First Drought, Now Iran Retaliates Against Brazil's Corn Crop

RIO GRANDE DO SUL, Brazil -- Just as Brazilian farmers experience a drought with this year's corn crop, global events this week bring even worse news.

Iran has announced it will no longer purchase corn from Brazil. On an annual basis, Iranians buy $2.2 billion worth of corn, soybeans, and beef from Brazil. That is a retaliation after Brazilian president Bolsonaro stood on U.S. President Donald Trump's side following a recent killing of an Iranian military leader.

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Crop Estimates

Meanwhile, Brazil's National Supply Company (Conab) released estimates for the country's crops this morning that seem to ignore drought worries. While its soybean acreage is 90.91 million acres, compared to 90.92 million acres last month, Conab's fourth survey since the season started indicates a total 2020 harvest of 122.2 million metric tons of the oilseed, which would be 2.6% higher than the previous cycle.

Though there are significant worries for the corn crops due to the drought in Rio Grande do Sul, the top summer corn producer in the country, the agency maintained its estimate for first crop production at 26.6 million metric tons – a 3.8% decrease compared with 2019. Conab attributes the forecast to a 1.1% increase in acreage.

INTL FCStone, the international private consultancy, on the other hand, decreased its forecast for the Brazilian corn output by 3.4%. According to FCStone, the production would be 25.75 million metric tons during this first crop. The estimate for the state of Rio Grande do Sul alone has an estimated production of 4.8 million metric tons of the coarse grain – 20% less than the previous season.

Drought-like Conditions

Several regions of the southernmost state of Brazil haven't seen any rain since December 18, 2019. Eventually, soybean losses will happen, but most agronomists think that the lack of moisture only affects corn for now. Farmers remember the record losses of 2012, the previous drought in the state with over 45% of the corn crop lost with also significant losses of soybeans and rice. This year, the lack of rain also affects significant tobacco and cattle. There is a forecast of rain for key areas of Rio Grande do Sul this Wednesday, but most think that this precipitation won't be sufficient.

Many municipalities in Rio Grande do Sul declared a state of emergency, which is when farmers are allowed to have extended their tax deadlines due to difficult weather situations. That is added to the worries regarding a devalued real, which reached a record low value of R$4.30 when planting. This worries farmers because many of the inputs are imported and become more expensive. The value now dropped to nearly R$4 for every dollar.

Júlio Borella, a farmer who plants both in the Southern part of Rio Grande do Sul and the Northwestern municipality of Passo Fundo, says that most of estimates are too optimistic.

"I think that there will be much larger losses, there are already larger losses than 20%. In the case of the South of Rio Grande do Sul, we don't have rain since November. It is hard to know about the yields because in the Southern border [with Uruguay] corn and soybeans are new," stated Borella.

Jair Dutra Rodrigues, president of the Association of Farmers in Passo Fundo, thinks the losses would be between 15% and 20% in corn in the region. Another northwestern location in the state sees a similar situation. Indio dos Santos, a broker in the town of Ijui who advises farmers, tells Agriculture.com that losses would also affect soybeans.

"We see losses above 30% in corn. It is still hard to quantify soybean losses. Some crops are just normal, some could not finish planting, but that could be a final yield loss of 15% to 20%. It all reminds us of 2012," he said.

In the northeast municipality of Lagoa Vermelha, there is a wide fear of also having soybean losses.

"We need rain very soon. On corn, some farmers have losses of 20%, some 50%, some account 60%, but if it doesn't rain, we will also lose the soybean crop," says agronomist Carlos Delavalle Filho from Lagoa Vermelha.

Most of the other producing states in Brazil are having a good crop, despite a rust alert. "In Castro, Paraná, we are having regular rain. Frost so far is being controlled. There is no emergency yet," said Paulo Bertolini, a member of the Brazilian Growers Association.

Argentina's Soybean Crop

Recently, the USDA's Global Agricultural Information Network (GAIN) released its latest estimate of the 2019/20 Argentina soybean planted area. It's forecast has the South American soybean acreage at 18 million hectares and production at 53 million tons, unchanged since September.

"Despite dry weather in the southern pampas, the soybean crop is 79% planted and in good condition. 2018/19 soybean exports are reduced to 10.2 million tons. On December 14, the new Argentine government raised export taxes on grains and oilseeds. However, anticipation of higher export taxes led to record-setting forward sales and export registration by farmers and exporters hoping to lock-in sales under the previous export tax rates," the GAIN report stated.