Required Report - Public distribution

**Date:** 5/1/2007

**GAIN Report Number:** BR7618

BR7618

**Brazil**

**Oilseeds and Products**

**Annual Soybean Report**

**2007**

**Approved by:**

![](media/image1.wmf)Alan D. Hrapsky, Agricultural Counselor

U.S. Embassy

**Prepared by:**

Elizabeth Mello, Agricultural Attaché

**Report Highlights:**

With fewer resources and on a reduced area of 20.8 million hectares,
Brazilian farmers will harvest a record soybean crop of 58.2 MMT, 2
million tons greater than last year's effort. Ideal climate conditions
contributed to the achievement. High international soybean prices are
expected to bail farmers out of much of the debt that they have
accumulated over the past three seasons due to drought and low prices.
With the Brazilian soybean harvest now 95 percent complete, expectations
are high for next year's crop, projected to reach 61 MMT.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Brasilia \[BR1\]

\[BR\]

Table of Contents

[Executive Summary 3](#executive-summary)

[Economic Overview 4](#economic-overview)

[Economic Indicators 4](#economic-indicators)

[Statistical Tables 5](#statistical-tables)

[A. Production, Supply, & Demand Tables
5](#production-supply-demand-tables)

[B. Trade Matrices 11](#b.-trade-matrices)

[Soybeans 11](#soybeans)

[Soybean Meal 12](#soybean-meal)

[Soybean Oil 13](#soybean-oil)

[Cottonseed Meal 14](#cottonseed-meal)

[Cottonseed Oil 15](#cottonseed-oil)

[C. Prices 16](#c.-prices)

[D. Policy Table 19](#d.-policy-table)

[Production 20](#production)

[2006/07 Crop Situation 20](#crop-situation)

[2006/07 Crop Estimates by State 20](#crop-estimates-by-state)

[Mato Grosso 20](#mato-grosso)

[Other Center-West 21](#other-center-west)

[South 21](#south)

[Southeast 22](#southeast)

[Northeast 22](#northeast)

[North 22](#north)

[2007/08 Crop Outlook 23](#crop-outlook)

[Area 23](#area)

[Production 24](#production-1)

[Consumption 24](#consumption)

[Input Tables 25](#input-tables)

[Stocks 25](#stocks)

[Exports 26](#exports)

[Transportation 27](#transportation)

[Policy 29](#policy)

[Moratorium on Soybeans from the Amazon
31](#moratorium-on-soybeans-from-the-amazon)

[Interstate Movement Tax (ICMS) Exemption (Lei Kandir)
31](#interstate-movement-tax-icms-exemption-lei-kandir)

[Biodiesel 31](#biodiesel)

[Brazil's Biosafety Law & Biotech Soybeans
33](#brazils-biosafety-law-biotech-soybeans)

[Import Tariffs 34](#import-tariffs)

# Executive Summary

Brazil ranks as the world's leading soybean exporter and second-largest
producer behind the United States. In 2007, soybeans will make up a
weighty 50 percent of Brazil's total grains. Nevertheless, what seems to
be a positive performance does not capture the reality the sector has
come into contact with over the past three years. Discouragement has
stemmed from detrimental weather, Soybean Rust, cheapening soybean
exports, and the strong national currency (Real) vis-à-vis the dollar,
which has slipped from 2.20 to 2.0 over the year. However, the business
of growing soybeans in Brazil still continues to thrive, as producers
shrug off erratic weather conditions and produce in spite of the
resistance.

They were finally rewarded for their determination, when at the
commencement of the planting season in September 2006, international
prices went on an upswing. Then El Nino took effect, and it began to
rain to the point of excessiveness in the Center-West, however, welcome
after three years of drought.

Brazil has the technological conditions and area available to become the
largest oilseed producer in the world. According to local agricultural
groups, there are still 90 million hectares available in Brazil without
causing deforestation. Farmer groups in Brazil complain that
agricultural policy must change in order for Brazil to take the lead in
soybean production.

The status of being a "new agricultural frontier" gives Brazil an edge
in the soybean business, taking into account that other world soybean
producers such as the US and Argentina face limitations, lacking
available land for expansion, especially with corn area expansion taking
place due to growing interest in ethanol.

**Projections**

This year's harvest was the antithesis of last year's situation. In
dramatic comparison with previous years, yields in 2007 were boosted by
a near-perfect combination of sun and precipitation. High international
prices are expected to bail farmers out of much of the debt that they
have accumulated over the past three seasons of drought and low prices.
Post's current production estimate is 58.2 million metric tons (MMT).
The area projection is 20.75 million hectares, a 6% decrease over last
year's area. This decline occurred as a result of the poor financial
situation of the farmers, suffering from a lack of financing available
in conjunction with their compounding debt. Some shifting from soy to
sugarcane occurred. In the South, area was basically maintained, while
the Center-west lost area to sugarcane, cotton, and pasture. Soy
expansion in most of the frontier areas came to a halt.

Post forecasts 2007/08 production at 61 MMT and 2.78 tons per hectare.
In spite of possible effects from La Niña, economic conditions will be
more favorable for the ag sector than the past three years, allowing
producers to once again pursue more aggressive production strategies.
Production continues to benefit from the changes to Brazilian
biotechnology policy that took place in 2006.

For 2007/08, the expected decrease in U.S. soybean area to expand corn
production has caught the attention of Brazilian farmers. Post expects
it to encourage Brazilian soy area expansion next season, which will
mean that clearing of new land is likely to resume in the expansion
areas of Center-west and Northern Brazil. Post expects area to rebound 4
percent to 21.9 million hectares. Although incentives to plant soybeans
next year abound, Post is not projecting a complete recuperation of the
soy area lost in the 06/07 crop season due to the fast-paced increase in
sugarcane area, which will compete with soy area in the coming year.

# Economic Overview

# 

President Lula and his economic team have implemented orthodox fiscal
and monetary policies and pursued many necessary reforms. Brazil\'s
external accounts, aided by a stable international environment, have
improved substantially over the last three years. GDP growth dropped to
2.9% in 2005 and 3.7% in 2006, down from a strong performance (5.7%) in
2004. Market expectations are for 4% growth in 2007. Brazil has
experienced booming exports, healthy external accounts, inflation under
control, decreasing unemployment and reductions in the debt-to-GDP
ratio. Buoyed by exports and investment inflows, the Real has remained
at relatively appreciated levels, allowing the government and businesses
to pay down external debt, although many in agriculture and in industry
complain the exchange rate is making Brazilian exports less competitive.
The government pre-paid its IMF obligations, its last remaining
rescheduled Paris Club obligations, and in April 2006 announced it had
retired the last of its Brady bonds. This removes from the books all
restructured debt associated with Brazil\'s late-1980\'s default. Based
upon the improving external debt dynamics, Fitch IBCA upgraded its
credit rating on Brazil\'s sovereign debt in February 2006, to BB (two
notches below investment grade).

The public sector net-debt-to-GDP ratio is on a downward trend but
remains high, at about 50%. Real interest rates also are declining, but
remain high. Analysts believe that sustainably reducing interest rates
will require reductions in the government\'s borrowing requirement,
reform of the financial sector and of the judiciary. Income and land
distribution remain skewed. Investment and domestic savings are low,
although growing. The informal sector constitutes between 35 to 40
percent of the economy, in part because the tax burden (nearly 38
percent of GDP) is high by comparison with other emerging markets.
Sustaining high growth rates in the longer term depends on reforms to
improve productivity and increase investment, including fiscal reform,
tax reform and labor code reform.

# 

# Economic Indicators

  --------------- ------ ------ ------ ------ ------ ------- ------- --------
                  2000   2001   2002   2003   2004   2005    2006    2007\*

  GDP Growth (%)  4      1.5    1.9    0.5    4.9    2.3     3.7     4

  Inflation (%)   6      7.7    12.5   9.3    7.6    5.7     3.1     3.2
  (IPCA/IBGE)                                                        

  Average         1.83   2.35   2.93   3.07   2.93   2.44    2.18    2.15
  Exchange Rate                                                      
  (R\$/US\$)                                                         

  Total Exports   55     58.2   60.4   73.1   96.5   118.3   137.5   148.4
  (US\$ billion)                                                     

  Total Imports   55.7   55.5   47.2   48.3   62.8   73.5    91.4    110
  (US\$ billion)                                                     
  --------------- ------ ------ ------ ------ ------ ------- ------- --------

\*Projected

# Statistical Tables

## Production, Supply, & Demand Tables

+---------------+------+-------+------+-------+------+-------+------+
| ####          |      |       |      |       |      |       |      |
| ### PSD Table |      |       |      |       |      |       |      |
|               |      |       |      |       |      |       |      |
| ######## Co   |      |       |      |       |      |       |      |
| untry: Brazil |      |       |      |       |      |       |      |
|               |      |       |      |       |      |       |      |
| **Oilseed,    |      |       |      |       |      |       |      |
| Soybean       |      |       |      |       |      |       |      |
| (Local)**     |      |       |      |       |      |       |      |
|               |      |       |      |       |      |       |      |
| **(1000       |      |       |      |       |      |       |      |
| HA)(1000      |      |       |      |       |      |       |      |
| MT)**         |      |       |      |       |      |       |      |
+---------------+------+-------+------+-------+------+-------+------+
|               | **20 | *     | **20 | **    | **20 | **    | **U  |
|               | 05** | *Revi | 06** | Estim | 07** | Forec | OM** |
|               |      | sed** |      | ate** |      | ast** |      |
+---------------+------+-------+------+-------+------+-------+------+
|               | **US | *     | **   | *     | **   | *     |      |
|               | DA** | *Post | USDA | *Post | USDA | *Post |      |
|               |      | Estim | Offi | Estim | Offi | Estim |      |
|               | **Of | ate** | cial | ate** | cial | ate** |      |
|               | fici |       | \    |       | \    |       |      |
|               | al** | *     | [Old | *     | [Old | *     |      |
|               |      | *\[Ne | \]** | *\[Ne | \]** | *\[Ne |      |
|               | **\  | w\]** |      | w\]** |      | w\]** |      |
|               | [Old |       |      |       |      |       |      |
|               | \]** |       |      |       |      |       |      |
+---------------+------+-------+------+-------+------+-------+------+
| **Market Year |      | 02    |      | 02    |      | 02    | MM/  |
| Begin**       |      | /2006 |      | /2007 |      | /2008 | YYYY |
+---------------+------+-------+------+-------+------+-------+------+
| **Area        | 2    | 22300 | 2    | 20800 | 0    | 21900 | (    |
| Planted**     | 2300 |       | 1100 |       |      |       | 1000 |
|               |      |       |      |       |      |       | HA)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Area        | 2    | 22229 | 2    | 20755 | 0    | 21900 | (    |
| Harvested**   | 2229 |       | 1000 |       |      |       | 1000 |
|               |      |       |      |       |      |       | HA)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Beginning   | 1638 | 1638  | 2252 | 1847  | 2078 | 1463  | (    |
| Stocks**      |      |       |      |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| *             | 5    | 56200 | 5    | 58200 | 0    | 61000 | (    |
| *Production** | 7000 |       | 8800 |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **MY          | 40   | 40    | 100  | 100   | 0    | 50    | (    |
| Imports**     |      |       |      |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **MY Imp.     | 0    | 0     | 0    | 0     | 0    | 0     | (    |
| from U.S.**   |      |       |      |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **MY Imp.     | 0    | 0     | 0    | 0     | 0    | 0     | (    |
| from the EC** |      |       |      |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **TOTAL       | 5    | 57878 | 6    | 60147 | 2078 | 62513 | (    |
| SUPPLY**      | 8678 |       | 1152 |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **MY          | 2    | 24770 | 2    | 26700 | 0    | 28500 | (    |
| Exports**     | 4770 |       | 6700 |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **MY Exp. to  | 1    | 11121 | 9955 | 9955  | 0    | 0     | (    |
| the EC**      | 1121 |       |      |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Crush Dom.  | 2    | 28756 | 2    | 29000 | 0    | 30000 | (    |
| Consumption** | 8756 |       | 9400 |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Food Use    | 0    | 5     | 0    | 10    | 0    | 10    | (    |
| Dom.          |      |       |      |       |      |       | 1000 |
| C             |      |       |      |       |      |       | MT)  |
| onsumption.** |      |       |      |       |      |       |      |
+---------------+------+-------+------+-------+------+-------+------+
| **Fe          | 2900 | 2500  | 2974 | 2974  | 0    | 3100  | (    |
| ed,Seed,Waste |      |       |      |       |      |       | 1000 |
| Dm.Cn.**      |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| #####         | 3    | 31261 | 3    | 31984 | 0    | 33110 | (    |
| ### TOTAL Dom | 1656 |       | 2374 |       |      |       | 1000 |
| . Consumption |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Ending      | 2252 | 1847  | 2078 | 1463  | 0    | 903   | (    |
| Stocks**      |      |       |      |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **TOTAL       | 5    | 57878 | 6    | 60147 | 0    | 62513 | (    |
| D             | 8678 |       | 1152 |       |      |       | 1000 |
| ISTRIBUTION** |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Calendar    | 0    | 0     | 0    | 0     | 0    | 0     | (    |
| Year          |      |       |      |       |      |       | 1000 |
| Imports**     |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Calendar Yr | 0    | 0     | 0    | 0     | 0    | 0     | (    |
| Imp. U.S.**   |      |       |      |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Calendar    | 0    | 0     | 0    | 0     | 0    | 0     | (    |
| Year          |      |       |      |       |      |       | 1000 |
| Exports**     |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Calndr Yr   | 0    | 0     | 0    | 0     | 0    | 0     | (    |
| Exp. to       |      |       |      |       |      |       | 1000 |
| U.S.**        |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+

+---------+--------+--------+--------+--------+-----+--------+------+
| **PSD   |        |        |        |        |     |        |      |
| Table** |        |        |        |        |     |        |      |
|         |        |        |        |        |     |        |      |
| **C     |        |        |        |        |     |        |      |
| ountry: |        |        |        |        |     |        |      |
| B       |        |        |        |        |     |        |      |
| razil** |        |        |        |        |     |        |      |
|         |        |        |        |        |     |        |      |
| **Meal, |        |        |        |        |     |        |      |
| Soybean |        |        |        |        |     |        |      |
| (L      |        |        |        |        |     |        |      |
| ocal)** |        |        |        |        |     |        |      |
|         |        |        |        |        |     |        |      |
| **(1000 |        |        |        |        |     |        |      |
| MT))**  |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
|         | **     | **Rev  | **     | **Esti | **  | **Fore | **U  |
|         | 2005** | ised** | 2006** | mate** | 200 | cast** | OM** |
|         |        |        |        |        | 7** |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
|         | **     | **Post | **USDA | **Post | **U | **Post |      |
|         | USDA** | Esti   | Of     | Esti   | SDA | Esti   |      |
|         |        | mate** | ficial | mate** | Of  | mate** |      |
|         | **Offi |        | \[O    |        | fic |        |      |
|         | cial** | **\[N  | ld\]** | **\[N  | ial | **\[N  |      |
|         |        | ew\]** |        | ew\]** | \[O | ew\]** |      |
|         | **\[O  |        |        |        | ld\ |        |      |
|         | ld\]** |        |        |        | ]** |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| *       |        | 0      |        | 0      |     | 0      | MM/  |
| *Market |        | 2/2006 |        | 2/2007 |     | 2/2008 | YYYY |
| Year    |        |        |        |        |     |        |      |
| Begin** |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| **      | 28756  | 28756  | 29400  | 29400  | 0   | 30000  | (    |
| Crush** |        |        |        |        |     |        | 1000 |
|         |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| **Extr. | 0.     | 0.     | 0      | 0.     | 0   |        | (    |
| Rate,   | 776429 | 776429 | .77551 | 782313 |     |        | PERC |
| 999     |        |        |        |        |     |        | ENT) |
| .9999** |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| **Be    | 640    | 640    | 894    | 894    | 835 | 324    | (    |
| ginning |        |        |        |        |     |        | 1000 |
| S       |        |        |        |        |     |        | MT)  |
| tocks** |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| **Produ | 22327  | 22327  | 22800  | 23000  | 0   | 23750  | (    |
| ction** |        |        |        |        |     |        | 1000 |
|         |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| **MY    | 214    | 214    | 250    | 230    | 0   | 210    | (    |
| Im      |        |        |        |        |     |        | 1000 |
| ports** |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| **MY    | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| Imp.    |        |        |        |        |     |        | 1000 |
| from    |        |        |        |        |     |        | MT)  |
| U.S.**  |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| **MY    | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| Imp.    |        |        |        |        |     |        | 1000 |
| from    |        |        |        |        |     |        | MT)  |
| the     |        |        |        |        |     |        |      |
| EC**    |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| **TOTAL | 23181  | 23181  | 23944  | 24124  | 835 | 24284  | (    |
| S       |        |        |        |        |     |        | 1000 |
| UPPLY** |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| **MY    | 12287  | 12287  | 12465  | 13400  | 0   | 13600  | (    |
| Ex      |        |        |        |        |     |        | 1000 |
| ports** |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| **MY    | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| Exp. to |        |        |        |        |     |        | 1000 |
| the     |        |        |        |        |     |        | MT)  |
| EC**    |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| **Ind   | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| ustrial |        |        |        |        |     |        | 1000 |
| Dom.    |        |        |        |        |     |        | MT)  |
| C       |        |        |        |        |     |        |      |
| onsum** |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| **Food  | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| Use     |        |        |        |        |     |        | 1000 |
| Dom.    |        |        |        |        |     |        | MT)  |
| Con     |        |        |        |        |     |        |      |
| sump.** |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| **Feed  | 10000  | 10000  | 10644  | 10400  | 0   | 10550  | (    |
| Waste   |        |        |        |        |     |        | 1000 |
| Dom.    |        |        |        |        |     |        | MT)  |
| C       |        |        |        |        |     |        |      |
| onsum** |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| TOTAL   | 10000  | 10000  | 10644  | 10400  | 0   | 10550  | (    |
| Dom.    |        |        |        |        |     |        | 1000 |
| Cons    |        |        |        |        |     |        | MT)  |
| umption |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| Ending  | 894    | 894    | 835    | 324    | 0   | 134    | (    |
| Stocks  |        |        |        |        |     |        | 1000 |
|         |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| TOTAL   | 23181  | 23181  | 23944  | 24124  | 0   | 24284  | (    |
| DISTR   |        |        |        |        |     |        | 1000 |
| IBUTION |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| C       | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| alendar |        |        |        |        |     |        | 1000 |
| Year    |        |        |        |        |     |        | MT)  |
| Imports |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| C       | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| alendar |        |        |        |        |     |        | 1000 |
| Yr Imp. |        |        |        |        |     |        | MT)  |
| U.S.    |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| C       | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| alendar |        |        |        |        |     |        | 1000 |
| Year    |        |        |        |        |     |        | MT)  |
| Exports |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| Calndr  | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| Yr Exp. |        |        |        |        |     |        | 1000 |
| to U.S. |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+

+---------+--------+--------+--------+--------+-----+--------+------+
| **PSD   |        |        |        |        |     |        |      |
| Table** |        |        |        |        |     |        |      |
|         |        |        |        |        |     |        |      |
| **C     |        |        |        |        |     |        |      |
| ountry: |        |        |        |        |     |        |      |
| B       |        |        |        |        |     |        |      |
| razil** |        |        |        |        |     |        |      |
|         |        |        |        |        |     |        |      |
| **Oil,  |        |        |        |        |     |        |      |
| Soybean |        |        |        |        |     |        |      |
| (L      |        |        |        |        |     |        |      |
| ocal)** |        |        |        |        |     |        |      |
|         |        |        |        |        |     |        |      |
| **(1000 |        |        |        |        |     |        |      |
| MT)**)  |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
|         | **     | **Rev  | **     | **Esti | **  | **Fore | **U  |
|         | 2005** | ised** | 2006** | mate** | 200 | cast** | OM** |
|         |        |        |        |        | 7** |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
|         | **USDA | **     | **USDA | **Post |     | **     |      |
|         | Of     | Post** | Of     | Esti   |     | Post** |      |
|         | ficial |        | ficial | mate** |     |        |      |
|         | \[O    | **Esti | \[O    |        |     | **Esti |      |
|         | ld\]** | mate** | ld\]** | **\[N  |     | mate** |      |
|         |        |        |        | ew\]** |     |        |      |
|         |        | **\[N  |        |        |     | **\[N  |      |
|         |        | ew\]** |        |        |     | ew\]** |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| Market  |        | **02/  |        | **02/  |     | **02/  | **M  |
| Year    |        | 2006** |        | 2007** |     | 2008** | M/YY |
| Begin   |        |        |        |        |     |        | YY** |
+---------+--------+--------+--------+--------+-----+--------+------+
| Crush   | 28756  | 28756  | 29400  | 29400  | 0   | 30000  | **(  |
|         |        |        |        |        |     |        | 1000 |
|         |        |        |        |        |     |        | M    |
|         |        |        |        |        |     |        | T)** |
+---------+--------+--------+--------+--------+-----+--------+------+
| Extr.   | 0.     | 0.     | 0.     | 0.     | 0   | 0.     | (    |
| Rate,   | 191995 | 191995 | 191327 | 193537 |     | 191667 | PERC |
| 9       |        |        |        |        |     |        | ENT) |
| 99.9999 |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| Be      | 248    | 248    | 250    | 250    | 248 | 335    | (    |
| ginning |        |        |        |        |     |        | 1000 |
| Stocks  |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| Pro     | 5521   | 5521   | 5625   | 5690   | 0   | 5750   | (    |
| duction |        |        |        |        |     |        | 1000 |
|         |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| MY      | 18     | 18     | 0      | 10     | 0   | 8      | (    |
| Imports |        |        |        |        |     |        | 1000 |
|         |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| MY Imp. | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| from    |        |        |        |        |     |        | 1000 |
| U.S.    |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| MY Imp. | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| from    |        |        |        |        |     |        | 1000 |
| the EC  |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| TOTAL   | 5787   | 5787   | 5875   | 5950   | 248 | 6093   | (    |
| SUPPLY  |        |        |        |        |     |        | 1000 |
|         |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| MY      | 2315   | 2315   | 2292   | 2000   | 0   | 2100   | (    |
| Exports |        |        |        |        |     |        | 1000 |
|         |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| MY Exp. | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| to the  |        |        |        |        |     |        | 1000 |
| EC      |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| Ind     | 252    | 252    | 285    | 295    | 0   | 300    | (    |
| ustrial |        |        |        |        |     |        | 1000 |
| Dom.    |        |        |        |        |     |        | MT)  |
| Consum  |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| Food    | 2970   | 2970   | 3050   | 3300   | 0   | 3410   | (    |
| Use     |        |        |        |        |     |        | 1000 |
| Dom.    |        |        |        |        |     |        | MT)  |
| C       |        |        |        |        |     |        |      |
| onsump. |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| Feed    | 0      | 0      | 0      | 20     | 0   | 20     | (    |
| Waste   |        |        |        |        |     |        | 1000 |
| Dom.    |        |        |        |        |     |        | MT)  |
| Consum  |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| TOTAL   | 3222   | 3222   | 3335   | 3615   | 0   | 3730   | (    |
| Dom.    |        |        |        |        |     |        | 1000 |
| Cons    |        |        |        |        |     |        | MT)  |
| umption |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| Ending  | 250    | 250    | 248    | 335    | 0   | 263    | (    |
| Stocks  |        |        |        |        |     |        | 1000 |
|         |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| TOTAL   | 5787   | 5787   | 5875   | 5950   | 0   | 6093   | (    |
| DISTR   |        |        |        |        |     |        | 1000 |
| IBUTION |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| C       | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| alendar |        |        |        |        |     |        | 1000 |
| Year    |        |        |        |        |     |        | MT)  |
| Imports |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| C       | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| alendar |        |        |        |        |     |        | 1000 |
| Yr Imp. |        |        |        |        |     |        | MT)  |
| U.S.    |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| C       | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| alendar |        |        |        |        |     |        | 1000 |
| Year    |        |        |        |        |     |        | MT)  |
| Exports |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| Calndr  | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| Yr Exp. |        |        |        |        |     |        | 1000 |
| to U.S. |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+

+----------------+------+------+------+-------+------+-------+------+
| **PSD Table**  |      |      |      |       |      |       |      |
|                |      |      |      |       |      |       |      |
| **Country:     |      |      |      |       |      |       |      |
| Brazil**       |      |      |      |       |      |       |      |
|                |      |      |      |       |      |       |      |
| **Oilseed,     |      |      |      |       |      |       |      |
| Cottonseed**   |      |      |      |       |      |       |      |
|                |      |      |      |       |      |       |      |
| **(1000        |      |      |      |       |      |       |      |
| HA)(1000 MT)** |      |      |      |       |      |       |      |
+----------------+------+------+------+-------+------+-------+------+
|                | **20 | **R  | **20 | **    | **20 | **    | **U  |
|                | 05** | evis | 06** | Estim | 07** | Forec | OM** |
|                |      | ed** |      | ate** |      | ast** |      |
+----------------+------+------+------+-------+------+-------+------+
|                | USDA | Post | USDA | Post  | USDA | Post  |      |
|                | Offi | Esti | Offi | Est   | Offi | Est   |      |
|                | cial | mate | cial | imate | cial | imate |      |
|                | \[O  | \[N  | \[O  | \[    | \[O  | \[    |      |
|                | ld\] | ew\] | ld\] | New\] | ld\] | New\] |      |
+----------------+------+------+------+-------+------+-------+------+
| Market Year    |      | 01/  |      | 01    |      | 01    | MM/  |
| Begin          |      | 2006 |      | /2007 |      | /2008 | YYYY |
+----------------+------+------+------+-------+------+-------+------+
| Area Planted   | 850  | 850  | 1050 | 1030  | 0    | 1065  | **(  |
| (COTTON)       |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | M    |
|                |      |      |      |       |      |       | T)** |
+----------------+------+------+------+-------+------+-------+------+
| Area           | 850  | 850  | 1050 | 1030  | 0    | 1065  | (    |
| Har            |      |      |      |       |      |       | 1000 |
| vested(COTTON) |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| Seed to Lint   | 0    | 0    | 0    | 0     | 0    | 0     | (    |
| Ratio          |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| Beginning      | 0    | 0    | 0    | 0     | 0    | 0     | (    |
| Stocks         |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| Production     | 1713 | 1713 | 2260 | 2260  | 0    | 2350  | (    |
|                |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| MY Imports     | 0    | 0    | 0    | 0     | 0    | 0     | (    |
|                |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| MY Imp. from   | 0    | 0    | 0    | 0     | 0    | 0     | (    |
| U.S.           |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| MY Imp. from   | 0    | 0    | 0    | 0     | 0    | 0     | (    |
| the EC         |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| TOTAL SUPPLY   | 1713 | 1713 | 2260 | 2260  | 0    | 2350  | (    |
|                |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| MY Exports     | 5    | 5    | 100  | 100   | 0    | 115   | (    |
|                |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| MY Exp. to the | 0    | 0    | 0    | 0     | 0    | 0     | (    |
| EC             |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| Crush Dom.     | 1470 | 1470 | 1875 | 1875  | 0    | 1935  | (    |
| Consumption    |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| Food Use Dom.  | 0    | 0    | 0    | 0     | 0    | 0     | (    |
| Consump.       |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| F              | 238  | 238  | 285  | 285   | 0    | 300   | (    |
| eed,Seed,Waste |      |      |      |       |      |       | 1000 |
| Dm.Cm.         |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| TOTAL Dom.     | 1708 | 1708 | 2160 | 2160  | 0    | 2235  | (    |
| Consumption    |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| Ending Stocks  | 0    | 0    | 0    | 0     | 0    | 0     | (    |
|                |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| TOTAL          | 1713 | 1713 | 2260 | 2260  | 0    | 2350  | (    |
| DISTRIBUTION   |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| Calendar Year  | 0    | 0    | 0    | 0     | 0    | 0     | (    |
| Imports        |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| Calendar Yr    | 0    | 0    | 0    | 0     | 0    | 0     | (    |
| Imp. U.S.      |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| Calendar Year  | 5    | 5    | 100  | 100   | 0    | 110   | (    |
| Exports        |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| Calndr Yr Exp. | 0    | 0    | 0    | 0     | 0    | 0     | (    |
| to U.S.        |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+

+------------+-------+-------+-------+-------+------+-------+--------+
| **PSD      |       |       |       |       |      |       |        |
| Table**    |       |       |       |       |      |       |        |
|            |       |       |       |       |      |       |        |
| **Country: |       |       |       |       |      |       |        |
| Brazil**   |       |       |       |       |      |       |        |
|            |       |       |       |       |      |       |        |
| **Meal,    |       |       |       |       |      |       |        |
| Co         |       |       |       |       |      |       |        |
| ttonseed** |       |       |       |       |      |       |        |
|            |       |       |       |       |      |       |        |
| **(1000    |       |       |       |       |      |       |        |
| MT)**      |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
|            | 2005  | Re    | 2006  | Est   | 2007 | For   | UOM    |
|            |       | vised |       | imate |      | ecast |        |
+------------+-------+-------+-------+-------+------+-------+--------+
|            | USDA  | Post  | USDA  | Post  | USDA | Post  |        |
|            | Off   | Est   | Off   | Est   | Offi | Est   |        |
|            | icial | imate | icial | imate | cial | imate |        |
|            | \[    | \[    | \[    | \[    | \[O  | \[    |        |
|            | Old\] | New\] | Old\] | New\] | ld\] | New\] |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Market     |       | 01    |       | 01    |      | 01    | M      |
| Year Begin |       | /2006 |       | /2007 |      | /2008 | M/YYYY |
+------------+-------+-------+-------+-------+------+-------+--------+
| Crush      | 1470  | 1470  | 1875  | 1875  | 0    | 1935  | (1000  |
|            |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| Extr.      | 0.4   | 0.4   | 0.464 | 0.4   | 0    | 0     | (PE    |
| Rate,      | 65986 | 71429 |       | 53333 |      | .4677 | RCENT) |
| 999.9999   |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Beginning  | 5     | 5     | 5     | 11    | 5    | 6     | (1000  |
| Stocks     |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| Production | 685   | 693   | 870   | 850   | 0    | 905   | (1000  |
|            |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| MY Imports | 0     | 6     | 0     | 5     | 0    | 5     | (1000  |
|            |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| MY Imp.    | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| from U.S.  |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| MY Imp.    | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| from the   |       |       |       |       |      |       | MT)    |
| EC         |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| TOTAL      | 690   | 704   | 875   | 866   | 5    | 916   | (1000  |
| SUPPLY     |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| MY Exports | 5     | 13    | 10    | 0     | 0    | 0     | (1000  |
|            |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| MY Exp. to | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| the EC     |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| Industrial | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| Dom.       |       |       |       |       |      |       | MT)    |
| Consum     |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Food Use   | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| Dom.       |       |       |       |       |      |       | MT)    |
| Consump.   |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Feed Waste | 680   | 680   | 860   | 860   | 0    | 905   | (1000  |
| Dom.       |       |       |       |       |      |       | MT)    |
| Consum     |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| TOTAL Dom. | 680   | 680   | 860   | 860   | 0    | 905   | (1000  |
| C          |       |       |       |       |      |       | MT)    |
| onsumption |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Ending     | 5     | 11    | 5     | 6     | 0    | 11    | (1000  |
| Stocks     |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| TOTAL      | 690   | 704   | 875   | 866   | 0    | 916   | (1000  |
| DI         |       |       |       |       |      |       | MT)    |
| STRIBUTION |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Calendar   | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| Year       |       |       |       |       |      |       | MT)    |
| Imports    |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Calendar   | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| Yr Imp.    |       |       |       |       |      |       | MT)    |
| U.S.       |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Calendar   | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| Year       |       |       |       |       |      |       | MT)    |
| Exports    |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Calndr Yr  | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| Exp. to    |       |       |       |       |      |       | MT)    |
| U.S.       |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+

+------------+-------+-------+-------+-------+------+-------+--------+
| #######    |       |       |       |       |      |       |        |
|  PSD Table |       |       |       |       |      |       |        |
|            |       |       |       |       |      |       |        |
| **Country: |       |       |       |       |      |       |        |
| Brazil**   |       |       |       |       |      |       |        |
|            |       |       |       |       |      |       |        |
| **Oil,     |       |       |       |       |      |       |        |
| Co         |       |       |       |       |      |       |        |
| ttonseed** |       |       |       |       |      |       |        |
|            |       |       |       |       |      |       |        |
| #######    |       |       |       |       |      |       |        |
|  (1000 MT) |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
|            | 2005  | Re    | 2006  | Est   | 2007 | For   | UOM    |
|            |       | vised |       | imate |      | ecast |        |
+------------+-------+-------+-------+-------+------+-------+--------+
|            | USDA  | Post  | USDA  | Post  | USDA | Post  |        |
|            | Off   | Est   | Off   | Est   | Offi | Est   |        |
|            | icial | imate | icial | imate | cial | imate |        |
|            | \[    | \[    | \[    | \[    | \[O  | \[    |        |
|            | Old\] | New\] | Old\] | New\] | ld\] | New\] |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Market     |       | 01    |       | 01    |      | 01    | M      |
| Year Begin |       | /2006 |       | /2007 |      | /2008 | M/YYYY |
+------------+-------+-------+-------+-------+------+-------+--------+
| Crush      | 1470  | 1470  | 1875  | 1875  | 0    | 1935  | (1000  |
|            |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| Extr.      | 0.1   | 0.1   | 0.16  | 0.16  | 0    | 0.1   | (PE    |
| Rate,      | 60544 | 67347 |       |       |      | 60207 | RCENT) |
| 999.9999   |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Beginning  | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| Stocks     |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| Production | 236   | 246   | 300   | 300   | 0    | 310   | (1000  |
|            |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| MY Imports | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
|            |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| MY Imp.    | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| from U.S.  |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| MY Imp.    | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| from the   |       |       |       |       |      |       | MT)    |
| EC         |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| TOTAL      | 236   | 246   | 300   | 300   | 0    | 310   | (1000  |
| SUPPLY     |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| MY Exports | 35    | 45    | 45    | 45    | 0    | 47    | (1000  |
|            |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| MY Exp. to | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| the EC     |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| Industrial | 75    | 75    | 84    | 84    | 0    | 87    | (1000  |
| Dom.       |       |       |       |       |      |       | MT)    |
| Consum     |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Food Use   | 126   | 126   | 171   | 171   | 0    | 176   | (1000  |
| Dom.       |       |       |       |       |      |       | MT)    |
| Consump.   |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Feed Waste | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| Dom.       |       |       |       |       |      |       | MT)    |
| Consum     |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| TOTAL Dom. | 201   | 201   | 255   | 255   | 0    | 263   | (1000  |
| C          |       |       |       |       |      |       | MT)    |
| onsumption |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Ending     | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| Stocks     |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| TOTAL      | 236   | 246   | 300   | 300   | 0    | 310   | (1000  |
| DI         |       |       |       |       |      |       | MT)    |
| STRIBUTION |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Calendar   | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| Year       |       |       |       |       |      |       | MT)    |
| Imports    |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Calendar   | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| Yr Imp.    |       |       |       |       |      |       | MT)    |
| U.S.       |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Calendar   | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| Year       |       |       |       |       |      |       | MT)    |
| Exports    |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Calndr Yr  | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| Exp. to    |       |       |       |       |      |       | MT)    |
| U.S.       |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+

## B. Trade Matrices

### Soybeans

  --------------- ---------- -------- -------- -------- -------- -------- -----------
  **Brazil                                                                
  Soybean                                                                 
  Exports**                                                               

  In 1000 Metric                                                          
  Tons                                                                    

  Feb/06-Jan/07                                                           

  Country         Quantity                     \% Share                   \% Change

                  2005       2006     2007     2005     2006     2007     2007/2006

  World           19,256     22,799   24,770   100      100      100      8.6

  United States   241        0        6        1.3      0.0      0.0      \-

  China           5,580      7,302    10,624   29.0     32.0     42.9     45.5

  Netherlands     3,559      5,223    3,673    18.5     22.9     14.8     -29.7

  Spain           1,596      2,118    1,873    8.3      9.3      7.6      -11.6

  Italy           906        1322     1097     4.7      5.8      4.4      -17.0

  Germany         1,630      895      1049     8.5      3.9      4.2      17.2

  Iran            640        914      900      3.3      4.0      3.6      -1.5

  Portugal        523        367      790      2.7      1.6      3.2      115.3

  Thailand        327        632      767      1.7      2.8      3.1      21.4

  United Kingdom  514        636      639      2.7      2.8      2.6      0.5

  Others          3,981      3,390    3,358    20.7     14.9     13.6     -0.9
  --------------- ---------- -------- -------- -------- -------- -------- -----------

  --------------- ---------- -------- -------- -------- -------- -------- -----------
  **Brazil                                                                
  Soybean                                                                 
  Imports**                                                               

  In 1000 Metric                                                          
  Tons                                                                    

  Feb/06-Jan/07                                                           

  Country         Quantity                     \% Share                   \% Change

                  2005       2006     2007     2005     2006     2007     2007/2006

  World           364        353      40       100      100      100      -88.7

  Paraguay        364        352      40       100      100      100      -88.6

  United States   0          0        0        0        0        0        0.0

  Others          0          0        0        0        0        0        0.0
  --------------- ---------- -------- -------- -------- -------- -------- -----------

### Soybean Meal

  --------------- ---------- -------- -------- -------- -------- -------- -----------
  **Brazil                                                                
  Soybean Meal                                                            
  Exports**                                                               

  In 1000 Metric                                                          
  Tons                                                                    

  Feb/06-Jan/07                                                           

  Country         Quantity                     \% Share                   \% Change

                  2005       2006     2007     2005     2006     2007     2007/2006

  World           14,567     14,225   12,275   100.0    100.0    100.0    -13.7

  Netherlands     4,086      3,477    2,491    28.0     24.4     20.3     -28.4

  France          2,993      2,943    2,434    20.5     20.7     19.8     -17.3

  Thailand        616        1,041    1,199    4.2      7.3      9.8      15.2

  Germany         1054       1,093    875      7.2      7.7      7.1      -19.9

  Iran            644        197      560      4.4      1.4      4.6      184.3

  Indonesia       476        460      504      3.3      3.2      4.1      9.6

  Korea South     434        947      443      3.0      6.7      3.6      -53.2

  Autralia        145        300      407      1.0      2.1      3.3      35.7

  United Kingdom  482        440      400      3.3      3.1      3.3      -9.1

  Italy           448        502      391      3.1      3.5      3.2      -22.1

  Saudi Arabia    387        290      353      2.7      2.0      2.9      21.7

  Slovenia        35         143      342      0.2      1.0      2.8      139.2

  Spain           621        315      266      4.3      2.2      2.2      -15.6

  Norway          90         249      208      0.6      1.8      1.7      -16.5

  United States   270        41       0        1.9      0.3      0.0      -100.0

  Others          1,786      1,787    1,402    12.3     12.6     11.4     -21.5
  --------------- ---------- -------- -------- -------- -------- -------- -----------

  --------------- ---------- --------- --------- -------- -------- -------- -----------
  **Brazil                                                                  
  Soybean Meal                                                              
  Imports**                                                                 

  In Metric Tons                                                            

  Feb/06-Jan/07                                                             

  Country         Quantity                       \% Share                   \% Change

                  2005       2006      2007      2005     2006     2007     2007/2006

  World           178,009    186,178   164,844   100      100      100      -11.5

  Paraguay        177,905    186,167   164,826   99.9     100.0    100.0    -11.5

  China           0          0         12        0        0        0        0.0

  United States   104        11        6         0        0        0        -45.5
  --------------- ---------- --------- --------- -------- -------- -------- -----------

### Soybean Oil

  --------------- ---------- -------- -------- -------- -------- -------- -----------
  **Brazil                                                                
  Soybean Oil                                                             
  Exports**                                                               

  In 1000 Metric                                                          
  Tons                                                                    

  Feb/06-Jan/07                                                           

  Country         Quantity                     \% Share                   \% Change

                  2005       2006     2007     2005     2006     2007     2007/2006

  World           2531       2697     2315     100      100      100      -14.2

  Iran            676        699      712      26.7     25.9     30.8     1.9

  Netherlands     61         174      528      2.4      6.5      22.8     203.4

  India           297        431      201      11.7     16.0     8.7      -53.4

  China           839        386      200      33.1     14.3     8.6      -48.2

  Italy           1          37       165      0.0      1.4      7.1      345.9

  France          2          9        104      0.1      0.3      4.5      1055.6

  Turkey          4          38       50       0.2      1.4      2.2      31.6

  South Africa    85         144      36       3.4      5.3      1.6      -75.0

  Bangladesh      78         31       36       3.1      1.1      1.6      16.1

  Tunisia         19         26       28       0.8      1.0      1.2      7.7

  United States   80         0        0        3.2      0.0      0.0      0.0

  Others          389        722      255      15.4     26.8     11.0     -64.7
  --------------- ---------- -------- -------- -------- -------- -------- -----------

  --------------- ---------- -------- -------- -------- -------- -------- -----------
  **Brazil                                                                
  Soybean Oil                                                             
  Imports**                                                               

  In 1000 Metric                                                          
  Tons                                                                    

  Feb/06-Jan/07                                                           

  Country         Quantity                     \% Share                   \% Change

                  2005       2006     2007     2005     2006     2007     2007/2006

  World           14         3        26       100.0    100.0    100.0    766.7

  Argentina       13         0        25       92.9     0.0      96.2     

  Paraguay        1          0        0        7.1      0.0      0.0      0.0

  Bolivia         0          1        0        0.0      33.3     0.0      -100.0

  United States   0          2        1        0.0      66.7     3.8      -50.0
  --------------- ---------- -------- -------- -------- -------- -------- -----------

### Cottonseed Meal

  -------------- ------------- ------------- ------------- ----------------
  **Brazil                                                 
  Cottonseed                                               
  Meal Exports**                                           

  In Metric Tons                                           

  Country        Quantity                                  \% Change

                 2005          2006          2007          2007/2006

  World          13,164        0             0             -100

  United Kingdom 13,164        0             0             -100

  Belgium        0             0             0             0

  Germany        0             0             0             0

  Angola         0             0             0             0
  -------------- ------------- ------------- ------------- ----------------

  -------------- ------------- ------------- ------------- ----------------
  **Brazil                                                 
  Cottonseed                                               
  Meal Imports**                                           

  In Metric Tons                                           

  Country        Quantity                                  \% Change

                 2005          2006          2007          2007/2006

  World          9252          5,661         2,218         -60.8

  Paraguay       9182          5,590         2,063         -63.1

  United States  71            71            155           118.3

  Uruguay        0             0             0             0.0

  Argentina      0             0             0             0.0
  -------------- ------------- ------------- ------------- ----------------

### Cottonseed Oil

  ----------------- ------------ ------------ ------------ ---------------
  **Brazil                                                 
  Cottonseed Oil                                           
  Exports**                                                

  In Metric Tons                                           

  Country           Quantity                               \% Change

                    2005         2006         2007         2007/2006

  World             59,950       45,250       25,932       -42.7

  Greece            0            0            6,300        \-

  South Africa      2,500        6,750        5,630        -16.6

  Netherlands       0            0            5,500        \-

  Korea North       3,000        1,700        3,000        76.5

  Korea South       5,500        3,000        2,500        -16.7

  Turkey            0            5,346        1,500        -71.9

  Malaysia          2,000        1,700        1,000        -41.2

  Japan             42           433          333          -23.1

  Bolivia           87           171          143          -16.4

  Trinidad & Tobago 25           64           13           -79.7

  United States     0            1            13           1200.0
  ----------------- ------------ ------------ ------------ ---------------

  -------------- ------------- ------------- ------------- ----------------
  **Brazil                                                 
  Cottonseed Oil                                           
  Imports**                                                

  In Metric Tons                                           

  Country        Quantity                                  \% Change

                 2005          2006          2007          2007/2006

  World          200           0             100           \-

  Paraguay       200           0             100           \-

  United States  0             0             0             0

  Argentina      0             0             0             0
  -------------- ------------- ------------- ------------- ----------------

## C. Prices

+-------------+----------+----------+----------+----------+----------+
| ######      |          |          |          |          |          |
| #  Soybean  |          |          |          |          |          |
| Price Table |          |          |          |          |          |
+-------------+----------+----------+----------+----------+----------+
| Country     | Brazil   |          |          |          |          |
+-------------+----------+----------+----------+----------+----------+
| Commodity   | Soybeans |          |          |          |          |
+-------------+----------+----------+----------+----------+----------+
| Prices in   | US\$/ton |          |          |          |          |
+-------------+----------+----------+----------+----------+----------+
| Year        | 2004     | 2005     | 2006     | \%       | \%       |
|             |          |          |          | Change   | Change   |
|             |          |          |          | 04/05    | 05/06    |
+-------------+----------+----------+----------+----------+----------+
| Jan         | 290.16   | 206.28   | 229.25   | -28.9    | 11.1     |
+-------------+----------+----------+----------+----------+----------+
| Feb         | 290.87   | 208.02   | 236.87   | -28.5    | 13.9     |
+-------------+----------+----------+----------+----------+----------+
| Mar         | 317.85   | 239.05   | 222.95   | -24.8    | -6.7     |
+-------------+----------+----------+----------+----------+----------+
| Apr         | 322.48   | 229.72   | 225.23   | -28.8    | -2.0     |
+-------------+----------+----------+----------+----------+----------+
| May         | 290.45   | 239.6    | 230.52   | -17.5    | -3.8     |
+-------------+----------+----------+----------+----------+----------+
| Jun         | 263.97   | 250.82   | 226.3    | -5.0     | -9.8     |
+-------------+----------+----------+----------+----------+----------+
| Jul         | 246.55   | 254.48   | 232.2    | 3.2      | -8.8     |
+-------------+----------+----------+----------+----------+----------+
| Aug         | 236.82   | 245.53   | 228.02   | 3.7      | -7.1     |
+-------------+----------+----------+----------+----------+----------+
| Sep         | 232.12   | 238.92   | 223.87   | 2.9      | -6.3     |
+-------------+----------+----------+----------+----------+----------+
| Oct         | 216.59   | 237.1    | 239.55   | 9.5      | 1.0      |
+-------------+----------+----------+----------+----------+----------+
| Nov         | 224.42   | 234.55   | 255.36   | 4.5      | 8.9      |
+-------------+----------+----------+----------+----------+----------+
| Dec         | 219.09   | 226.04   | 263.28   | 3.2      | 16.5     |
+-------------+----------+----------+----------+----------+----------+
| Export      |          |          |          |          |          |
| Price FOB   |          |          |          |          |          |
| Paranagua   |          |          |          |          |          |
+-------------+----------+----------+----------+----------+----------+

  ---------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
  **Domestic                                                                                               
  Soybean Prices                                                                                           
  (R\$/60 kg.                                                                                              
  bag)**                                                                                                   

  **For Paraná                                                                                             
  (PR), Sao Paulo                                                                                          
  (SP), Rio Grande                                                                                         
  do Sul (RS), and                                                                                         
  Mato Grosso                                                                                              
  (MT)**                                                                                                   

  Month/Location   2004                            2005                            2006                    

                   PR 1/   SP 2/   RS 3/   MT 4/   PR 1/   SP 2/   RS 3/   MT 4/   PR 1/   SP 2/   RS 3/   MT 4/

  Jan              45.81   45.85   46.1    41.21   33.04   33.75   33.25   28.9    29      27.63   27.38   24.95

  Feb              44.48   44.35   45.56   37.79   28.3    29.25   29.25   24.43   27.5    27.6    26.3    22.1

  Mar              50.18   49.76   50.71   43.53   33.43   35.5    34.25   30.13   25.3    24.6    23.5    20

  Apr              51      49.75   52.13   47.75   32.35   31.95   32.73   27.88   24.83   23.13   23.23   19.23

  May              45.5    44.32   44.01   43.75   30.9    30.45   31.08   26.48   26.25   24.45   24.63   20.75

  Jun              43.88   43.63   43.13   41.5    33.03   32.15   31.78   28.25   27.6    25.3    25.3    22.78

  Jul              40.1    40.5    39.5    36.06   32.8    31.15   29.78   27.13   26.87   25.67   25.83   23.57

  Aug              38.13   38.28   38.51   34.5    31.42   32.32   30.3    26.76   26.9    25.9    25.9    23.1

  Sep              37.3    38.75   36.63   32.83   29.33   29.28   27.95   25.23   27.33   25.5    26.17   22.77

  Oct              34.3    35.5    34.6    31.64   29.6    27.7    27.3    24.9    29.33   28      27.5    25

  Nov              33.88   33.25   33.13   30.05   29.3    26      26.7    25.1    32      31      31.17   28

  Dec              32.5    33.75   32.5    29.93   28.2    25.5    27.6    24.8    32.5    31.43   31.5    29.33
  ---------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------

+------------+---------------+------------+---------------+------------+
| ##         |               |            |               |            |
| ##### Soym |               |            |               |            |
| eal Prices |               |            |               |            |
+------------+---------------+------------+---------------+------------+
|            | 2005          |            | 2006          |            |
+------------+---------------+------------+---------------+------------+
| Month      | Paranaguá 1/  | SP 2/      | Paranaguá 1/  | SP 2/      |
+------------+---------------+------------+---------------+------------+
| JAN        | 174.94        | 184.11     | 196.62        | 210.30     |
+------------+---------------+------------+---------------+------------+
| FEB        | 172.1         | 173.86     | 200.48        | 188.06     |
+------------+---------------+------------+---------------+------------+
| MAR        | 194.62        | 189.40     | 181.88        | 169.22     |
+------------+---------------+------------+---------------+------------+
| APR        | 191.91        | 180.60     | 183.48        | 164.07     |
+------------+---------------+------------+---------------+------------+
| MAY        | 198.28        | 176.21     | 184.74        | 172.62     |
+------------+---------------+------------+---------------+------------+
| JUN        | 208.64        | 196.04     | 188.44        | 174.62     |
+------------+---------------+------------+---------------+------------+
| JUL        | 217.18        | 198.78     | 184.34        | 180.58     |
+------------+---------------+------------+---------------+------------+
| AUG        | 212.28        | 202.15     | 184.03        | 179.93     |
+------------+---------------+------------+---------------+------------+
| SEP        | 202.22        | 198.74     | 190.23        | 188.56     |
+------------+---------------+------------+---------------+------------+
| OCT        | 198.18        | 194.88     | 207.01        | 197.67     |
+------------+---------------+------------+---------------+------------+
| NOV        | 193.81        | 194.00     | 214.84        | 209.99     |
+------------+---------------+------------+---------------+------------+
| DEC        | 210.14        | 206.32     | 206.11        | 201.53     |
+------------+---------------+------------+---------------+------------+
| Average    | 197.86        | 191.26     | 193.52        | 186.43     |
+------------+---------------+------------+---------------+------------+
| 1/ FOB --  |               |            |               |            |
| Paranaguá  |               |            |               |            |
| Port       |               |            |               |            |
| (US\$/ton) |               |            |               |            |
|            |               |            |               |            |
| 2/ São     |               |            |               |            |
| Paulo      |               |            |               |            |
| --US\$/ton |               |            |               |            |
| -- 12%     |               |            |               |            |
| ICMS tax   |               |            |               |            |
+------------+---------------+------------+---------------+------------+

+------------+---------------+------------+---------------+------------+
| #######    |               |            |               |            |
|  Crude Soy |               |            |               |            |
| oil Prices |               |            |               |            |
+------------+---------------+------------+---------------+------------+
|            | 2005          |            | 2006          |            |
+------------+---------------+------------+---------------+------------+
| Month      | Paranaguá 1/  | SP 2/      | Paranaguá 1/  | SP 2/      |
+------------+---------------+------------+---------------+------------+
| JAN        | 445.55        | 565.82     | 434.47        | 503.30     |
+------------+---------------+------------+---------------+------------+
| FEB        | 440.42        | 513.86     | 458.83        | 530.09     |
+------------+---------------+------------+---------------+------------+
| MAR        | 497.36        | 577.08     | 469.89        | 563.72     |
+------------+---------------+------------+---------------+------------+
| APR        | 482.29        | 564.17     | 476.08        | 535.97     |
+------------+---------------+------------+---------------+------------+
| MAY        | 467.10        | 529.53     | 518.67        | 580.65     |
+------------+---------------+------------+---------------+------------+
| JUN        | 463.27        | 526.03     | 498.96        | 576.67     |
+------------+---------------+------------+---------------+------------+
| JUL        | 460.27        | 532.55     | 504.34        | 586.76     |
+------------+---------------+------------+---------------+------------+
| AUG        | 454.59        | 518.45     | 518.43        | 625.00     |
+------------+---------------+------------+---------------+------------+
| SEP        | 460.19        | 528.29     | 522.10        | 618.09     |
+------------+---------------+------------+---------------+------------+
| OCT        | 465.67        | 535.00     | 551.66        | 653.49     |
+------------+---------------+------------+---------------+------------+
| NOV        | 440.83        | 532.79     | 649.61        | 778.70     |
+------------+---------------+------------+---------------+------------+
| DEC        | 442.24        | 514.04     | 643.08        | 817.44     |
+------------+---------------+------------+---------------+------------+
| Average    | 459.98        | 536.47     | 520.51        | 614.16     |
+------------+---------------+------------+---------------+------------+
| 1/ FOB --  |               |            |               |            |
| Paranaguá  |               |            |               |            |
| Port       |               |            |               |            |
| (US\$/ton) |               |            |               |            |
|            |               |            |               |            |
| 2/ São     |               |            |               |            |
| Paulo      |               |            |               |            |
| --US\$/ton |               |            |               |            |
| -- 12%     |               |            |               |            |
| ICMS tax   |               |            |               |            |
+------------+---------------+------------+---------------+------------+

+-------------+--------+--------+--------+--------+--------+--------+
| #######     |        |        |        |        |        |        |
|  Monthly Ex |        |        |        |        |        |        |
| change Rate |        |        |        |        |        |        |
| s: R\$/US\$ |        |        |        |        |        |        |
+-------------+--------+--------+--------+--------+--------+--------+
| **M         | **     | **     | **     | **     | **%    | **%    |
| onth/Year** | 2004** | 2005** | 2006** | 2007** | Change | Change |
|             |        |        |        |        | 0      | 0      |
|             |        |        |        |        | 5/06** | 6/07** |
+-------------+--------+--------+--------+--------+--------+--------+
| Jan         | 2.85   | 2.69   | 2.27   | 2.14   | -15.71 | -5.73  |
+-------------+--------+--------+--------+--------+--------+--------+
| Feb         | 2.93   | 2.60   | 2.16   | 2.09   | -16.86 | -16.86 |
+-------------+--------+--------+--------+--------+--------+--------+
| Mar         | 2.91   | 2.71   | 2.15   | 2.09   | -20.52 | -20.52 |
+-------------+--------+--------+--------+--------+--------+--------+
| Apr         | 2.91   | 2.58   | 2.12   | 2.03   | -17.80 | -17.80 |
+-------------+--------+--------+--------+--------+--------+--------+
| May         | 3.10   | 2.46   | 2.17   |        | -11.61 | \-     |
+-------------+--------+--------+--------+--------+--------+--------+
| Jun         | 3.13   | 2.42   | 2.25   |        | -7.02  | \-     |
+-------------+--------+--------+--------+--------+--------+--------+
| Jul         | 3.04   | 2.37   | 2.19   |        | -7.71  | \-     |
+-------------+--------+--------+--------+--------+--------+--------+
| Aug         | 3.00   | 2.36   | 2.16   |        | -8.40  | \-     |
+-------------+--------+--------+--------+--------+--------+--------+
| Sep         | 2.89   | 2.30   | 2.17   |        | -5.57  | \-     |
+-------------+--------+--------+--------+--------+--------+--------+
| Oct         | 2.85   | 2.26   | 2.15   |        | -4.74  | \-     |
+-------------+--------+--------+--------+--------+--------+--------+
| Nov         | 2.79   | 2.21   | 2.16   |        | -2.31  | \-     |
+-------------+--------+--------+--------+--------+--------+--------+
| Dec         | 2.72   | 2.28   | 2.15   |        | -5.70  | \-     |
+-------------+--------+--------+--------+--------+--------+--------+
| **Average** | **     | **     | **     |        | **-1   | \-     |
|             | 2.93** | 2.44** | 2.18** |        | 0.71** |        |
+-------------+--------+--------+--------+--------+--------+--------+
| Source:     |        |        |        |        |        |        |
| Banco       |        |        |        |        |        |        |
| Central do  |        |        |        |        |        |        |
| Brasil      |        |        |        |        |        |        |
| (www.       |        |        |        |        |        |        |
| bcb.gov.br) |        |        |        |        |        |        |
+-------------+--------+--------+--------+--------+--------+--------+

## D. Policy Table

+------------------+------------+------------+------------+------------+
| ####### Officia  |            |            |            |            |
| l Minimum Prices |            |            |            |            |
+------------------+------------+------------+------------+------------+
| Product (Unit) / | 2006/07    |            | 2005/06    |            |
| Crop Year        |            |            |            |            |
+------------------+------------+------------+------------+------------+
| Area             | R\$        | US\$       | R\$        | US\$       |
+------------------+------------+------------+------------+------------+
| Cotton (15 kg)   |            |            |            |            |
+------------------+------------+------------+------------+------------+
| Brazil           | 44.6       | 20.46      | 44.6       | 21.33      |
+------------------+------------+------------+------------+------------+
| Cottonseed (15   |            |            |            |            |
| kg)              |            |            |            |            |
+------------------+------------+------------+------------+------------+
| Brazil           | 13.4       | 6.15       | 13.4       | 6.15       |
+------------------+------------+------------+------------+------------+
| Soybeans (60 kg) |            |            |            |            |
+------------------+------------+------------+------------+------------+
| SOUTH,           | 14         | 6.42       | 14         | 6.70       |
| SOUTHEAST,       |            |            |            |            |
| CENTER-WEST &    |            |            |            |            |
| RORAIMA          |            |            |            |            |
+------------------+------------+------------+------------+------------+
| NORTH (except    | 13         | 5.96       | 13         | 6.22       |
| RORAIMA) &       |            |            |            |            |
| NORTHEAST        |            |            |            |            |
+------------------+------------+------------+------------+------------+
| Source: Ministry |            |            |            |            |
| of Agriculture,  |            |            |            |            |
| CONAB            |            |            |            |            |
+------------------+------------+------------+------------+------------+
|                  |            |            |            |            |
+------------------+------------+------------+------------+------------+
| Exchange Rate:   |            |            |            |            |
| 2005/06-R\$2.18; |            |            |            |            |
| 2006/07-R\$2.09  |            |            |            |            |
+------------------+------------+------------+------------+------------+

# Production

# 

## 2006/07 Crop Situation

This year's harvest was the antithesis of last year's situation. In
dramatic comparison with previous years, yields in 2007 were boosted by
a near-perfect combination of sun and precipitation. High international
prices are expected to bail farmers out of much of the debt that they
have accumulated over the past three seasons of drought and low prices.
Post's current production estimate is 58.2 million metric tons (MMT).
The area projection is 20.75 million hectares, a 6% decrease over last
year's area. Production forecasts of some Brazilian sources are: 57.9
(Conab- see page 23 of report), 59.8 (Safras), and 58.5 MMT (Céleres).
These entities' area numbers range from 20.6 (Conab) to 21.0 million
hectares (Safras).

This season, if a spoiler of yields existed, it was humidity. This
year's soybean crop was highly influenced by the El Niño weather
pattern, which has brought regular and significant rains to Brazil's
growing areas. Due to increasingly wet conditions, soybean rust posed
more of a threat this year, especially in the Center-west region.
Farmers continue to manage rust well due to the Embrapa alert system as
well as their general familiarity with the disease. This year's soybean
crop is positioned to come within reach of the 2002/03 record soybean
yields, and are projected at 2.8 tons per hectare; far-surpassing the
5-year average yield of 2.53. Due to the liquidity crisis in Brazil,
farmers did not in all cases use recommended applications of inputs, but
heavy and evenly dispersed rains throughout crucial flowering and
podfill development stages have assisted this year's crop a great deal.
With more cash in hand next year, farmers can be expected to achieve
better yields as they return to higher input usage.

On the negative side, the weakening exchange rate continued to cause
discouragement for farmers, since it implicated buying inputs at a
stronger dollar and selling their product at a weaker one. Soybean rust
also carried a heavy cost for farmers, who applied fungicide up to five
times during the season.

## 2006/07 Crop Estimates by State

### Mato Grosso

Brazil's number one soybean state reduced its area by nearly 15 percent
this year. For this reason, although this year's yields surpassed those
of last year's crop, increasing from 2.7 to 3.0, production will not
reach last year's levels.

The harvest is complete in Mato Grosso. Farmers continued to struggle
with rust in the state, since the areas under production are so
expansive, Embrapa's system of alerts is not as effective in the region
as it is in other areas.

The one major problem in the state took place in the Northern part of
the state, in a major production area. An estimated 30% of the crop in
the region, including the major growing areas of Sinope and Sorriso,
suffered losses due to incessant rain and excess water in the field,
which kept farmers from harvesting. As the product sat in the field, the
quality of the beans decreased. These beans were not harvested at
maturity, and after 10 days began to rot, causing a number of farmers in
the area to lose their entire crop. Of the 30% total production area in
the region suffering losses, much of the product was discounted, and in
some cases, rejected, due to the deterioration in quality of the beans.
Overall yields for Mato Grosso were still highly satisfactory and above
the national average. This is due to the fact that the rest of the state
performed better than expected, and in spite of lower input use this
year, other areas of the state made up the difference.

### Other Center-West

Like Mato Grosso, Goiás and Mato Grosso do Sul states also had
difficulty with Rust and excess humidity. Post brought down its number
for Goiás due to the excess rain that occurred in January and February.
At this time, a good percentage of the crop was in its final phase and
was negatively impacted. Similarly, the end of the crop phase for
soybeans in Mato Grosso do Sul was a disappointment due to the wet
weather, and was also affected by rust and other diseases.

+--------------------+-------------+------------+---------------------+
| ###### 200         |             |            |                     |
| 6/07 Post Forecast |             |            |                     |
|  Soybean Area, Yie |             |            |                     |
| ld, and Production |             |            |                     |
+--------------------+-------------+------------+---------------------+
| (1000 ha; Tons/ha, |             |            |                     |
| Thousand tons)     |             |            |                     |
+--------------------+-------------+------------+---------------------+
| **Region**         | **Area**    | **Yield**  | **Production**      |
+--------------------+-------------+------------+---------------------+
| **Center West**    | **8,953**   | 2.898      | **25,950**          |
+--------------------+-------------+------------+---------------------+
| MS                 | 1,700       | **2.765**  | 4,700               |
+--------------------+-------------+------------+---------------------+
| MT                 | 5,050       | **2.990**  | 15,100              |
+--------------------+-------------+------------+---------------------+
| GO                 | 2,150       | **2.791**  | 6,000               |
+--------------------+-------------+------------+---------------------+
| DF                 | 53          | **2.830**  | 150                 |
+--------------------+-------------+------------+---------------------+
| **South**          | **8,375**   | **2.777**  | 23,260              |
+--------------------+-------------+------------+---------------------+
| PR                 | 4,000       | **3.000**  | 12,000              |
+--------------------+-------------+------------+---------------------+
| SC                 | 375         | **2.827**  | 1,060               |
+--------------------+-------------+------------+---------------------+
| RS                 | 4,000       | **2.550**  | 10,200              |
+--------------------+-------------+------------+---------------------+
| **Southeast**      | **1,460**   | **2.603**  | **3,800**           |
+--------------------+-------------+------------+---------------------+
| MG                 | 930         | **2.581**  | 2,400               |
+--------------------+-------------+------------+---------------------+
| SP                 | 530         | **2.642**  | 1,400               |
+--------------------+-------------+------------+---------------------+
| **Northeast**      | **1,443**   | **2.661**  | **3,840**           |
+--------------------+-------------+------------+---------------------+
| MA                 | 378         | **2.672**  | 1,010               |
+--------------------+-------------+------------+---------------------+
| PI                 | 225         | **2.800**  | 630                 |
+--------------------+-------------+------------+---------------------+
| BA                 | 840         | **2.619**  | 2,200               |
+--------------------+-------------+------------+---------------------+
| **North**          | **521**     | **2.599**  | **1,354**           |
+--------------------+-------------+------------+---------------------+
| RO                 | 100         | **2.700**  | 270                 |
+--------------------+-------------+------------+---------------------+
| AM                 | 3           | **3.000**  | 9                   |
+--------------------+-------------+------------+---------------------+
| RR                 | 18          | **3.333**  | 60                  |
+--------------------+-------------+------------+---------------------+
| PA                 | 90          | **2.833**  | 255                 |
+--------------------+-------------+------------+---------------------+
| TO                 | 310         | **2.452**  | 760                 |
+--------------------+-------------+------------+---------------------+
| **Totals**         | **20,752**  | **2.805**  | **58,204**          |
+--------------------+-------------+------------+---------------------+

### South

The three southern states have experienced a great production year, and
will by far surpass 05/06 yields. In fact, the south may surpass the
record previously set by the region during the 02/03 crop year. The
overall yield for the region is forecast at nearly 2.8 tons per hectare.

Post recently made upward adjustments to the three states, but the
biggest improvement in yields occurred in Rio Grande do Sul, Brazil's
southernmost state. Rains that fell during the week before Easter were
particularly beneficial, causing Post to increase its production
estimate for the state to 10.2 million tons, which will be a new record.
With the exception of the 2002/03 crop year, Rio Grande do Sul has
typically brought down the nation's average soy yields. Due to the last
several years of drought in the state, it was producing one-fourth to
one-half of its potential. This year soybean production in the state is
back on track, and typical low yielding areas of Missões, Santo Angelo,
and São Lourenço (Northwest Rio Grande do Sul) are showing a surprising
step up from previous years. The state of Santa Catarina is also set to
experience a 25 percent boost in production over last year's harvest.

### Southeast

The Southeast experienced the biggest shift in area to sugarcane, losing
13 percent. This caused production to decrease substantially in the
region. São Paulo has now completed the harvest and Minas Gerais is
halfway through, due to an excess of rain the fell during the latter
part of March and beginning of April in the Northeast of the state.
Minas has suffered in particular with rust and even drought during the
development phase.

### Northeast

Bordering Minas Gerais, Bahia also dealt with drought issues during the
development phase of the crop. Rains during the second week of April
helped to alleviate the problem, but also caused a hold-up in the
harvest of beans that were further developed and ready to be harvested.
Rust has been a continuing problem in Bahia.

Certain areas of Piauí and Maranhão went for extended periods in Febuary
and March without rain, during the crucial podfill phase, which is
expected to impact yields somewhat. Post visited the area in early
February and received good reports of yields averaging 3.0 tons per
hectare due to the good combination of sun and rain they were
experiencing. Although expansion in the region is at a standstill this
year, soybean area can be expected to continue rising due to the
availability of land and the region's transportation advantage. A new
grain terminal at Maranhão's Itaquí port is set to open early 2008.

### North

The North also has a transportation advantage via Itaquí or by barge via
the Madeira and Amazon rivers. The Cargill port in Santarém, Pará is now
once again an option, as well as Maggi's Itacoatiara port in the state
of Amazonas. Total area in the North decreased this year by 4 percent
(20,000 HA), but can be expected to bounce back in 07/08. In addition,
although area decreased in Tocantins, it increased 10-33 percent in
Pará, Amazonas, and Roraima. Post have received reports of a brand-new
area opening up in the state of Pará, called Santa Maria das Barreiras,
located southeast of Redenção. Expansion continues.

Yields in the northern states were, like the Northeast, impacted by
drought during the development phase. However, it is early to tell for
the majority of the Northern crop, with much of it grown close to the
equator and harvested later in the season. Total production for the
North is forecast at 1.4 million metric ton.

<table>
<colgroup>
<col style="width: 19%" />
<col style="width: 10%" />
<col style="width: 10%" />
<col style="width: 8%" />
<col style="width: 11%" />
<col style="width: 11%" />
<col style="width: 8%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="10"><strong>Official Brazilian Soybean Area, Production,
&amp; Yield Estimates</strong></td>
</tr>
<tr class="even">
<td></td>
<td colspan="3"><strong>AREA (1000 ha)</strong></td>
<td colspan="3"><strong>Production (1000 t)</strong></td>
<td colspan="3"><strong>Yield (kg/ha)</strong></td>
</tr>
<tr class="odd">
<td><strong>State/CropYear</strong></td>
<td><strong>2006</strong></td>
<td><strong>2007</strong></td>
<td><strong>% Var.</strong></td>
<td><strong>2006</strong></td>
<td><strong>2007</strong></td>
<td><strong>% Var.</strong></td>
<td><strong>2006</strong></td>
<td><strong>2007</strong></td>
<td><strong>% Var.</strong></td>
</tr>
<tr class="even">
<td><strong>North</strong></td>
<td><strong>517.5</strong></td>
<td><strong>429.2</strong></td>
<td><strong>-17.1</strong></td>
<td><strong>1,283.20</strong></td>
<td><strong>1,207.00</strong></td>
<td><strong>-5.9</strong></td>
<td><strong>2,480</strong></td>
<td><strong>2,812</strong></td>
<td><strong>13.4</strong></td>
</tr>
<tr class="odd">
<td>Roraima</td>
<td>20.0</td>
<td>20.0</td>
<td><strong>0.0</strong></td>
<td>56</td>
<td>56</td>
<td><strong>0.0</strong></td>
<td>2,800</td>
<td>2,800</td>
<td><strong>0.0</strong></td>
</tr>
<tr class="even">
<td>Rondônia</td>
<td>106.4</td>
<td>91.0</td>
<td><strong>-14.5</strong></td>
<td>283</td>
<td>279.4</td>
<td><strong>-1.3</strong></td>
<td>2,660</td>
<td>3,070</td>
<td><strong>15.4</strong></td>
</tr>
<tr class="odd">
<td>Amazonas</td>
<td>1.9</td>
<td>1.9</td>
<td><strong>0.0</strong></td>
<td>5.7</td>
<td>5.3</td>
<td><strong>-7.0</strong></td>
<td>3,000</td>
<td>2,786</td>
<td><strong>-7.1</strong></td>
</tr>
<tr class="even">
<td>Pará</td>
<td>79.7</td>
<td>47.0</td>
<td><strong>-41.0</strong></td>
<td>238.1</td>
<td>140.5</td>
<td><strong>-41.0</strong></td>
<td>2,987</td>
<td>2,990</td>
<td><strong>0.1</strong></td>
</tr>
<tr class="odd">
<td>Tocantins</td>
<td>309.5</td>
<td>269.3</td>
<td><strong>-13.0</strong></td>
<td>700.4</td>
<td>725.8</td>
<td><strong>3.6</strong></td>
<td>2,263</td>
<td>2,695</td>
<td><strong>19.1</strong></td>
</tr>
<tr class="even">
<td><strong>Northeast</strong></td>
<td><strong>1,487.1</strong></td>
<td><strong>1,457.9</strong></td>
<td><strong>-2.0</strong></td>
<td><strong>3,560.90</strong></td>
<td><strong>3,940.70</strong></td>
<td><strong>10.7</strong></td>
<td><strong>2,395</strong></td>
<td><strong>2,703</strong></td>
<td><strong>12.9</strong></td>
</tr>
<tr class="odd">
<td>Maranhão</td>
<td>382.5</td>
<td>384.4</td>
<td><strong>0.5</strong></td>
<td>1025.1</td>
<td>1030.2</td>
<td><strong>0.5</strong></td>
<td>2,680</td>
<td>2,680</td>
<td><strong>0.0</strong></td>
</tr>
<tr class="even">
<td>Piauí</td>
<td>232.0</td>
<td>222.7</td>
<td><strong>-4.0</strong></td>
<td>544.5</td>
<td>600.6</td>
<td><strong>10.3</strong></td>
<td>2,347</td>
<td>2,697</td>
<td><strong>14.9</strong></td>
</tr>
<tr class="odd">
<td>Bahia</td>
<td>872.6</td>
<td>850.8</td>
<td><strong>-2.5</strong></td>
<td>1,991.30</td>
<td>2,309.90</td>
<td><strong>16.0</strong></td>
<td>2,282</td>
<td>2,715</td>
<td><strong>19.0</strong></td>
</tr>
<tr class="even">
<td><p id="center-west" class="heading">Center-West</p></td>
<td><strong>10,353.6</strong></td>
<td><strong>9,105.0</strong></td>
<td><strong>-12.1</strong></td>
<td><strong>26,795.50</strong></td>
<td><strong>26,624.50</strong></td>
<td><strong>-0.6</strong></td>
<td><strong>2,588</strong></td>
<td><strong>2,924</strong></td>
<td><strong>13.0</strong></td>
</tr>
<tr class="odd">
<td>Mato Grosso</td>
<td>5,891.5</td>
<td>5,125.6</td>
<td><strong>-13.0</strong></td>
<td>15,877.60</td>
<td>15,274.30</td>
<td><strong>-3.8</strong></td>
<td>2,695</td>
<td>2,980</td>
<td><strong>10.6</strong></td>
</tr>
<tr class="even">
<td>Mato Grosso do Sul</td>
<td>1,919.1</td>
<td>1,736.8</td>
<td><strong>-9.5</strong></td>
<td>4,375.50</td>
<td>5,010.70</td>
<td><strong>14.5</strong></td>
<td>2,280</td>
<td>2,885</td>
<td><strong>26.5</strong></td>
</tr>
<tr class="odd">
<td>Goiás</td>
<td>2,489.0</td>
<td>2,190.3</td>
<td><strong>-12.0</strong></td>
<td>6,396.70</td>
<td>6,176.60</td>
<td><strong>-3.4</strong></td>
<td>2,570</td>
<td>2,820</td>
<td><strong>9.7</strong></td>
</tr>
<tr class="even">
<td>Distrito Federal</td>
<td>54.0</td>
<td>52.3</td>
<td><strong>-3.1</strong></td>
<td>145.7</td>
<td>162.9</td>
<td><strong>11.8</strong></td>
<td>2,699</td>
<td>3,115</td>
<td><strong>15.4</strong></td>
</tr>
<tr class="odd">
<td><strong>Southeast</strong></td>
<td><strong>1,717.5</strong></td>
<td><strong>1,455.7</strong></td>
<td><strong>-15.2</strong></td>
<td><strong>4,051.80</strong></td>
<td><strong>4,052.50</strong></td>
<td><strong>0.0</strong></td>
<td><strong>2,359</strong></td>
<td><strong>2,784</strong></td>
<td><strong>18.0</strong></td>
</tr>
<tr class="even">
<td>Minas Gerais</td>
<td>1,060.9</td>
<td>930.4</td>
<td><strong>-12.3</strong></td>
<td>2,482.50</td>
<td>2,623.70</td>
<td><strong>5.7</strong></td>
<td>2,340</td>
<td>2,820</td>
<td><strong>20.5</strong></td>
</tr>
<tr class="odd">
<td>São Paulo</td>
<td>656.6</td>
<td>525.3</td>
<td><strong>-20.0</strong></td>
<td>1,569.30</td>
<td>1,428.80</td>
<td><strong>-9.0</strong></td>
<td>2,390</td>
<td>2,720</td>
<td><strong>13.8</strong></td>
</tr>
<tr class="even">
<td><strong>South</strong></td>
<td><strong>8,153.6</strong></td>
<td><strong>8,238.0</strong></td>
<td><strong>1.0</strong></td>
<td><strong>17,722.50</strong></td>
<td><strong>22,135.60</strong></td>
<td><strong>24.9</strong></td>
<td><strong>2,174</strong></td>
<td><strong>2,687</strong></td>
<td><strong>23.6</strong></td>
</tr>
<tr class="odd">
<td>Paraná</td>
<td>3,928.5</td>
<td>3,967.8</td>
<td><strong>1.0</strong></td>
<td>9,389.10</td>
<td>12,101.80</td>
<td><strong>28.9</strong></td>
<td>2,390</td>
<td>3,050</td>
<td><strong>27.6</strong></td>
</tr>
<tr class="even">
<td>Santa Catarina</td>
<td>339.5</td>
<td>376.8</td>
<td><strong>11.0</strong></td>
<td>814.8</td>
<td>1040</td>
<td><strong>27.6</strong></td>
<td>2,400</td>
<td>2,760</td>
<td><strong>15.0</strong></td>
</tr>
<tr class="odd">
<td>Rio Grande do Sul</td>
<td>3,885.6</td>
<td>3,893.4</td>
<td><strong>0.2</strong></td>
<td>7,518.60</td>
<td>8,993.80</td>
<td><strong>19.6</strong></td>
<td>1,935</td>
<td>2,310</td>
<td><strong>19.4</strong></td>
</tr>
<tr class="even">
<td><strong>North/Northeast</strong></td>
<td><strong>2,004.6</strong></td>
<td><strong>1,887.1</strong></td>
<td><strong>-5.9</strong></td>
<td><strong>4,844.10</strong></td>
<td><strong>5,147.70</strong></td>
<td><strong>6.3</strong></td>
<td><strong>2,416</strong></td>
<td><strong>2,728</strong></td>
<td><strong>12.9</strong></td>
</tr>
<tr class="odd">
<td><strong>Center-South</strong></td>
<td><strong>20,224.7</strong></td>
<td><strong>18,798.7</strong></td>
<td><strong>-7.1</strong></td>
<td><strong>48,569.80</strong></td>
<td><strong>52,812.60</strong></td>
<td><strong>8.7</strong></td>
<td><strong>2,402</strong></td>
<td><strong>2,809</strong></td>
<td><strong>16.9</strong></td>
</tr>
<tr class="even">
<td><strong>Brazil</strong></td>
<td><strong>22,229.3</strong></td>
<td><strong>20,685.8</strong></td>
<td><strong>-6.9</strong></td>
<td><strong>53,413.90</strong></td>
<td><strong>57,960.30</strong></td>
<td><strong>8.5</strong></td>
<td><strong>2,403</strong></td>
<td><strong>2,802</strong></td>
<td><strong>16.6</strong></td>
</tr>
</tbody>
</table>

## 2007/08 Crop Outlook

### Area

This year's soybean area dropped about 6 percent due to the poor
financial situation of the farmers. This was in good part due to the
lack of financing available to farmers in conjunction with their
compounding debt. Some shifting from soy to sugarcane occurred. In the
South, area was basically maintained, while the Center-west lost area to
sugarcane, cotton, and pasture. Soy expansion in most of the frontier
areas came to a halt. This includes the entire Northeast (Bahia,
Maranhão and Piauí), Tocantins, and Rondonia. However, the northern
states of Pará, Roraima, and Amazonas experienced continued soy area
expansion in 06/07.

For 2007/08, the expected decrease in U.S. soybean area to expand corn
production has made a big impact on Brazilian farmers. Post expects it
to encourage Brazilian soy area expansion next season, which will mean
that the clearing of new land will resume in the expansion areas of
Center-west and Northern Brazil. Post expects area to rebound 4 percent
to 21.9 million hectares. Although incentives to plant soybeans next
year abound, Post is not projecting a complete recuperation of the soy
area lost in the 06/07 crop season due to the fast-paced increase in
sugarcane area, which will compete with soy area in the coming year.

### Production 

Post forecasts 2007/08 production at 61 MMT, with average yields of 2.78
tons per hectare, assuming that La Niña conditions will return to cause
dryness in some production areas. In spite of possible interference from
La Niña, economic conditions will be more favorable for the ag sector
than the past three years, allowing them to once again pursue more
aggressive production strategies. Production continues to benefit from
the changes to Brazilian biotechnology policy that took place in 2006.
Prices are favorable, and the international market would be more bullish
on soybeans if it weren't for high global stocks and continuing big
production in the U.S. and Argentina. This could quickly change.
Brazilian farmers are betting that the Food Vs. Fuel debate will cause
soybeans to go into catch-up mode on the world market. If this indeed
comes to pass, markets will scramble to locate more cropland to cope
with surging demand. Brazilian farmers will greatly benefit when this
happens, and are planting faithfully with confidence that it will.

Negative factors for the coming year include the strong Real, continuing
to cheapen exports; and the rising costs of inputs and transportation,
which continue to cut away at farmers' profit margins. If dry weather
indeed returns, Rust will be less of a inconvenience.

# 

### Consumption

  ------------- ------------- ------------- ------------- --------- ------------ ------------ ------------ ----------
  **Installed                                                                                              
  Soybean Crush                                                                                            
  and Refining                                                                                             
  Capacity by                                                                                              
  State:                                                                                                   
  2003-2005**                                                                                              

  **State**                                                                                                

                **2004**      **2005**      **2006**      **Var.    **2004**     **2005**     **2006**     **Var. %**
                                                          %**                                              

  Paraná        31,765        32,115        32,950        2.6       2,910        3,160        3,160        0.0

  Rio Grande do 19,700        21,200        23,600        11.3      1,650        1,650        1,950        18.2
  Sul                                                                                                      

  Mato Grosso   20,600        21,000        21,400        1.9       1,250        1,250        2,450        96.0

  São Paulo     14,950        15,600        18,800        20.5      6,230        6,010        2,770        -53.9

  Goiás         16,920        18,150        16,400        -9.6      2,090        2,230        5,850        162.3

  Mato Grosso   7,295         8,295         9,360         12.8      540          540          540          0.0
  do Sul                                                                                                   

  Minas Gerais  6,400         6,600         6,600         0.0       1,270        1,270        1,270        0.0

  Bahia         5,344         5,344         5,500         2.9       880          880          970          10.2

  Santa         4,034         4,034         4,034         0.0       530          530          450          -15.1
  Catarina                                                                                                 

  Piaui         2,360         2,360         2,460         4.2       120          120          120          0.0

  Amazonas      2,000         2,000         2,000         0.0       450          450          \-           \-

  Pernambuco    400           400           400           0.0       80           80           400          400.0

  Ceara                       \-            \-            \-        \-           \-           80           \-

  **Total**     **131,768**   **137,098**   **143,504**   **4.7**   **18,000**   **18,170**   **20,010**   **10.1**
  ------------- ------------- ------------- ------------- --------- ------------ ------------ ------------ ----------

## Input Tables

  -------------------- ------------------- ---------------------- ----------------
  **Relative Swap                                                 
  Value of Soybeans                                               
  for Inputs (60kg                                                
  bags per unit)**                                                

  Year                 Fertilizer          Harvester              Tractor

  1996                 20.9                5,091                  1,901

  1997                 18.5                5,044                  1,745

  1998                 22.7                6,427                  2,078

  1999                 26.9                7,355                  2,163

  2000                 25.4                7,059                  1,960

  2001                 23.4                6,543                  1,783

  2002                 17.6                4,972                  1,310

  2003                 19.8                6,177                  1,636

  2004                 22.7                7,692                  1,862

  2005                 19.6                10,531                 2,681

  2006                 20.5                11,355                 3,367

  Source: Conab                                                   
  (www.conab.gov.br)                                              
  -------------------- ------------------- ---------------------- ----------------

  ------------------------- ------------ ------------ ------------ ------------ ---------
  **Fertilizer Supply and                                                       
  Sales (Total Metric                                                           
  Tons)**                                                                       

  Item                      2003         2004         2005         2006         Change %

  Production                9,353,177    9,733,609    8,533,923    8,777,832    2.9

  Imports                   14,683,123   15,424,325   11,724,687   12,101,973   3.2

  Sales                     22,796,232   22,767,489   20,194,731   20,981,734   3.9

  Source: National                                                              
  Fertilizer Association                                                        
  (ANDA)(www.anda.org.br)                                                       
  ------------------------- ------------ ------------ ------------ ------------ ---------

+------+---------------+----------------+---------+-------------------+
| ##   |               |                |         |                   |
| #### |               |                |         |                   |
| # To |               |                |         |                   |
| tal  |               |                |         |                   |
| Fert |               |                |         |                   |
| iliz |               |                |         |                   |
| er S |               |                |         |                   |
| ales |               |                |         |                   |
|  & R |               |                |         |                   |
| elat |               |                |         |                   |
| ive  |               |                |         |                   |
| Cost |               |                |         |                   |
+------+---------------+----------------+---------+-------------------+
| Year | Quantity 1/   | Soybeans 2/    | Corn 2/ | Sugar Cane 3/     |
+------+---------------+----------------+---------+-------------------+
| 2002 | 19,114,268    | 15.6           | 30.8    | 18.2              |
+------+---------------+----------------+---------+-------------------+
| 2003 | 22,796,232    | 15.5           | 32.7    | 20.4              |
+------+---------------+----------------+---------+-------------------+
| 2004 | 22,767,489    | 17.4           | 41.7    | 26.7              |
+------+---------------+----------------+---------+-------------------+
| 2005 | 20,194,731    | 19.6           | 40.1    | 21.9              |
+------+---------------+----------------+---------+-------------------+
| 2006 | 20,981,734    | 20.5           | 39.9    | 16.2              |
+------+---------------+----------------+---------+-------------------+
| 1/   |               |                |         |                   |
| All  |               |                |         |                   |
| Com  |               |                |         |                   |
| modi |               |                |         |                   |
| ties |               |                |         |                   |
| (me  |               |                |         |                   |
| tric |               |                |         |                   |
| t    |               |                |         |                   |
| ons) |               |                |         |                   |
+------+---------------+----------------+---------+-------------------+
| 2/   |               |                |         |                   |
| 60   |               |                |         |                   |
| kg   |               |                |         |                   |
| bags |               |                |         |                   |
| of   |               |                |         |                   |
| c    |               |                |         |                   |
| ommo |               |                |         |                   |
| dity |               |                |         |                   |
| ne   |               |                |         |                   |
| eded |               |                |         |                   |
| to   |               |                |         |                   |
| buy  |               |                |         |                   |
| 1    |               |                |         |                   |
| me   |               |                |         |                   |
| tric |               |                |         |                   |
| ton  |               |                |         |                   |
| of   |               |                |         |                   |
| fer  |               |                |         |                   |
| tili |               |                |         |                   |
| zer. |               |                |         |                   |
+------+---------------+----------------+---------+-------------------+
| 3/   |               |                |         |                   |
| Me   |               |                |         |                   |
| tric |               |                |         |                   |
| tons |               |                |         |                   |
| of   |               |                |         |                   |
| cane |               |                |         |                   |
| ne   |               |                |         |                   |
| eded |               |                |         |                   |
| to   |               |                |         |                   |
| buy  |               |                |         |                   |
| 1    |               |                |         |                   |
| me   |               |                |         |                   |
| tric |               |                |         |                   |
| ton  |               |                |         |                   |
| of   |               |                |         |                   |
| fer  |               |                |         |                   |
| tili |               |                |         |                   |
| zer. |               |                |         |                   |
+------+---------------+----------------+---------+-------------------+
| Sou  |               |                |         |                   |
| rce: |               |                |         |                   |
| Nati |               |                |         |                   |
| onal |               |                |         |                   |
| Fe   |               |                |         |                   |
| rtil |               |                |         |                   |
| izer |               |                |         |                   |
| Ass  |               |                |         |                   |
| ocia |               |                |         |                   |
| tion |               |                |         |                   |
| (AN  |               |                |         |                   |
| DA)( |               |                |         |                   |
| www. |               |                |         |                   |
| anda |               |                |         |                   |
| .org |               |                |         |                   |
| .br) |               |                |         |                   |
+------+---------------+----------------+---------+-------------------+

# 

# Stocks

The rise in international soybean prices that occurred last October
triggered farmers to sell more quantities of soybeans earlier in the
marketing season, which took some pressure off stocks. In spite of
higher soybean production in 06/07, strong domestic consumption and
strong exports have assisted in keeping stock levels adjusted. Post
estimated this year's ending stock levels at 1.4 MMT.

Storage capacity is slowly increasing due to investment by
multinationals. However, much product is still stored in the open
on-farm, which leads to some unnecessary loss and also creates
difficulty in tracking actual stock levels. The Brazilian government
does not hold oilseed stocks. The majority of stocks are held by
cooperatives, processors, or at the port. Domestic processors and
cooperatives carry soybeans as \"stocks\" until the commodity is priced.
Brazil's on-farm capacity is extremely small, and can currently
accommodate only about 5 percent of the local crop. Although storage
space is expanding at all levels, it is not keeping up with production
growth. Over the past several years grain storage capacity has increased
only 10 percent that of grain production. The grain storage deficit is
about 30 percent. Although storage is increasing in frontier areas, many
farmers have spent their profits buying more farmland instead of
building on-farm storage and then end up depending on multinationals for
storage, thus forced to take whatever the price happens to be at
harvest.

# Exports

Soybean exports for marketing year 2006/07 concluded in January at
24,770 MMT, showing Brazil moved 2 MMT more soybeans than last year. Due
to the mega soybean crop in the US, however, Brazil lost its position
this year as leader of world soybean exports. China continues to import
a larger and larger percentage of Brazil's exports. Exports to the
Netherlands, Spain and Italy declined in 2006/07. Soy meal and oil
exports declined, as Asia continues to develop their own soybean
processing industry. In addition, the lack of profit earned by Brazil's
processing sector is causing Brazilian companies to loose market share
to other countries, in particular Argentina. Soymeal and soyoil exports
both decreased 15% in 2006/07.

![](media/image2.wmf)

Exports to date for the 2007 calendar year are behind those of the
previous year by 18%. According to SECEX, 2.05 MMT of soybeans were
exported during the first quarter of 2007, versus 2.65 MMT in 2006. In
spite of lower volume, Brazilians received 14% higher FOB prices than
those of first quarter 2006, which averaged \$270/ton. Soymeal and
Soyoil prices were also higher than this time last year, in spite of
lower export volumes. Of particular interest was China's decline in
soybean imports this quarter, 50 percent lower than in 2006.

# Transportation

Soybean farmers continue to pay a high price for transportation due to
rising global energy prices. Farmers in the Center-West area of Brazil,
the heart of Brazilian soybean country, have the most to be concerned
about since they transport their product the furthest to port. In
addition, the great majority of transportation is done by truck.
Brazil's relative low production costs vis-à-vis the U.S. and Argentina
would equal a tremendous advantage if not for the high cost of
transporting their product to port. Most soybean farmers in Mato Grosso
will receive just over half the price of their soybeans at port because
the other half is spent transporting their soybeans by truck on poor
roads to ports 1500 miles away at Paranaguá and Santos. New, although
limited infrastructure created in the last few years has provided
options for transport out of the Brazilian Midwest. The Madeira/Amazon
river outlet where barges move soybeans out on the Madeira River to the
Amazon is now being used as an alternative for farmers in Mato Grosso,
Pará, and Amazonas. Both Cargill and the Maggi Group have port
facilities along this route.

![](media/image3.jpeg){width="5.708333333333333in"
height="5.475694444444445in"}

The Northeast Transportation corridor is becoming more strategic due to
the growth of soybean production in the region. A rail line from the
western border of the state of Maranhão connects with the port of
Itaquí. This rail line also connects with the Carajás terminal, just
north of Redenção, a major soy-producing area in the neighboring state
of Pará. In addition, the North-South Railway is expanding, currently
connects Itaquí port with Araguaina, Tocantins but will eventually go
all the way to Goiania, Goiás. The most important development for the
Northern Corridor is the completion of Tegram grain terminal at Itaquí
which will provide the necessary infrastructure for grain shipments. A
strong rate of growth in the past year indicates that this port will be
a more widely used option for exporters in the future.

+-------------+-----------------+-----------+-----------+-------------+
| #######     |                 |           |           |             |
|  Examples o |                 |           |           |             |
| f Freight R |                 |           |           |             |
| ates for Bu |                 |           |           |             |
| lk Soybeans |                 |           |           |             |
+-------------+-----------------+-----------+-----------+-------------+
| **Truck     |                 |           |           |             |
| (production |                 |           |           |             |
| area to     |                 |           |           |             |
| port)**     |                 |           |           |             |
+-------------+-----------------+-----------+-----------+-------------+
| **Origin**  | **Destination** | *         | **U       | **          |
|             |                 | *Distance | S\$/ton** | US\$/t.km** |
|             |                 | (km)**    |           |             |
+-------------+-----------------+-----------+-----------+-------------+
| Guiratinga, | Rondonópolis,   | 115       | 8.80      | 0.08        |
| MT          | MT              |           |           |             |
+-------------+-----------------+-----------+-----------+-------------+
| Luis        | Feira de        | 880       | 38.12     | 0.04        |
| Eduardo     | Santana, BA     |           |           |             |
| Magalhães,  |                 |           |           |             |
| BA          |                 |           |           |             |
+-------------+-----------------+-----------+-----------+-------------+
| Pejuçara,   | Cruz Alta, RS   | 42        | 3.42      | 0.08        |
| RS          |                 |           |           |             |
+-------------+-----------------+-----------+-----------+-------------+
| Pensão      | São Simão, GO   | 230       | 15.40     | 0.07        |
| Velha, GO   |                 |           |           |             |
+-------------+-----------------+-----------+-----------+-------------+
| Quinta do   | Paranaguá, PR\* | 509       | 29.33     | 0.06        |
| Sol, PR     |                 |           |           |             |
+-------------+-----------------+-----------+-----------+-------------+
| Rio Verde,  | Itumbiara, GO   | 189       | 10.75     | 0.06        |
| GO          |                 |           |           |             |
+-------------+-----------------+-----------+-----------+-------------+
| **Rail      |                 |           |           |             |
| (rail head  |                 |           |           |             |
| to port)**  |                 |           |           |             |
+-------------+-----------------+-----------+-----------+-------------+
| **Origin**  | **Destination** | *         | **U       | **          |
|             |                 | *Distance | S\$/ton** | US\$/t.km** |
|             |                 | (km)**    |           |             |
+-------------+-----------------+-----------+-----------+-------------+
| Porto       | São Luis, MA\*  | 713       | 19.63     | 0.03        |
| Franco, MA  |                 |           |           |             |
+-------------+-----------------+-----------+-----------+-------------+
| **Water     |                 |           |           |             |
| (river port |                 |           |           |             |
| to river    |                 |           |           |             |
| port)**     |                 |           |           |             |
+-------------+-----------------+-----------+-----------+-------------+
| **Origin**  | **Destination** | *         | **U       | **          |
|             |                 | *Distance | S\$/ton** | US\$/t.km** |
|             |                 | (km)**    |           |             |
+-------------+-----------------+-----------+-----------+-------------+
| I           | Porto Velho, RO | 1100      | 21.01     | 0.02        |
| tacoatiara, |                 |           |           |             |
| AM          |                 |           |           |             |
+-------------+-----------------+-----------+-----------+-------------+
| Porto       | Itacoatiara,    | 1100      | 21.01     | 0.02        |
| Velho, RO   | AM\*            |           |           |             |
+-------------+-----------------+-----------+-----------+-------------+
| Source:     |                 |           |           |             |
| Freight     |                 |           |           |             |
| Information |                 |           |           |             |
| System -    |                 |           |           |             |
| Sifreca     |                 |           |           |             |
| (htt        |                 |           |           |             |
| p://sifreca |                 |           |           |             |
| .esalq.usp. |                 |           |           |             |
| br/sifreca) |                 |           |           |             |
+-------------+-----------------+-----------+-----------+-------------+
| \"\*\"      |                 |           |           |             |
| export      |                 |           |           |             |
| point       |                 |           |           |             |
+-------------+-----------------+-----------+-----------+-------------+

# 

# Policy

The use of government subsidies for soybeans has reached new levels (see
bar graph below). The following government programs were used for
soybeans for the first time in 2006:

![](media/image4.wmf)

**Subsidy Auction Program (PEP):**

This program is similar to the U.S. loan deficiency payment program.
Through this program, the government pays the difference between the
prevailing market price and the minimum price of the product. Only
wheat, corn, and rubber were eligible for this program until 2006. The
federal government via CONAB (Brazilian Food Company, equivalent to the
Commodity Credit Corporation) conducts public auctions to set a premium
for buyers of a given product. These buyers then contact producers
interested in selling their production at the minimum support price in
force. Buyers (normally processors or millers) must transport the
product to the destination (a region) previously established by the
program.

**The Risk Premium for Private Option (PROP):**

PROP (Private Option Risk Premium) is a price support program managed by
CONAB, which is linked to the Ministry of Agriculture. This program is
new and heavily used for soybeans. It signals an indicator of the future
price to the market by looking at the difference relative to production
costs and income of growers. PROP represents the maximum amount that
CONAB will pay to cooperatives and processors in order to guarantee a
certain price to producers, which is above the market price. The first
weekly auction of PROP options for soybeans was conducted on May 23,
2006 to assist in the sale of \$44.6 million in soybeans (see table
below). The government paid producers between US\$.70 and \$2.80 per
60-kilo bag of soybeans, depending on how far the producer was located
from port.

+----------+-----------+----------------+-----------+----------------+
| ######   |           |                |           |                |
| PROP Soy |           |                |           |                |
| bean Ope |           |                |           |                |
| rations  |           |                |           |                |
| in 2006  |           |                |           |                |
| and 2007 |           |                |           |                |
+----------+-----------+----------------+-----------+----------------+
| #####    | **2007**  |                | **2006**  |                |
| ## State |           |                |           |                |
+----------+-----------+----------------+-----------+----------------+
|          | **        | **Total        | **        | **Total        |
|          | Contracts | Premium Value  | Contracts | Premium Value  |
|          | Sold 1/** | (US\$)**       | Sold 1/** | (US\$)**       |
+----------+-----------+----------------+-----------+----------------+
| Mato     | 38,931    | 44,508,389.41  | 38,126    | 43,585,480.58  |
| Grosso   |           |                |           |                |
+----------+-----------+----------------+-----------+----------------+
| Goiás    | 0         | 0              | 5,685     | 2,520,443.35   |
+----------+-----------+----------------+-----------+----------------+
| Mato     | 0         | 0              | 1,264     | 811,228.08     |
| Grosso   |           |                |           |                |
| do Sul   |           |                |           |                |
+----------+-----------+----------------+-----------+----------------+
| Minas    | 0         | 0              | 1,982     | 799,160.10     |
| Gerais   |           |                |           |                |
+----------+-----------+----------------+-----------+----------------+
| Pará     | 0         | 0              | 252       | 312,233.50     |
+----------+-----------+----------------+-----------+----------------+
| Bahia    | 0         | 0              | 307       | 209,121.43     |
+----------+-----------+----------------+-----------+----------------+
| Piauí    | 0         | 0              | 78        | 49,384.73      |
+----------+-----------+----------------+-----------+----------------+
| Maranhão | 0         | 0              | 65        | 37,030.79      |
+----------+-----------+----------------+-----------+----------------+
| Federal  | 0         | 0              | 0         | 0              |
| District |           |                |           |                |
+----------+-----------+----------------+-----------+----------------+
| Rondônia | 0         | 0              | 0         | 0              |
+----------+-----------+----------------+-----------+----------------+
| T        | 0         | 0              | 0         | 0              |
| ocantins |           |                |           |                |
+----------+-----------+----------------+-----------+----------------+
| *        | *         | **44,508,389** | *         | **48,324,083** |
| *Total** | *38,931** |                | *47,759** |                |
+----------+-----------+----------------+-----------+----------------+
| 1/ 27    |           |                |           |                |
| ton      |           |                |           |                |
| c        |           |                |           |                |
| ontract. |           |                |           |                |
| Current  |           |                |           |                |
| exchange |           |                |           |                |
| rate:    |           |                |           |                |
| 1US\$    |           |                |           |                |
| =R\$2.03 |           |                |           |                |
+----------+-----------+----------------+-----------+----------------+
| Source:  |           |                |           |                |
| Conab    |           |                |           |                |
+----------+-----------+----------------+-----------+----------------+

**The Equalization Premium Paid to the Producer (PEPRO):**

This is a premium granted to the farmer or cooperative which sells its
products at public auction, where the government pays the difference
between the Reference Value established by the government and the value
of the premium (the maximum value paid by the government as a guarantee
of the Reference Value).

+---------+------------+---------------+------------+----------------+
| **PEPRO |            |               |            |                |
| Soybean |            |               |            |                |
| Ope     |            |               |            |                |
| rations |            |               |            |                |
| in 2006 |            |               |            |                |
| and     |            |               |            |                |
| 2007**  |            |               |            |                |
+---------+------------+---------------+------------+----------------+
| #####   | **2007**   |               | **2006**   |                |
| # State |            |               |            |                |
+---------+------------+---------------+------------+----------------+
|         | **Quantity | **Total       | **Quantity | **Total        |
|         | Negotiated | Premium Value | Negotiated | Premium Value  |
|         | 1/**       | (US\$)**      | 1/**       | (US\$)**       |
+---------+------------+---------------+------------+----------------+
| Mato    | 2,195.0    | 83,362,250.92 | 3448.7     | 143,071,191.73 |
| Grosso  |            |               |            |                |
+---------+------------+---------------+------------+----------------+
| Goiás   | 23.2       | 194,034.48    | 237.1      | 3,566,611.19   |
+---------+------------+---------------+------------+----------------+
| Mato    | 13.9       | 288,000.00    | 699.0      | 20,190,951.66  |
| Grosso  |            |               |            |                |
| do Sul  |            |               |            |                |
+---------+------------+---------------+------------+----------------+
| Minas   | 20.0       | 167,487.68    | 132.5      | 2,288,345.75   |
| Gerais  |            |               |            |                |
+---------+------------+---------------+------------+----------------+
| Pará    | 0.2        | 6,502.46      | 15.6       | 545,629.56     |
+---------+------------+---------------+------------+----------------+
| Bahia   | 42.9       | 888,413.79    | 310.1      | 8,513,332.23   |
+---------+------------+---------------+------------+----------------+
| Piauí   | 12.5       | 254,679.80    | 70.7       | 2,027,076.85   |
+---------+------------+---------------+------------+----------------+
| M       | 10.0       | 206,896.55    | 49.5       | 1,317,367.49   |
| aranhão |            |               |            |                |
+---------+------------+---------------+------------+----------------+
| Federal | 0.0        | 0.00          | 4.5        | 77,080.30      |
| D       |            |               |            |                |
| istrict |            |               |            |                |
+---------+------------+---------------+------------+----------------+
| R       | 27.0       | 874,137.93    | 49.4       | 1,830,394.09   |
| ondônia |            |               |            |                |
+---------+------------+---------------+------------+----------------+
| To      | 4.0        | 82,758.62     | 52.9       | 1,489,646.85   |
| cantins |            |               |            |                |
+---------+------------+---------------+------------+----------------+
| **      | **2,348**  | 42,524,710    | **5,070**  | 184,917,628    |
| Total** |            |               |            |                |
+---------+------------+---------------+------------+----------------+
| 1/      |            |               |            |                |
| T       |            |               |            |                |
| housand |            |               |            |                |
| Metric  |            |               |            |                |
| Tons.   |            |               |            |                |
| Current |            |               |            |                |
| e       |            |               |            |                |
| xchange |            |               |            |                |
| rate:   |            |               |            |                |
| 1US\$=  |            |               |            |                |
| R\$2.03 |            |               |            |                |
+---------+------------+---------------+------------+----------------+
| Source: |            |               |            |                |
| Conab   |            |               |            |                |
+---------+------------+---------------+------------+----------------+

## Moratorium on Soybeans from the Amazon

In reaction to pressure from the European food industry, major soybean
traders including Cargill, Bunge, ADM, Dreyfus and the Maggi group
declared a two-year moratorium last July of purchasing soybeans from
newly deforested areas in the Amazon. The Brazilian Vegetable Oil
Industry Association (ABIOVE) and the National Grain Exporters
Association (ANEC) both agreed upon the moratorium. The agreement also
includes an element to ensure traceability of soybeans and to avoid
sourcing from farms that are involved in deforestation. This measure
does not affect production on areas previously cleared. Farmers owning
land cleared after July 24, 2006 in the Amazon forest zone (which
excludes the Cerrado and transitional forest zones) were prohibited to
sell their soybeans to these companies.

Current Brazilian law states that farmers may clear 20 percent of their
land in these areas, but the moratorium makes soybeans even from the 20
legal percent unmarketable. The moratorium is in effect until July 2008,
after which the effectiveness of the measure will be evaluated. Without
the appropriate enforcement measures in place, concern exists that a
situation similar to that of illegal Amazon timber may be created with
illegal soybeans, where legal transport and shipping documents are used
to trade illegally sourced material. In addition, the ease of mixing and
processing illegal soybeans is potentially greater than timber.

Repeated charges from Greenpeace and other environmental groups that
their industry sponsored rainforest destruction motivated the groups to
try and recover the image of the Brazilian soybean exporters in the
European market. Although NGOs such as Greenpeace have declared their
approval of the decision, the Brazilian Ministry of Agriculture is
concerned that the measure may become another non-tariff barrier to
Brazilian exports. However, so far the measures have not impacted grain
production estimates.

## Interstate Movement Tax (ICMS) Exemption (Lei Kandir)

In September 1996, through "Lei Complementar 95-A", better known as the
"Lei Kandir," the GOB exempted exports of raw materials and
semi-manufactured products from the interstate movement tax (ICMS -
Imposto Sobre Circulação de Mercadorias e Serviços). In other words, it
canceled this export tax on soybeans and derivative products. Prior to
the change, interstate movement of soybeans going to export were taxed
at 13 percent, while soybean meal and soybean oil were assessed lower
rates: 11 and 8.5 percent respectively. While state governments are in
desperate need of tax revenue and the domestic crushing sector continues
to chafe under the exemption, elimination of the Lei Kandir does not
appear likely in the foreseeable future. However tempting it may be for
the Brazilian Government to consider an export tax because of the need
for revenues in a taxation system that is in dire need of an overhaul,
the prevailing sense is that such a tax will not be re-adopted.

## Biodiesel

The world's leader in ethanol (made from sugarcane in Brazil)
production, Brazil is also advancing with biodiesel. Brazil launched its
"Probiodiesel" program in 2002, with Portaria MCT Number 702, Directive
#702 of the Ministry of Science and Technology. The program aims to
develop technology for the production, industrialization, and use of
biodiesel, and its use in mixtures with diesel using pure and residual
vegetable oils. Brazil wants to reduce its dependence on diesel imports,
as it has successfully done with petroleum. Although Brazilian
consumption of petroleum has been increasing, imports have declined due
to growing domestic production and the use of ethanol. While most
vehicles in Brazil no longer operate on 100 percent alcohol fuel, all
Brazilian gasoline requires 20-25 percent alcohol content,

which considerably reduces petroleum requirements. However, the
situation with biodiesel is different. Consumption and imports have been
rising rapidly with demand, and the Brazilian government is concerned
with the growing dependence on diesel imports.

Brazil's soil and climate diversity presents various crop possibilities
for biodiesel, such as soybean, palm, coconut, castor seed, cottonseed,
and sunflower. As soybeans account for the vast majority of Brazilian
oilseed production, it presents the most viable option for large-scale
production. Furthermore, the processing sector is well developed and
Brazilian soybean research is advanced and more easily mobilized.
However, other commodities are better options for Brazil's remote North
and Northeast interior. Small-scale self-sufficiency is the aspiration
for these regions, which are remote and difficult to reach with imported
fuels. The semi-arid Northeast is focusing on castor seed, while the
Amazon region would likely adopt palm oil. However, the remoteness and
isolation of these areas makes it highly unlikely that they could become
significant producers or exporters.

Variability of agricultural commodity prices has been more dramatic than
that of oil, thereby reducing its attractiveness as an economic
alternative. However, many believe that it is only a matter of time
before biodiesel becomes permanently profitable, as natural diesel
sources dry up. Northeastern Brazil is encouraging the production of
castor seed by small-scale producers for biodiesel production.

######### Biodiesel Production

Under current legislation, the potential market for biodiesel is
estimated at 840 million liters per year for 2006 and 2007, 1 billion
liters per year between 2008 and 2013; and 2.4 billion liters per year
as of 2013 to comply with the current legislation.

Biodiesel production began with 6 production facilities in 2005, with
estimated production of 40 million liters. Currently, there are 7
biodiesel refineries operating in Brazil in Minas Gerais, Pará, Piaui,
Mato Grosso, Sao Paulo, Rio de Janeiro and Paraná. In order to produce
biodiesel, investors are required to have authorization from National
Petroleum Agency and to be registered at the Federal Treasury.

In spite of the modest level of current production, several new
refineries are currently in development and should substantially
increase biodiesel production in the near future. The Mines and Energy
Ministry reported 22 new projects in progress and total investments over
\$ 286 million. Industrial capacity is expected to reach 1.7 billion
liters in 2007, versus an estimated 730 million liters capacity at end
2006. Because of this rapid rise in capacity, the Brazilian Government
has been studying the possibility of raising the mandated blend to five
percent even before 2013. The following table shows the breakdown by
state for the projected industrial capacity for biofuels production by
end-2007.

The most commonly used process to produce biodiesel is
transesterification. It is a chemical reaction between a vegetable oil
or animal fat and ethanol or methanol in the presence of a catalyzer.
The reaction produces biodiesel and some byproducts such as glycerin and
meal and others, which add value to the biodiesel chain.

The MME reports that approximately two thirds of the Brazilian biodiesel
production utilizes soybeans as the raw material, followed by castor (25
percent of total production), and animal lard. Biodiesel produced from
soybeans in the Center-Western region of Brazil results in the cheapest
cost (40 cents per liter) when considering only production cost of the
raw material. When considering purchase cost of the raw material, the
use of cottonseed in the Northeast resulted in a cost of production of
33 cents per liter.

+------------------------+------------------+-------------------------+
| ###### Brazilian       |                  |                         |
| Industrial Capacity fo |                  |                         |
| r Biodiesel Production |                  |                         |
+------------------------+------------------+-------------------------+
| State                  | \# of Mills      | Industrial Capacity     |
+------------------------+------------------+-------------------------+
| Para                   | 1                | 8.0                     |
+------------------------+------------------+-------------------------+
| Tocantins              | 1                | 100.0                   |
+------------------------+------------------+-------------------------+
| Maranhao               | 1                | 100.0                   |
+------------------------+------------------+-------------------------+
| Ceara                  | 1                | 100.0                   |
+------------------------+------------------+-------------------------+
| Bahia                  | 1                | 100.0                   |
+------------------------+------------------+-------------------------+
| Piaui                  | 1                | 100.0                   |
+------------------------+------------------+-------------------------+
| Goias                  | 3                | 171.7                   |
+------------------------+------------------+-------------------------+
| Mato Grosso            | 4                | 122.6                   |
+------------------------+------------------+-------------------------+
| Sao Paulo              | 5                | 418.0                   |
+------------------------+------------------+-------------------------+
| Minas Gerais           | 4                | 49.9                    |
+------------------------+------------------+-------------------------+
| Rio de Janeiro         | 1                | 54.0                    |
+------------------------+------------------+-------------------------+
| Parana                 | 2                | 66.0                    |
+------------------------+------------------+-------------------------+
| Rio Grande do Sul      | 4                | 316.0                   |
+------------------------+------------------+-------------------------+
| **Total**              | **29**           | **1,706.2**             |
+------------------------+------------------+-------------------------+
| Source: Ministry of    |                  |                         |
| Agrarian Development   |                  |                         |
+------------------------+------------------+-------------------------+

## Brazil's Biosafety Law & Biotech Soybeans

Under the current legal framework (Law #11,105 plus Presidential Decree
#5,691), all imported or local commercially grown, processed, sold, and
consumed biotech products, must be approved by the National Technical
Commission on Biosafety (CTNBio), under the Ministry of Science and
Technology. Because CTNBio is a board and is comprised of 27 members,
including government and private sector representatives, approvals of
commercial biotech events is difficult. Currently, there are only two
events approved for commercial use in Brazil -- soybeans and cotton.

Due to the passing of this legislation in 2005, more and more Brazilian
soybean farmers have planted biotech seed this crop year. Some
impediments, such as lack of sufficient seed and farmers' hesitancy to
plant relatively untested varieties new to their climates, have kept
biotech soybeans from expanding more rapidly.

However, fast-paced growth in the next few years of biotech area is
expected. Corn is responsible for part of the growth. As corn prices
began to rise in 2006, Brazilian farmers developed a new strategy in
order to plant more corn. It consisted of planting and harvesting GMO
early variety soybeans, then planting winter corn as soon as possible in
order to harvest it before the arrival of freezing temperatures in July.
This has contributed to the largest percentage of Biotech soybeans ever
planted in Brazil. Twenty-five to thirty percent of Mato Grosso's
soybeans are biotech, compared to 5 percent last season. The
International Service for Application of Agro-biotechnology states that
Brazil's overall soybean area is 54% GMO. The same group expects
Brazil's soybean area to reach 80% in the next ten years.

The increase in biotech beans also created problems for some grain
terminals, because now a challenge exists to segregate conventional and
biotech soybeans. However, premiums for those who grow conventional
beans are increasing in value, as much as \$10 per ton. The more
difficult to source, the higher the premium, such as in the South, where
biotech has become the majority of the crop. In the center-west, where
conventional beans are still prevalent, the premium offered for
transgenic soybeans was reportedly in the neighborhood of \$6 per ton
this year.

ABIOVE (Brazil's vegetable oil association) claims that Brazil should
exploit its non-GMO market niche, granted that the U.S. and Argentina
have gone nearly 100 percent biotech in soybeans. The main barrier to
managing this opportunity, however, is Brazil's difficulty in
segregating GMO beans from conventional ones. ABIOVE has expressed
concern that Brazil should improve the management and control of
separate transport and storage for, as well as traceablity of,
conventional soybeans.

## Import Tariffs

The Brazilian Government's import tariffs on oilseeds and products were
recently lowered 1.5 percent and are contained in the MERCOSUL Common
External Tariff schedule (TEC). Brazil, Argentina, Paraguay and Uruguay
are members of the MERCOSUL trade pact. Venezuela was also given member
status last year. Bolivia and Chile are associate members.

+---------------+---------------+---------------------+---------------+
| #             |               |                     |               |
| ###### MERCOS |               |                     |               |
| UL Common Ext |               |                     |               |
| ernal Tariffs |               |                     |               |
+---------------+---------------+---------------------+---------------+
| Tariff Code   |               | Description         | \%            |
+---------------+---------------+---------------------+---------------+
| 1201          |               | Soybeans            |               |
+---------------+---------------+---------------------+---------------+
|               | .00.10        | Seed for planting   | 0             |
+---------------+---------------+---------------------+---------------+
|               | .00.90        | Other               | 8             |
+---------------+---------------+---------------------+---------------+
| 1207          |               | Cotton              |               |
+---------------+---------------+---------------------+---------------+
|               | .20.10        | Seed for planting   | 0             |
+---------------+---------------+---------------------+---------------+
|               | .20.90        | Cottonseed          | 8             |
+---------------+---------------+---------------------+---------------+
| 1507          |               | Soybean oil, not    |               |
|               |               | chemically modified |               |
+---------------+---------------+---------------------+---------------+
|               | .10.00        | Crude               | 10            |
+---------------+---------------+---------------------+---------------+
|               | 0.9           | Other               |               |
+---------------+---------------+---------------------+---------------+
|               | .90.10        | Refined             | 12            |
+---------------+---------------+---------------------+---------------+
|               | .90.90        | Other               | 10            |
+---------------+---------------+---------------------+---------------+
| 1512          |               | Cottonseed oil      |               |
+---------------+---------------+---------------------+---------------+
|               | .21.00        | Crude               | 10            |
+---------------+---------------+---------------------+---------------+
|               | 0.29          | Other               |               |
+---------------+---------------+---------------------+---------------+
|               | .29.10        | Refined             | 10            |
+---------------+---------------+---------------------+---------------+
|               | .29.90        | Other               | 10            |
+---------------+---------------+---------------------+---------------+
| 1208          |               | Oilseed flour       |               |
+---------------+---------------+---------------------+---------------+
|               | .10.00        | Soybean             | 10            |
+---------------+---------------+---------------------+---------------+
|               | .90.00        | Other               | 10            |
+---------------+---------------+---------------------+---------------+
| 2304          |               | Meals resulted from |               |
|               |               | extraction of       |               |
|               |               | soybean oil         |               |
+---------------+---------------+---------------------+---------------+
|               | .00.10        | Meals & pellets     | 6             |
+---------------+---------------+---------------------+---------------+
|               | .00.90        | Other               | 6             |
+---------------+---------------+---------------------+---------------+
| 2306          |               | Meals resulted from |               |
|               |               | extraction of       |               |
|               |               | vegetable oil       |               |
+---------------+---------------+---------------------+---------------+
|               | .10.00        | Cotoonseed meal     | 6             |
+---------------+---------------+---------------------+---------------+
| Source:       |               |                     |               |
| Brazilian     |               |                     |               |
| Government -  |               |                     |               |
| Aduaneiras    |               |                     |               |
| Tarifa        |               |                     |               |
| Externa Comum |               |                     |               |
| (TEC)         |               |                     |               |
+---------------+---------------+---------------------+---------------+