South America is a major player in world grain and soybean markets. It already produces one and one-half times the soybeans that the United States produces and it is the second-largest exporter of corn in the world.
It's influence will continue to grow and it is likely that Brazil, alone, will be the No. 1 commodity/food exporter in the world in our lifetimes. Without including California, Brazil probably already is ahead of the United States.
This locks North and South American agriculture systems into a complex web of influences and countervailing influences. What happens in one region affects decisions in production and marketing in the other. This drives both short- and long-term production and pricing cycles and ultra-long term production shifts for both. While South America produces more soybeans, the U.S. produces three and a half times the corn that South America produces.
It is vital to understand the production, marketing, infrastructure, government policies, export and other systems in both places. That information also needs to be layered with an understanding of the demand side driven by growing economies like China. China already is importing soybeans amounting to as much as three-fourths of the soybeans produced in Brazil.
But gathering the needed information can be difficult. There are differences in how agricultural statistics are gathered and reported. In the United States, the U.S. Department of Agriculture statistics are the gold standard. In Brazil, reports come from the National Supply Co., which is a public company operating under the Ministry of Agriculture. In Argentina, however, government crop reports generally are unreliable.
Getting past such difficulties requires an information source or sources with a strong set of skills that include:
On top of this skill set, credibility is an important factor. There are few independent sources of information on South American agriculture. The best sources will not have positions in the market that might influence their research or analysis. They also will be independent of companies and others that operate in the region.
When these standards are met, it is important that information you are receiving is coming from a physical presence in-country. That requires travel and interviews all across countries like Brazil, combined with hands-on, in-field estimates for acreage and production.
There is no substitute for credible, timely, hands-on information. It is a fundamental requirement for assessing and evaluating South American crops in the context of North American and global production and markets. The economic consequences of basing sales and hedging decisions on weak information in both the short and long terms can be severe.