cause deliveries of this input to rise to 45 million tons next year, 2.5% more than this year.

The consumption of pesticides is still uncertain, as producers wait for a further drop in prices and postpone purchases. In analysts’ assessment, the cost of seeds will be lower.

The soybean planting area increases to 45.3 million hectares, an increase of 2.5%, but the sector will be marked by a reduction in margins.

Production rises to 163 million tons in 2023/24, with the possibility of exports of 100 million and internal crushing of 54 million.

Industry margins will also be affected this year, due to Argentina’s return to global supply of soybean meal and oil. With the drop in soybean production in Argentina this year, Brazil occupied a large part of the international market for these products.

Corn, with low prices and prospects for reduced margins, will have a planting of 22.3 million hectares, below the 2022/23 area. Production falls 5%, to 127 million tons, and exports drop to 48 million.

The delay in planting soybeans, due to irregular rainfall, should delay the sowing of corn, which occurs shortly after the oilseed harvest. Missing the ideal planting window reduces productivity.

The 2023/24 sugar cane harvest was of great volume and with exceptional prices. The price scenario could repeat itself in 2024/25. India and Thailand have problems with their crops.

Sugarcane crushing in 2024/25 is expected to fall to 610 million tons in the center-south, 2.4% less than in 2023/24. It will be a more sugar harvest, due to international prices. Sugar production rises to 40.9 million tons, and ethanol production drops to 31.7 billion liters.

Rabobank forecasts a coffee harvest of 66 million bags in 2023/24, an increase of 10%. Considering the 2023 harvest and the scenario of a good harvest in 2024, exports are between 40 million and 42 million bags (July to June), and next year’s average prices will be US$ 1.5 per pound .

The area to be sown with cotton increases to 1.8 million hectares in 2023/24. Fiber gains space from corn, which has a reduced margin and delays in planting. After a record 3.2 million tons this year, cotton production is expected to reach 3 million in 2023/24.

The scenario is challenging for citrus farming. Brazilian juice production drops to 900 thousand tons in the 2023/24 harvest, and global juice production stands at 1.4 million. High price of juice and loss of consumer income affect demand.

This lower supply of juice and the increase in the final product at retail will guarantee good prices for producers in 2024.

The protein sector also shows improvements next year. Beef production rises to 9.1 million tons, an increase of 1.5%, and exports are expected to reach 2.25 million, 2.5% more than in 2023.

Imports from China and domestic consumption should allow this expansion. Brazil will, however, face stiffer competition from Australia, New Zealand and the United States. Lower average prices require more efficiency and productivity from livestock farmers.

For Rabobank analysts, pork production will grow 3.5%, reaching 5.2 million tons in 2024. Lower costs and increased domestic and Chinese demands will allow a better margin for producers. Exports, up 4%, rise to 1.21 million tons.

Chicken production maintains its growth rate, with meat production estimated at 15.88 million tons next year. Exports grow 3.5%, to 5.1 million.

Average prices next year should be similar to those in the second half of this year, according to the bank’s estimates.

The milk market experienced a scenario of lower-than-expected demand and fluctuations in product supply this year.

Capture by the industry, which should be 23.7 billion liters, rises to 24 billion in 2024. The average price paid to the producer per liter will be R$2.55, with an adjustment of 4.1% in relation to this year.

Milk prices are recovering on the international market, and Brazilian imports, which were quite strong this year, will depend on the exchange rate in 2024. The American currency should be worth R$5.15 next year, the bank predicts.