Brazil extends its sway into agriculture commodity markets
Now it is time to reach others bigger markets for agricultural commodities. Soybeans and corn are the targets. Brazil's expanding influence is contributing to a decline in prices and dimming the outlook for the entire sector.
Everybody knows that Brazil represents a force in coffee, sugar and orange juice, markets in which it is the world's No. 1 supplier.
"Brazil is the world's farm," said James Cordier, president of Tampa, Fla.-based brokerage Liberty Trading Group, who has placed bets that coffee prices will fall through March. "They're dominating supply pressure in just about every market."
Coffee prices shed 13% in the second quarter, nearing a four-year low. Brazilian growers have begun picking what the government forecasts will be a record "off-cycle" crop.
Sugar prices were down 7.3% in the period and are close to a three-year low. Again, the culprit is Brazil, which is forecast to produce a record amount of sugar cane. The International Sugar Organization, an industry group, expects global supplies to outpace demand by a record 10 million tons this year, largely because of Brazil.
While Brazil's output has long swayed prices of coffee and sugar, its impact on other agricultural markets is becoming more pronounced.
Indeed, recent price booms that encouraged Brazilian farmers to rev up investment ended up pushing prices lower. That is occurring against a backdrop of slower economic growth, most notably in China, the biggest importer of many commodities, including soybeans and cotton.
Brazil's soybean crop is expected to reach a record of 85 million metric tons in the 2013-2014 crop season, according to the U.S. Department of Agriculture. The country's soybean output in the 2012-13 season rose 34% compared with five seasons ago, an increase largely fueled by China's more protein-focused diet.
Brazil's corn output increased 36% in the past five seasons, and it harvested its biggest crop on record last harvest, according to the USDA.
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