Required Report - public distribution

**Date:** 5/27/2008

**GAIN Report Number:** BR8612

BR7618

**Brazil**

**Oilseeds and Products**

**Annual Soybean Report**

**2008**

**Approved by:**

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

U.S. Embassy

**Prepared by:**

Elizabeth Mello, Agricultural Attaché

**Report Highlights:**

Thanks to high international prices and good overall climatic
conditions, Brazil's Oilseed sector is experiencing a moment of relative
prosperity. Farmers produced a record soybean crop of an estimated 60.1
MMT on 21.7 million hectares, 1 million tons more of soybeans on 4% more
area than last year. Brazil's overall soybean yield, nearly identical to
last year's, is expected to reach 2.8 tons per hectare. Less occurrences
of Soybean Rust contributed to this year's positive outcome. Production
and area are in 2008/09 projected to increase by 7%, increasing
production to 64.3 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 19](#production)

[2006/07 Crop Situation 19](#crop-situation)

[2006/07 Crop Estimates by State **Error! Bookmark not
defined.**](#__RefHeading___Toc165864013)

[Mato Grosso 22](#mato-grosso)

[Other Center-West **Error! Bookmark not
defined.**](#__RefHeading___Toc165864015)

[South **Error! Bookmark not defined.**](#__RefHeading___Toc165864016)

[Southeast **Error! Bookmark not
defined.**](#__RefHeading___Toc165864017)

[Northeast **Error! Bookmark not
defined.**](#__RefHeading___Toc165864018)

[North **Error! Bookmark not defined.**](#__RefHeading___Toc165864019)

[2007/08 Crop Outlook 24](#crop-outlook)

[Area 24](#area)

[Production 25](#production-1)

[Consumption 25](#consumption)

[Input Tables 26](#input-tables)

[Stocks 25](#stocks)

[Exports 27](#exports)

[Transportation 30](#transportation)

[Policy 36](#policy)

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

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

[Biodiesel 39](#__RefHeading___Toc165864031)

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

[Import Tariffs 42](#import-tariffs)

# Executive Summary

Brazil ranks as the world's second-largest producer and exporter of
soybeans behind the United States. The status of being a "new
agricultural frontier" gives Brazil an edge in the soybean business,
since 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 ethanol production.

In 2007/08, soybeans will make up nearly 50 percent of Brazil's total
grains. Post projects that farmers produced a record 60.1 MMT of
soybeans on an area equivalent to the 2003/04 season, with yields of
nearly 2.8 tons per hectare. The Brazilian government's projections are
for 59.5 MMT with a yield of 2.8. However, several factors contribute to
the continued lukewarm financial state of farmers. Although CBOT prices
were at historic highs during the growing season, timing was everything
for producers this year. Up to 70% of Mato Grosso farmers sold their
crop before the CBOT price rally when prices hit \$16 per bushel; and
sold at or below \$12. Only 20% of farmers sold their crop with \$16 per
bushel prices.

The other major negative factor for farmers in Brazil and elsewhere is
the rising cost of inputs. As the price of soybeans rises, input costs
concurrently rise. Fertilizers and herbicides have increased about 75%
over the course of the season. So, in spite of the season's high
international soybean prices, earnings were not what they could have
been, and farmers continue to carry debt.

High international prices and a good 2007/08 harvest are expected to
stimulate a considerable area increase next year. Although farmers are
still carrying debts, the extension and rollover of debt, which was
announced by the Brazilian government in April, will be an important
factor in the 7% Post projected increase in area to 23,200 hectares.
This would equal a complete recuperation in area lost during the 2006/07
season (surpassing the area in 2004/05 by 400,000 hectares). The North
and Center-west should experience the majority of the area growth, and
our estimate is that Mato Grosso, Maranhão, Piaui, Tocantins, and
Western Bahia will experience highest growth relative to this year's
area. Corn prices will also affect soybean area, and summer corn
planting in Brazil should continue to rise modestly. A return to more
soy and less corn planting in the US this year is expected to impact
what are already historically high Brazilian corn prices. In addition,
some shifting from soy to sugarcane should continue to occur.

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. Nevertheless, farmer groups in Brazil complain
that agricultural policy must change in order for Brazil to take the
lead in soybean production.

# Economic Overview

# 

President Lula and his economic team have implemented orthodox fiscal
and monetary policies and pursued many necessary reforms. Brazil\'s
external accounts have improved substantially over the last four years.
GDP growth was strong in 2007 at 5.4 percent, its strongest since 2004.
Market expectations are for 4.7% growth in 2008. Brazil has experienced
booming exports, healthy external accounts, low inflation, 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 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 42%. Real interest rates also are declining, but
remain high. Analysts believe that 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 36 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

  --------------- ------ ------ ------ ------ ------- ------- ------- --------
                  2001   2002   2003   2004   2005    2006    2007    2008\*

  GDP Growth (%)  1.3    2.7    1.1    5.7    3.2     3.8     5.4     4.7

  Inflation (%)   7.7    12.5   9.3    7.6    5.7     3.1     4.5     4.7
  (IPCA/IBGE)                                                         

  Average         2.35   2.93   3.07   2.92   2.43    2.18    1.95    1.74
  Exchange Rate                                                       
  (R\$/US\$)                                                          

  Total Exports   58.3   60.4   73.2   96.7   118.5   137.8   160.6   175
  (US\$ billion)                                                      

  Total Imports   55.6   47.2   48.3   62.8   73.6    91.4    126     150
  (US\$ billion)                                                      
  --------------- ------ ------ ------ ------ ------- ------- ------- --------

\*Projected, Central Bank

# Statistical Tables

## Production, Supply, & Demand Tables

+---------------+------+-------+------+-------+------+-------+------+
| ####          |      |       |      |       |      |       |      |
| ### PSD Table |      |       |      |       |      |       |      |
|               |      |       |      |       |      |       |      |
| ######## Co   |      |       |      |       |      |       |      |
| untry: Brazil |      |       |      |       |      |       |      |
|               |      |       |      |       |      |       |      |
| **Oilseed,    |      |       |      |       |      |       |      |
| Soybean       |      |       |      |       |      |       |      |
| (Local)**     |      |       |      |       |      |       |      |
|               |      |       |      |       |      |       |      |
| **(1000       |      |       |      |       |      |       |      |
| HA)(1000      |      |       |      |       |      |       |      |
| MT)**         |      |       |      |       |      |       |      |
+---------------+------+-------+------+-------+------+-------+------+
|               | **20 | *     | **20 | **    | **20 | **    | **U  |
|               | 06** | *Revi | 07** | Estim | 08** | 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**       |      | /2007 |      | /2008 |      | /2009 | YYYY |
+---------------+------+-------+------+-------+------+-------+------+
| **Area        | 2    | 21100 | 2    | 21700 |      | 23200 | (    |
| Planted**     | 1100 |       | 1700 |       |      |       | 1000 |
|               |      |       |      |       |      |       | HA)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Area        | 2    | 20700 | 2    | 21700 |      | 23200 | (    |
| Harvested**   | 0700 |       | 1300 |       |      |       | 1000 |
|               |      |       |      |       |      |       | HA)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Beginning   | 2252 | 2252  | 3321 | 3171  | 1800 | 3667  | (    |
| Stocks**      |      |       |      |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| *             | 5    | 58850 | 6    | 60100 |      | 64300 | (    |
| *Production** | 9000 |       | 1000 |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **MY          | 108  | 108   | 130  | 40    |      | 35    | (    |
| Imports**     |      |       |      |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **MY Imp.     | 0    | 0     | 0    | 0     |      | 0     | (    |
| from U.S.**   |      |       |      |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **MY Imp.     | 0    | 0     | 0    | 0     |      | 0     | (    |
| from the EC** |      |       |      |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **TOTAL       | 6    | 61210 | 6    | 63311 |      | 68002 | (    |
| SUPPLY**      | 1360 |       | 4451 |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **MY          | 2    | 23805 | 2    | 23794 |      | 28000 | (    |
| Exports**     | 3805 |       | 7900 |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **MY Exp. to  | 1    | 11000 | 1    | 10200 |      | 0     | (    |
| the EC**      | 1000 |       | 0200 |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Crush Dom.  | 3    | 31300 | 3    | 32500 |      | 34000 | (    |
| Consumption** | 1300 |       | 1800 |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Food Use    | 0    | 0     | 0    | 50    |      | 60    | (    |
| Dom.          |      |       |      |       |      |       | 1000 |
| C             |      |       |      |       |      |       | MT)  |
| onsumption.** |      |       |      |       |      |       |      |
+---------------+------+-------+------+-------+------+-------+------+
| **Fe          | 2934 | 2934  | 2951 | 3300  |      | 3350  | (    |
| ed,Seed,Waste |      |       |      |       |      |       | 1000 |
| Dm.Cn.**      |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| #####         | 3    | 34234 | 3    | 35850 |      | 37410 | (    |
| ### TOTAL Dom | 4234 |       | 4751 |       |      |       | 1000 |
| . Consumption |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Ending      | 3321 | 3171  | 1800 | 3667  |      | 2592  | (    |
| Stocks**      |      |       |      |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **TOTAL       | 6    | 61210 | 6    | 63311 |      | 68002 | (    |
| D             | 1360 |       | 4451 |       |      |       | 1000 |
| ISTRIBUTION** |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Calendar    | 98   | 98    | 130  | 0     |      | 0     | (    |
| Year          |      |       |      |       |      |       | 1000 |
| Imports**     |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Calendar Yr | 0    | 0     | 0    | 0     |      | 0     | (    |
| Imp. U.S.**   |      |       |      |       |      |       | 1000 |
|               |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Calendar    | 2    | 23734 | 2    | 0     |      | 0     | (    |
| Year          | 3734 |       | 7300 |       |      |       | 1000 |
| Exports**     |      |       |      |       |      |       | MT)  |
+---------------+------+-------+------+-------+------+-------+------+
| **Calndr Yr   | 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 |        | 2/2007 |        | 2/2008 |     | 2/2009 | YYYY |
| Year    |        |        |        |        |     |        |      |
| Begin** |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| **      | 31300  | 31300  | 31800  | 32500  | 0   | 33300  | (    |
| Crush** |        |        |        |        |     |        | 1000 |
|         |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| **Extr. | 0      | 0      | 0,     | 0,     | 0   | 0,     | (    |
| Rate,   | ,77476 | ,77476 | 774057 | 769231 |     | 768769 | PERC |
| 999     |        |        |        |        |     |        | ENT) |
| .9999** |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| **Be    | 863    | 863    | 1313   | 1313   | 1   | 723    | (    |
| ginning |        |        |        |        | 115 |        | 1000 |
| S       |        |        |        |        |     |        | MT)  |
| tocks** |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| **Produ | 24250  | 24250  | 24615  | 25000  | 0   | 25600  | (    |
| ction** |        |        |        |        |     |        | 1000 |
|         |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| **MY    | 146    | 146    | 210    | 110    | 0   | 130    | (    |
| 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 | 25259  | 25259  | 26138  | 26423  | 1   | 26453  | (    |
| S       |        |        |        |        | 115 |        | 1000 |
| UPPLY** |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| **MY    | 12346  | 12346  | 12923  | 14300  | 0   | 14500  | (    |
| 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  | 11600  | 11600  | 12100  | 11400  | 0   | 11500  | (    |
| Waste   |        |        |        |        |     |        | 1000 |
| Dom.    |        |        |        |        |     |        | MT)  |
| C       |        |        |        |        |     |        |      |
| onsum** |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| TOTAL   | 11600  | 11600  | 12100  | 11400  | 0   | 11500  | (    |
| Dom.    |        |        |        |        |     |        | 1000 |
| Cons    |        |        |        |        |     |        | MT)  |
| umption |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| Ending  | 1313   | 1313   | 1115   | 723    | 0   | 453    | (    |
| Stocks  |        |        |        |        |     |        | 1000 |
|         |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| TOTAL   | 25259  | 25259  | 26138  | 26423  | 0   | 26453  | (    |
| DISTR   |        |        |        |        |     |        | 1000 |
| IBUTION |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| C       | 149    | 149    | 220    | 220    | 0   | 0      | (    |
| alendar |        |        |        |        |     |        | 1000 |
| Year    |        |        |        |        |     |        | MT)  |
| Imports |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| C       | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| alendar |        |        |        |        |     |        | 1000 |
| Yr Imp. |        |        |        |        |     |        | MT)  |
| U.S.    |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| C       | 12477  | 12477  | 13500  | 13500  | 0   | 0      | (    |
| alendar |        |        |        |        |     |        | 1000 |
| Year    |        |        |        |        |     |        | MT)  |
| Exports |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| Calndr  | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| Yr Exp. |        |        |        |        |     |        | 1000 |
| to U.S. |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
|         | 11600  | 11600  | 12100  | 11400  | 0   | 11500  |      |
+---------+--------+--------+--------+--------+-----+--------+------+

+---------+--------+--------+--------+--------+-----+--------+------+
| **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  |        | 0      |        | 0      |     | 0      | **M  |
| Year    |        | 2/2007 |        | 2/2008 |     | 2/2009 | M/YY |
| Begin   |        |        |        |        |     |        | YY** |
+---------+--------+--------+--------+--------+-----+--------+------+
| Crush   | 31300  | 31300  | 31800  | 32500  | 0   | 34000  | **(  |
|         |        |        |        |        |     |        | 1000 |
|         |        |        |        |        |     |        | M    |
|         |        |        |        |        |     |        | T)** |
+---------+--------+--------+--------+--------+-----+--------+------+
| Extr.   | 0,     | 0,     | 0,     | 0,     | 0   | 0,     | (    |
| Rate,   | 191693 | 191693 | 191981 | 190154 |     | 191176 | PERC |
| 9       |        |        |        |        |     |        | ENT) |
| 99.9999 |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| Be      | 300    | 300    | 341    | 341    | 306 | 351    | (    |
| ginning |        |        |        |        |     |        | 1000 |
| Stocks  |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| Pro     | 6000   | 6000   | 6105   | 6180   | 0   | 6500   | (    |
| duction |        |        |        |        |     |        | 1000 |
|         |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| MY      | 62     | 62     | 125    | 30     | 0   | 50     | (    |
| 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   | 6362   | 6362   | 6571   | 6551   | 306 | 6901   | (    |
| SUPPLY  |        |        |        |        |     |        | 1000 |
|         |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| MY      | 2521   | 2521   | 2575   | 2100   | 0   | 2300   | (    |
| Exports |        |        |        |        |     |        | 1000 |
|         |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| MY Exp. | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| to the  |        |        |        |        |     |        | 1000 |
| EC      |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| Ind     | 500    | 500    | 650    | 850    | 0   | 900    | (    |
| ustrial |        |        |        |        |     |        | 1000 |
| Dom.    |        |        |        |        |     |        | MT)  |
| Consum  |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| Food    | 3000   | 3000   | 3040   | 3250   | 0   | 3300   | (    |
| Use     |        |        |        |        |     |        | 1000 |
| Dom.    |        |        |        |        |     |        | MT)  |
| C       |        |        |        |        |     |        |      |
| onsump. |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| Feed    | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| Waste   |        |        |        |        |     |        | 1000 |
| Dom.    |        |        |        |        |     |        | MT)  |
| Consum  |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| TOTAL   | 3500   | 3500   | 3690   | 4100   | 0   | 4200   | (    |
| Dom.    |        |        |        |        |     |        | 1000 |
| Cons    |        |        |        |        |     |        | MT)  |
| umption |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| Ending  | 341    | 341    | 306    | 351    | 0   | 401    | (    |
| Stocks  |        |        |        |        |     |        | 1000 |
|         |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| TOTAL   | 6362   | 6362   | 6571   | 6551   | 0   | 6901   | (    |
| DISTR   |        |        |        |        |     |        | 1000 |
| IBUTION |        |        |        |        |     |        | MT)  |
+---------+--------+--------+--------+--------+-----+--------+------+
| C       | 44     | 44     | 120    | 0      | 0   | 0      | (    |
| alendar |        |        |        |        |     |        | 1000 |
| Year    |        |        |        |        |     |        | MT)  |
| Imports |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| C       | 0      | 0      | 0      | 0      | 0   | 0      | (    |
| alendar |        |        |        |        |     |        | 1000 |
| Yr Imp. |        |        |        |        |     |        | MT)  |
| U.S.    |        |        |        |        |     |        |      |
+---------+--------+--------+--------+--------+-----+--------+------+
| C       | 2343   | 2343   | 2550   | 2550   | 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   | 1110 | 1110 | 1030 | 1030  | 0    | 1150  | **(  |
| (COTTON)       |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | M    |
|                |      |      |      |       |      |       | T)** |
+----------------+------+------+------+-------+------+-------+------+
| Area           | 1094 | 1094 | 1150 | 1000  | 0    | 1100  | (    |
| Har            |      |      |      |       |      |       | 1000 |
| vested(COTTON) |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| Seed to Lint   | 0    | 0    | 0    | 0     | 0    | 0     | (    |
| Ratio          |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| Beginning      | 0    | 0    | 95   | 95    | 130  | 130   | (    |
| Stocks         |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| Production     | 2606 | 2606 | 2681 | 2681  | 0    | 2700  | (    |
|                |      |      |      |       |      |       | 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   | 2606 | 2606 | 2776 | 2776  | 0    | 2830  | (    |
|                |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| MY Exports     | 120  | 120  | 135  | 135   | 0    | 130   | (    |
|                |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| MY Exp. to the | 0    | 0    | 0    | 0     | 0    | 0     | (    |
| EC             |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| Crush Dom.     | 2106 | 2106 | 2205 | 2205  | 0    | 2200  | (    |
| Consumption    |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| Food Use Dom.  | 0    | 0    | 0    | 0     | 0    | 0     | (    |
| Consump.       |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| F              | 285  | 285  | 306  | 306   | 0    | 300   | (    |
| eed,Seed,Waste |      |      |      |       |      |       | 1000 |
| Dm.Cm.         |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| TOTAL Dom.     | 2391 | 2391 | 2511 | 2511  | 0    | 2630  | (    |
| Consumption    |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| Ending Stocks  | 95   | 95   | 130  | 130   | 0    | 200   | (    |
|                |      |      |      |       |      |       | 1000 |
|                |      |      |      |       |      |       | MT)  |
+----------------+------+------+------+-------+------+-------+------+
| TOTAL          | 2606 | 2606 | 2776 | 2776  | 0    | 2830  | (    |
| 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  | 100  | 100  | 100  | 100   | 0    | 100   | (    |
| 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      | 2106  | 2106  | 2205  | 2205  | 0    | 2205  | (1000  |
|            |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| Extr.      | 0,4   | 0,4   | 0,4   | 0,4   | 0    | 0,4   | (PE    |
| Rate,      | 96201 | 96201 | 90703 | 90703 |      | 90703 | RCENT) |
| 999.9999   |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Beginning  | 11    | 11    | 15    | 15    | 10   | 10    | (1000  |
| Stocks     |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| Production | 1045  | 1045  | 1082  | 1082  | 0    | 1080  | (1000  |
|            |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| MY Imports | 5     | 5     | 5     | 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      | 1061  | 1061  | 1102  | 1102  | 0    | 1100  | (1000  |
| SUPPLY     |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| MY Exports | 0     | 0     | 0     | 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 | 1046  | 1046  | 1092  | 1092  | 0    | 1090  | (1000  |
| Dom.       |       |       |       |       |      |       | MT)    |
| Consum     |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| TOTAL Dom. | 1046  | 1046  | 1092  | 1092  | 0    | 1090  | (1000  |
| C          |       |       |       |       |      |       | MT)    |
| onsumption |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Ending     | 15    | 15    | 10    | 10    | 0    | 10    | (1000  |
| Stocks     |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| TOTAL      | 1061  | 1061  | 1102  | 1102  | 0    | 1100  | (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      | 2106  | 2106  | 2205  | 2205  | 0    | 2205  | (1000  |
|            |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| Extr.      | 0,1   | 0,1   | 0,1   | 0,1   | 0    | 0,1   | (PE    |
| Rate,      | 62393 | 62393 | 63265 | 63265 |      | 63265 | RCENT) |
| 999.9999   |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Beginning  | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| Stocks     |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| Production | 342   | 342   | 360   | 360   | 0    | 360   | (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      | 342   | 342   | 360   | 360   | 0    | 360   | (1000  |
| SUPPLY     |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| MY Exports | 50    | 50    | 54    | 54    | 0    | 50    | (1000  |
|            |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| MY Exp. to | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| the EC     |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| Industrial | 100   | 100   | 105   | 105   | 0    | 120   | (1000  |
| Dom.       |       |       |       |       |      |       | MT)    |
| Consum     |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Food Use   | 192   | 192   | 201   | 201   | 0    | 200   | (1000  |
| Dom.       |       |       |       |       |      |       | MT)    |
| Consump.   |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Feed Waste | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| Dom.       |       |       |       |       |      |       | MT)    |
| Consum     |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| TOTAL Dom. | 292   | 292   | 306   | 306   | 0    | 320   | (1000  |
| C          |       |       |       |       |      |       | MT)    |
| onsumption |       |       |       |       |      |       |        |
+------------+-------+-------+-------+-------+------+-------+--------+
| Ending     | 0     | 0     | 0     | 0     | 0    | 0     | (1000  |
| Stocks     |       |       |       |       |      |       | MT)    |
+------------+-------+-------+-------+-------+------+-------+--------+
| TOTAL      | 342   | 342   | 360   | 360   | 0    | 370   | (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   | 45    | 45    | 45    | 45    | 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-Jan Marketing                                        
  Year                                                     

  Country            Quantity                              

                     2006              2007                2008

  World              22,799            24,770              23,780

  United States      0                 6                   .08

  China              7,302             10,624              10,071

  Netherlands        5,223             3,673               3,381

  Spain              2,118             1,873               2,355

  Italy              1322              1097                1,176

  Germany            895               1049                407

  Iran               914               900                 336

  Portugal           367               790                 872

  Thailand           632               767                 963

  United Kingdom     636               639                 643

  Others             3,390             3,358               7,708
  ------------------ ----------------- ------------------- ----------------

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

  In 1000 Metric                                           
  Tons                                                     

  Feb-Jan Marketing                                        
  Year                                                     

  Country            Quantity                              

                     2006              2007                2008

  World              353               40                  108

  Paraguay           352               40                  108

  United States      0                 0                   0

  Others             0                 0                   0
  ------------------ ----------------- ------------------- ----------------

### Soybean Meal

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

  In 1000 Metric                                                            
  Tons                                                                      

  Feb-Jan Marketing                                                         
  Year                                                                      

  Country            Quantity                                               

                     **2006**          **2007**            **2008**         

  World              14,225            12,275              12,343           

  Netherlands        3,477             2,491               2,539            

  France             2,943             2,434               2,621            

  Thailand           1,041             1,199               831              

  Germany            1,093             875                 1,096            

  Iran               197               560                 833              

  Indonesia          460               504                 432              

  Korea South        947               443                 664              

  Australia          300               407                 304              

  United Kingdom     440               400                 493              

  Italy              502               391                 414              

  Saudi Arabia       290               353                 122              

  Spain              315               266                 394              

  Norway             249               208                 11               

  United States      41                0                   0                

  Others             1,787             1,402               1,589            
  ------------------ ----------------- ------------------- ---------------- --

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

  In Metric Tons                                           

  Feb-Jan Marketing                                        
  Year                                                     

  Country            Quantity                              

                     **2006**          **2007**            **2008**

  World              186,178           164,844             98,338

  Paraguay           186,167           164,826             98,316

  China              0                 12                  12

  United States      11                6                   10
  ------------------ ----------------- ------------------- ----------------

### Soybean Oil

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

  In 1000 Metric                                           
  Tons                                                     

  Feb-Jan Marketing                                        
  Year                                                     

  Country            Quantity                              

                     **2006**          **2007**            **2008**

  World              2697              2315                2521

  Iran               699               712                 450

  Netherlands        174               528                 303

  India              431               201                 280

  China              386               200                 471

  Italy              37                165                 52

  France             9                 104                 176

  Turkey             38                50                  5

  South Africa       144               36                  122

  Bangladesh         31                36                  133

  Tunisia            26                28                  2

  United States      0                 2                   0.3

  Others             722               255                 527
  ------------------ ----------------- ------------------- ----------------

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

  In 1000 Metric                                           
  Tons                                                     

  Feb-Jan Marketing                                        
  Year                                                     

  Country            Quantity                              

                     **2006**          **2007**            **2008**

  World              3                 26                  62

  Argentina          0                 25                  53

  Paraguay           0                 0                   1

  Bolivia            1                 0                   2

  United States      2                 1                   5
  ------------------ ----------------- ------------------- ----------------

### Cottonseed Meal

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

  In Metric Tons                                           

  Country            Quantity                              

                     **2006**          **2007**            **2008**

  World              0                 0                   0

  United Kingdom     0                 0                   0

  Belgium            0                 0                   0

  Germany            0                 0                   0

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

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

  In Metric Tons                                           

  Country            Quantity                              

                     **2006**          **2007**            **2008**

  World              5,661             2,218               112

  Paraguay           5,590             2,063               0

  United States      71                155                 112

  Uruguay            0                 0                   0

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

### Cottonseed Oil

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

  In Metric Tons                                        

  Country           Quantity                            

                    **2006**           **2007**         **2008**

  World             45,250             25,932           21,004

  Greece            0                  6,300            1,000

  South Africa      6,750              5,630            8,093

  Netherlands       0                  5,500            0

  Korea North       1,700              3,000            0

  Korea South       3,000              2,500            5,060

  Turkey            5,346              1,500            1,523

  Malaysia          1,700              1,000            4,250

  Japan             433                333              238

  Bolivia           171                143              28

  Trinidad & Tobago 64                 13               0

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

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

  In Metric Tons                                        

  Country           Quantity                            

                    **2006**           **2007**         **2008**

  World             0                  100              0.5

  Paraguay          0                  100              0

  United States     0                  0                0

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

## C. Prices

+-------------+-----------------+-------------------+-----------------+
| ######      |                 |                   |                 |
| #  Soybean  |                 |                   |                 |
| Price Table |                 |                   |                 |
+-------------+-----------------+-------------------+-----------------+
| Country     | Brazil          |                   |                 |
+-------------+-----------------+-------------------+-----------------+
| Commodity   | Soybeans        |                   |                 |
+-------------+-----------------+-------------------+-----------------+
| Prices in   | US\$/ton        |                   |                 |
+-------------+-----------------+-------------------+-----------------+
| Year        | **2005**        | **2006**          | **2007**        |
+-------------+-----------------+-------------------+-----------------+
| Jan         | 206.28          | 229.25            | 293.78          |
+-------------+-----------------+-------------------+-----------------+
| Feb         | 208.02          | 236.87            | 281.01          |
+-------------+-----------------+-------------------+-----------------+
| Mar         | 239.05          | 222.95            | 278.90          |
+-------------+-----------------+-------------------+-----------------+
| Apr         | 229.72          | 225.23            | 268.04          |
+-------------+-----------------+-------------------+-----------------+
| May         | 239.6           | 230.52            | 276.69          |
+-------------+-----------------+-------------------+-----------------+
| Jun         | 250.82          | 226.3             | 295.43          |
+-------------+-----------------+-------------------+-----------------+
| Jul         | 254.48          | 232.2             | 302.05          |
+-------------+-----------------+-------------------+-----------------+
| Aug         | 245.53          | 228.02            | 319.98          |
+-------------+-----------------+-------------------+-----------------+
| Sep         | 238.92          | 223.87            | 368.28          |
+-------------+-----------------+-------------------+-----------------+
| Oct         | 237.1           | 239.55            | 382.34          |
+-------------+-----------------+-------------------+-----------------+
| Nov         | 234.55          | 255.36            | 390.44          |
+-------------+-----------------+-------------------+-----------------+
| Dec         | 226.04          | 263.28            | 432.25          |
+-------------+-----------------+-------------------+-----------------+
| 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   2005                            2006                            2007                    

                   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              33.04   33.75   33.25   28.9    29      27.63   27.38   24.95   30.83   30.57   30.43   25.33

  Feb              28.3    29.25   29.25   24.43   27.5    27.6    26.3    22.1    30.85   32.17   31.17   26.93

  Mar              33.43   35.5    34.25   30.13   25.3    24.6    23.5    20      31.00   32.28   30.48   26.25

  Apr              32.35   31.95   32.73   27.88   24.83   23.13   23.23   19.23   29.83   29.50   28.77   24.67

  May              30.9    30.45   31.08   26.48   26.25   24.45   24.63   20.75   29.45   29.20   28.73   25.60

  Jun              33.03   32.15   31.78   28.25   27.6    25.3    25.3    22.78   31.00   30.05   29.30   26.35

  Jul              32.8    31.15   29.78   27.13   26.87   25.67   25.83   23.57   27.50   27.78   27.00   25.15

  Aug              31.42   32.32   30.3    26.76   26.9    25.9    25.9    23.1    33.67   33.13   33.58   31.67

  Sep              29.33   29.28   27.95   25.23   27.33   25.5    26.17   22.77   38.33   38.33   37.17   36.00

  Oct              29.6    27.7    27.3    24.9    29.33   28      27.5    25      39.83   40.17   38.33   36.50

  Nov              29.3    26      26.7    25.1    32      31      31.17   28      42.50   42.70   40.24   38.36

  Dec              28.2    25.5    27.6    24.8    32.5    31.43   31.5    29.33   44.07   44.50   42.67   39.67
  ---------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------

+------------+---------------+------------+---------------+------------+
| ##         |               |            |               |            |
| ##### Soym |               |            |               |            |
| eal Prices |               |            |               |            |
+------------+---------------+------------+---------------+------------+
|            | 2006          |            | 2007          |            |
+------------+---------------+------------+---------------+------------+
| Month      | Paranaguá 1/  | SP 2/      | Paranaguá 1/  | SP 2/      |
+------------+---------------+------------+---------------+------------+
| JAN        | 196.62        | 210.30     | 237.41        | 438.75     |
+------------+---------------+------------+---------------+------------+
| FEB        | 200.48        | 188.06     | 228.25        | 455.15     |
+------------+---------------+------------+---------------+------------+
| MAR        | 181.88        | 169.22     | 220.64        | 443.87     |
+------------+---------------+------------+---------------+------------+
| APR        | 183.48        | 164.07     | 208.51        | 384.90     |
+------------+---------------+------------+---------------+------------+
| MAY        | 184.74        | 172.62     | 210.53        | 378.66     |
+------------+---------------+------------+---------------+------------+
| JUN        | 188.44        | 174.62     | 219.96        | 396.09     |
+------------+---------------+------------+---------------+------------+
| JUL        | 184.34        | 180.58     | 231.24        | 231.24     |
+------------+---------------+------------+---------------+------------+
| AUG        | 184.03        | 179.93     | 239.36        | 239.36     |
+------------+---------------+------------+---------------+------------+
| SEP        | 190.23        | 188.56     | 283.62        | 283.62     |
+------------+---------------+------------+---------------+------------+
| OCT        | 207.01        | 197.67     | 307.87        | 307.87     |
+------------+---------------+------------+---------------+------------+
| NOV        | 214.84        | 209.99     | 319.53        | 319.53     |
+------------+---------------+------------+---------------+------------+
| DEC        | 206.11        | 201.53     | n/a           | n/a        |
+------------+---------------+------------+---------------+------------+
| Average    | 193.52        | 186.43     |               |            |
+------------+---------------+------------+---------------+------------+
| 1/ FOB --  |               |            |               |            |
| Paranaguá  |               |            |               |            |
| Port       |               |            |               |            |
| (US\$/ton) |               |            |               |            |
|            |               |            |               |            |
| 2/ São     |               |            |               |            |
| Paulo      |               |            |               |            |
| --US\$/ton |               |            |               |            |
| -- 12%     |               |            |               |            |
| ICMS tax   |               |            |               |            |
+------------+---------------+------------+---------------+------------+

+------------+---------------+------------+---------------+------------+
| #######    |               |            |               |            |
|  Crude Soy |               |            |               |            |
| oil Prices |               |            |               |            |
+------------+---------------+------------+---------------+------------+
|            | 2006          |            | 2007          |            |
+------------+---------------+------------+---------------+------------+
| Month      | Paranaguá 1/  | SP 2/      | Paranaguá 1/  | SP 2/      |
+------------+---------------+------------+---------------+------------+
| JAN        | 434.47        | 503.30     | 695.28        | 1667.50    |
+------------+---------------+------------+---------------+------------+
| FEB        | 458.83        | 530.09     | 609.42        | 1510.00    |
+------------+---------------+------------+---------------+------------+
| MAR        | 469.89        | 563.72     | 609.79        | 1487.50    |
+------------+---------------+------------+---------------+------------+
| APR        | 476.08        | 535.97     | 645.24        | 1537.00    |
+------------+---------------+------------+---------------+------------+
| MAY        | 518.67        | 580.65     | 702.39        | 1622.00    |
+------------+---------------+------------+---------------+------------+
| JUN        | 498.96        | 576.67     | 764.11        | 1740.00    |
+------------+---------------+------------+---------------+------------+
| JUL        | 504.34        | 586.76     | 789.91        | 1757.50    |
+------------+---------------+------------+---------------+------------+
| AUG        | 518.43        | 625.00     | 803.96        | 1930.00    |
+------------+---------------+------------+---------------+------------+
| SEP        | 522.10        | 618.09     | 844.47        | 1935.00    |
+------------+---------------+------------+---------------+------------+
| OCT        | 551.66        | 653.49     | 885.09        | 2010.00    |
+------------+---------------+------------+---------------+------------+
| NOV        | 649.61        | 778.70     | 1037.26       | 2307.50    |
+------------+---------------+------------+---------------+------------+
| DEC        | 643.08        | 817.44     | 1045.64       | 2306.67    |
+------------+---------------+------------+---------------+------------+
| 1/ FOB --  |               |            |               |            |
| Paranaguá  |               |            |               |            |
| Port       |               |            |               |            |
| (US\$/ton) |               |            |               |            |
|            |               |            |               |            |
| 2/ São     |               |            |               |            |
| Paulo      |               |            |               |            |
| --US\$/ton |               |            |               |            |
| -- 12%     |               |            |               |            |
| ICMS tax   |               |            |               |            |
+------------+---------------+------------+---------------+------------+

+-------------+------------+-------------+------------+-------------+
| #######     |            |             |            |             |
|  Monthly Ex |            |             |            |             |
| change Rate |            |             |            |             |
| s: R\$/US\$ |            |             |            |             |
+-------------+------------+-------------+------------+-------------+
| **M         | **2004**   | **2005**    | **2006**   | **2007**    |
| onth/Year** |            |             |            |             |
+-------------+------------+-------------+------------+-------------+
| Jan         | 2.85       | 2.69        | 2.27       | 2.14        |
+-------------+------------+-------------+------------+-------------+
| Feb         | 2.93       | 2.60        | 2.16       | 2.09        |
+-------------+------------+-------------+------------+-------------+
| Mar         | 2.91       | 2.71        | 2.15       | 2.09        |
+-------------+------------+-------------+------------+-------------+
| Apr         | 2.91       | 2.58        | 2.12       | 2.03        |
+-------------+------------+-------------+------------+-------------+
| May         | 3.10       | 2.46        | 2.17       | 1.94        |
+-------------+------------+-------------+------------+-------------+
| Jun         | 3.13       | 2.42        | 2.25       | 1.92        |
+-------------+------------+-------------+------------+-------------+
| Jul         | 3.04       | 2.37        | 2.19       | 1.88        |
+-------------+------------+-------------+------------+-------------+
| Aug         | 3.00       | 2.36        | 2.16       | 1.96        |
+-------------+------------+-------------+------------+-------------+
| Sep         | 2.89       | 2.30        | 2.17       | 1.88        |
+-------------+------------+-------------+------------+-------------+
| Oct         | 2.85       | 2.26        | 2.15       | 1.75        |
+-------------+------------+-------------+------------+-------------+
| Nov         | 2.79       | 2.21        | 2.16       | 1.78        |
+-------------+------------+-------------+------------+-------------+
| Dec         | 2.72       | 2.28        | 2.15       | 1.76        |
+-------------+------------+-------------+------------+-------------+
| **Average** | **2.93**   | **2.44**    | **2.18**   | **1.94**    |
+-------------+------------+-------------+------------+-------------+
| Source:     |            |             |            |             |
| Banco       |            |             |            |             |
| Central do  |            |             |            |             |
| Brasil      |            |             |            |             |
| (www.       |            |             |            |             |
| bcb.gov.br) |            |             |            |             |
+-------------+------------+-------------+------------+-------------+

## ![](media/image2.png){width="6.417361111111111in" height="5.125694444444444in"} 

## D. Policy Table

+------------------+------------+------------+------------+------------+
| ####### Officia  |            |            |            |            |
| l Minimum Prices |            |            |            |            |
+------------------+------------+------------+------------+------------+
| Product (Unit) / | 2006/07    |            | 2007/08    |            |
| 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:   |            |            |            |            |
| 2006/07-R\$2.09  |            |            |            |            |
+------------------+------------+------------+------------+------------+

# Production

# 

## 2006/07 Crop Situation

## 

Crop conditions in Brazil were very good with the exception of the
extreme South of Brazil in the states of Rio Grande do Sul and Santa
Catarina. La Nina did not have the negative impact on Brazil that was
expected before the season started. However, it made enough of an impact
in Rio Grande do Sul, Santa Catarina, and Mato Grosso do Sul for Conab
to decrease its total production estimate by several hundred thousand
tons in early May.

Post's forecast remains at 60.1 MMT on 21.7 Million Hectares. Lower
yields in the South were balanced out by better-than-expected results in
Mato Grosso. Soybeans were planted anywhere from 8 days to one month
late, which brought two major consequences. The positive effect was
significantly less soybean rust, and the negative has been a very wet
harvest, especially in the state of Mato Grosso. Although there was some
concern in the press about losses in Northern Mato Grosso, actual losses
are minimal and the result of the high humidity in the region is a
compromise in bean quality.

**Record Prices but Marginal Profit**

With respect to Southern Brazil and other areas closer to ports,
although losses were greater, margins will certainly be higher due to
lower transportation costs. Transportation costs in Mato Grosso are
estimated to total up to half of farmers' total costs in this state,
especially in the central producing area of Sorriso/Lucas do Rio
Verde/Nova Mutum. These are notably the largest soy-producing counties
in Brazil.

+--------------------+-------------+------------+---------------------+
| ###### 200         |             |            |                     |
| 7/08 Post Forecast |             |            |                     |
|  Soybean Area, Yie |             |            |                     |
| ld, and Production |             |            |                     |
+--------------------+-------------+------------+---------------------+
| (1000 ha; Tons/ha, |             |            |                     |
| Thousand tons)     |             |            |                     |
+--------------------+-------------+------------+---------------------+
| **Region**         | **Area**    | **Yield**  | **Production**      |
+--------------------+-------------+------------+---------------------+
| **Center West**    | **9710**    | **2,992**  | **29050**           |
+--------------------+-------------+------------+---------------------+
| MS                 | 1850        | **2,662**  | 4925                |
+--------------------+-------------+------------+---------------------+
| MT                 | 5600        | **3,080**  | 17250               |
+--------------------+-------------+------------+---------------------+
| GO                 | 2200        | **3,045**  | 6700                |
+--------------------+-------------+------------+---------------------+
| DF                 | 60          | **2,917**  | 175                 |
+--------------------+-------------+------------+---------------------+
| **South**          | **8400**    | **2,512**  | **21100**           |
+--------------------+-------------+------------+---------------------+
| PR                 | 4050        | **2,938**  | 11900               |
+--------------------+-------------+------------+---------------------+
| SC                 | 350         | **2,714**  | 950                 |
+--------------------+-------------+------------+---------------------+
| RS                 | 4000        | **2,063**  | 8250                |
+--------------------+-------------+------------+---------------------+
| **Southeast**      | **1515**    | **2,739**  | **4150**            |
+--------------------+-------------+------------+---------------------+
| MG                 | 975         | **2,718**  | 2650                |
+--------------------+-------------+------------+---------------------+
| SP                 | 540         | **2,778**  | 1500                |
+--------------------+-------------+------------+---------------------+
| **Northeast**      | **1575**    | **2,787**  | **4390**            |
+--------------------+-------------+------------+---------------------+
| MA                 | 420         | **2,857**  | 1200                |
+--------------------+-------------+------------+---------------------+
| PI                 | 255         | **2,706**  | 690                 |
+--------------------+-------------+------------+---------------------+
| BA                 | 900         | **2,778**  | 2500                |
+--------------------+-------------+------------+---------------------+
| **North**          | **523**     | **2,790**  | **1459**            |
+--------------------+-------------+------------+---------------------+
| RO                 | 100         | **3,050**  | 305                 |
+--------------------+-------------+------------+---------------------+
| AM                 | 3           | **3,000**  | 9                   |
+--------------------+-------------+------------+---------------------+
| RR                 | 25          | **3,000**  | 75                  |
+--------------------+-------------+------------+---------------------+
| PA                 | 85          | **3,059**  | 260                 |
+--------------------+-------------+------------+---------------------+
| TO                 | 310         | **2,613**  | 810                 |
+--------------------+-------------+------------+---------------------+
| **Totals**         | **21723**   | **2,769**  | **60149**           |
+--------------------+-------------+------------+---------------------+

## 

## Rust

It is now without question that losses this year due to soybean rust are
much less than in previous years. Soybean Rust, which was responsible
for more than \$10 billion in damage over past crop years, has shown
continual signs of reduction in Brazil, and this year's production
losses are estimated at 25% less than last year's. According to Embrapa,
the number of breakouts through April 2008 was at near-lowest levels
lowest since 2002 at 2,200 cases. At the same time last year, there were
2,900 cases registered. This year, no cases at all were registered in
November. January was the month when the most number of rust breakouts
occurred.

There are two main reasons for the diminishing number of breakouts.
State laws prohibiting farmers from planting soybeans for a 90 day
fallow period (vazio sanitário), to keep soybean rust from spreading in
the off-season, have helped tremendously with the control of rust. The
laws also require spraying soybean plants that grow wild in the
off-season, in addition to the prohibition of second-crop soy.

The La Niña weather phenomenon has also helped moderate the rust
situation. Due to less overall rainfall, which also arrived later than
normal, the disease has not been able to spread as easily. In Bahia,
which was the state with the most cases in 2006/07, due to the drought
situation, has had no cases registered this year. In Mato Grosso there
are more registered cases this year than last year, but rainfall has
also picked up in the state and technology there to detect the disease
is improving. Soy fields in Mato Grosso do Sul state suffered the most
with Rust this year, with 550 registered cases. Paraná registered more
cases than Mato Grosso do Sul, but suffered fewer losses due to better
management.

According to Brazil's leading rust expert, José Tadashi Torinori, rust
prevention this year has been more efficient, due to the fact that
growers are avoiding losses at all costs due to the high value of their
soybeans. He believes that the increased use of generic fungicides has
lowered spraying costs for farmers by 10-15 percent.

On the other hand, other fungus-based diseases have been on the uprise,
including Rhizoctonia solani (mela da soja) in Mato Grosso, and
Sclerotinia sclerotiorum (white mold or mofo branco). These fungi are
costing producers in affected regions about 2-3 60 kilo bags of soy in
fungicide (or up to 5% of total production value).

**Rust-resistant Soy Ready for 2008/09 Crop Season**

The Mato Grosso Foundation Agricultural research center recently
announced that their new rust-resistant soybean variety will be ready
for farmers to plant next season (2008/09). Named "Inox", it has been
under development since 2002, and is adapted for use in the Center-west
states of Mato Grosso, Mato Grosso do Sul, and Goiás; but can also be
used in Tocantins (North), Minas Gerais (Southeast), Maranhão, and Bahia
(Northeast). The research will continue for a variety adapted to the
growth conditions of the South, but it is unclear if it will be ready by
planting time next year.

Although there is no price yet set for the new seed, the Mato Grosso
Foundation states that its use will lower the cost of production,
because it will require one spray application, instead of the
traditional three or more for current varieties. This variety has become
particularly interesting for farmers as the leading chemical used to
combat rust lost its effectiveness this year.

![](media/image3.wmf){width="2.011111111111111in"
height="2.011111111111111in"}

### Mato Grosso

In the past 10 years, Mato Grosso has become recognized as a global
source of meat and grains. Numerous government incentives, combined with
the entrepreneurial spirit of the Brazilian farmer, created a revolution
in the Center-west. The result of this revolution exploded in this
region at the beginning of the decade, and the word "agribusiness"
became part of the Brazilian vocabulary.

Technology developed by research institutions Mato Grosso Foundation and
Embrapa spurred on the revolution, helping agriculture to make large
gains in areas that were previously small-scale traditional activities.
In 2004, Mato Grosso became Brazil's leading soy-producing state, which
now accounts for over 30% of total production. This growth greatly
benefitted the state's economy and today, the highest quality of life is
found in areas with the highest concentration of soybean production,
such as Lucas do Rio Verde and Sorriso, the state's (and nation's)
greatest soybean-producing region. Between 2000-2004, the state doubled
its GNP as soy production skyrocketed. Soy exports in Mato Grosso make
up 72% of the state's total exports, valuing \$3.1 billion.

However, all these positives don't necessarily reflect farmers' reality.
Infrastructure deficiencies, including shockingly deficient roads,
insufficient rail and underutilized waterways, continue to annul the
competitiveness of producers in Mato Grosso. The cost of production is
by far the highest of any Brazilian state, due to the cost of bringing
in fertilizers and other inputs. Diesel prices in Mato Grosso are higher
than the rest of Brazil by about 20%. Fuel prices are also higher in
Mato Grosso than any other commercial soybean producing region, and more
than twice the cost of Argentina. Local research shows that diesel makes
up 53% of the total value of product exported to Europe.

In 2007 things got desperate in Mato Grosso as the state began to lose
its relative competitiveness in the world market. This was due to the
fact that Mato Grosso's logistical and production costs increased in
greater proportion than that of its competitors. The weight of billions
of dollars of unpaid debt, which had been managed by farmers up to the
2003/04 crop season, got out of control due to producers' lack of
operating capital. Farmers began to question if they would be able to
keep producing, as factors lined up against them. A political decision
made by the Brazilian Government last year to extend rural debt terms,
the adoption of a Conab price equalization program, helped producers to
stay in the game until prices began to pick up late last year. While
farmers in Mato Grosso still complain about the government's
inconsistent Ag Policy, government support and high international
soybean prices have bailed farmers out of what looked to be a major
financial crisis in 2007.

**Mato Grosso Infrastructure Update**

The BR 163 highway is the prime transport artery of Mato Grosso, running
1100 miles from the state capital to Cargill's deep water port in
Santarem PA.  The paving of BR 163 in MT is finished except for a 50 km
portion in Guarantã do Norte (200 mi North of Cuiabá).  In Pará, 600
miles of the BR 163 are still unpaved.  Brazil's military dictatorship
built the BR 163 in the early 1970s to integrate the Amazon with the
rest of Brazil.  Lula recently announced (some 30 years later) a
commitment of \$350 million to pave the remaining 500 miles in PA. The
Cargill port was built on the bet that the road would be finished, and
if it is, Cargill estimates that they will move an at least additional 3
MMT per year.  

On the other hand, many farmers in Mato Grosso see the Amazon river as
their best option for transportation of soybeans.  It is a highly
underutilized transport corridor, since oceangoing cargo vessels can
navigate it as far inland (1800 km) as Itacoatiara, where the Maggi port
is located.  From Manaus to the outlet it is up to 20 miles wide and at
least 360 feet deep.

The Ferronorte rail line hauled 7.5 MMT of soybeans and soybean meal out
of Mato Grosso to Santos in 2007, but has the potential to move much
more.  America Latina Logistica's (ALL) current plan is to extend the
line 260 kilometers further into the state to the city of Rondonopolis,
but environmental issues are yet to be resolved and the rights have not
been finalized. Bunge, Cargill, Maggi, and ADM are all present in
Rondonopolis, and are waiting for this decision to be made.

This project would help to lower the cost of transporting commodities in
and out of MT, but progress has been extremely slow.  Only 50 miles of a
single track have been laid in MT with only two grain terminals along
these 50 miles:  Alto Taquari and Alto Araguaia. Between 250-300 trucks
deliver product daily to these two terminals (mostly soybeans), and
between 6 and 7 60-unit trains carry product daily to Santos, which is a
4-day trip to reach this port due to older sections of the track in the
state of Sao Paulo.  When the product reaches Santos, there are reports
of further delays due to bottlenecks.

**Brazilian Government Official Numbers**

+-----------------------+----------------+----------------+----------+
| **Region/State**      | *              | *              | **%      |
|                       | *Production\*: | *Production\*: | Change** |
|                       | 2006-2007\     | 2007-2008\*\*\ |          |
|                       | (1,000 mt)**   | (1,000 mt)**   |          |
+-----------------------+----------------+----------------+----------+
| **North**             |                |                |          |
+-----------------------+----------------+----------------+----------+
| Amazonas (AM)         | 0.0            | 0.0            | 0.0      |
+-----------------------+----------------+----------------+----------+
| Pará (PA)             | 140.5          | 165.0          | 17.4     |
+-----------------------+----------------+----------------+----------+
| Rondônia (RO)         | 277.5          | 318.5          | 14.8     |
+-----------------------+----------------+----------------+----------+
| Roraima (RR)          | 0.0            | 45.0           | 192.2    |
+-----------------------+----------------+----------------+----------+
| Tocantins (TO)        | 646.5          | 886.9          | 37.2     |
+-----------------------+----------------+----------------+----------+
|                       | **Total:       | **Total:       | **Total: |
|                       | 1,064.5**      | 1,415.4**      | 31.1**   |
+-----------------------+----------------+----------------+----------+
| **Northeast**         |                |                |          |
+-----------------------+----------------+----------------+----------+
| Bahia (BA)            | 2,297.2        | 2,433.8        | 5.9      |
+-----------------------+----------------+----------------+----------+
| Maranhão (MA)         | 1,084.0        | 1,221.3        | 12.7     |
+-----------------------+----------------+----------------+----------+
| Piauí (PI)            | 486.0          | 742.8          | 52.8     |
+-----------------------+----------------+----------------+----------+
|                       | **Total:       | **Total:       | **Total: |
|                       | 3,867.2**      | 4,397.9**      | 13.7**   |
+-----------------------+----------------+----------------+----------+
| **Center West**       |                |                |          |
+-----------------------+----------------+----------------+----------+
| Distrito Federal (DF) | 140.5          | 153.4          | 9.2      |
+-----------------------+----------------+----------------+----------+
| Goiás (GO)            | 6,114.0        | 6,571.9        | 7.5      |
+-----------------------+----------------+----------------+----------+
| Mato Grosso (MT)      | 15,359.0       | 17,737.9       | 15.5     |
+-----------------------+----------------+----------------+----------+
| Mato Grosso do Sul    | 4,881.3        | 5,609.2        | -5.6     |
| (MS)                  |                |                |          |
+-----------------------+----------------+----------------+----------+
|                       | **Total:       | **Total:       | **Total: |
|                       | 26,494.8**     | 29,072.5**     | 9.7**    |
+-----------------------+----------------+----------------+----------+
| **Southeast**         |                |                |          |
+-----------------------+----------------+----------------+----------+
| Minas Gerais (MG)     | 2,567.9        | 2,500.8        | -2.6     |
+-----------------------+----------------+----------------+----------+
| São Paulo (SP)        | 1,437.5        | 1,446.5        | 0.6      |
+-----------------------+----------------+----------------+----------+
|                       | **Total:       | **Total:       | **Total: |
|                       | 4,005.4**      | 4,005.4**      | -1.5**   |
+-----------------------+----------------+----------------+----------+
| **South**             |                |                |          |
+-----------------------+----------------+----------------+----------+
| Paraná (PR)           | 11,915.6       | 11,829.6       | -0.7     |
+-----------------------+----------------+----------------+----------+
| Rio Grande do Sul     | 9,924.6        | 7,815.6        | -21.3    |
| (RS)                  |                |                |          |
+-----------------------+----------------+----------------+----------+
| Santa Catarina (SC)   | 1,104.3        | 1,024.4        | -7.2     |
+-----------------------+----------------+----------------+----------+
|                       | **Total:       | **Total:       | **Total: |
|                       | 22,944.5**     | 20,669.6**     | -9.9**   |
+-----------------------+----------------+----------------+----------+
| **Total Production:** | **58,376.4**   | **59,502.6**   | **1.9**  |
+-----------------------+----------------+----------------+----------+
| \*Data based on       |                |                |          |
| calendar year,        |                |                |          |
| January-December      |                |                |          |
|                       |                |                |          |
| \*\*Forecast, May     |                |                |          |
| 2008                  |                |                |          |
|                       |                |                |          |
| Source: Companhia     |                |                |          |
| Nacional de           |                |                |          |
| Abastecimento (CONAB) |                |                |          |
+-----------------------+----------------+----------------+----------+

## 2008/09 Crop Outlook

### Area

High international prices and a good 2007/08 harvest are expected to
stimulate a considerable area increase next year. Although farmers are
still carrying debt, the extension and rollover of debt, which was
announced by the Brazilian government in April, will be an important
factor in the 7% Post projected increase in area to 23,200 hectares.
This would equal a complete recuperation in area lost during the 2006/07
season (surpassing the area in 2004/05 by 400,000 hectares). The North
and Center-west should experience the majority of the area growth, and
our estimate is that Mato Grosso, Maranhão (especially Chapadinha area),
Piaui, Tocantins, and Western Bahia will experience highest growth
relative to this year's area. Corn prices will also have a small impact,
as summer corn planting in Brazil should continue to rise modestly. A
return to more soy and less corn planting in the US this year is
expected to impact what are already historically high Brazilian corn
prices. In addition, some shifting from soy to sugarcane should continue
to occur.

In addition, rising input costs should keep soybean expansion in check.
An increase in production costs is expected to coincide with area growth
in 2008/09. According to CONAB, the cost of production per hectare in
Brazil will increase 16.2%. Costs in Sorriso, Mato Grosso, are estimated
to increase from R\$1405 to R\$1442 next season, and in Passo Fundo, Rio
Grande do Sul, the estimated increase is R\$1095 to R\$1327 (May
exchange rate: 1.65 Reals = U\$S1.00). These estimates are considered
conservative, as the Brazilian producer association is estimating larger
increases.

### Production 

Post forecasts 2008/09 production at 64,300 MMT, with average yields of
2.77 tons per hectare. Economic conditions will continue to be more
favorable for the ag sector, 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.
Favorable prices, due to lower global stocks, growing global demand for
soybeans, export policy in Argentina and continuing demand and interest
in corn for ethanol in the US have created a market bullish on soybeans.
Brazilian farmers benefitted considerably from much higher prices during
the 2007/08 season, and are expecting with a degree of confidence that
the trend will continue.

Repeat negative factors for the coming year are the strong Real and the
rising costs of inputs and transportation, which continue to cut away at
farmers' profit margins. Rust is expected to be less of a hindrance in
the future, although weather will play a role in this.

# 

# Stocks

In spite of higher soybean production in 07/08, strong domestic
consumption, accelerated crushing, and strong exports have caused
Brazil's stocks to decrease to their lowest levels in 6 years. Oil and
Meals stocks are also following this trend.

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 5-7 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.

### Consumption

  ------------- ---------------- ------------- ------------- --------- -------------- ------------ ------------ ---------
  **Installed                                                                                                   
  Soybean Crush                                                                                                 
  and Refining                                                                                                  
  Capacity by                                                                                                   
  State:                                                                                                        
  2005-2007**                                                                                                   

  **State**     **Processing**                                         **Refining**                             

                **2005**         **2006**      **2007**      **%**     **2005**       **2006**     **2007**     **%**

  Paraná        32,115           32,950        33,850        22.6      3,160          3,160        3,460        16.3

  Rio Grande do 21,200           23,600        24,800        16.6      1,650          1,950        2,000        9.4
  Sul                                                                                                           

  Mato Grosso   21,000           21,400        22,000        14.7      1,250          2,450        2,700        12.7

  São Paulo     15,600           18,800        19,650        13.1      6,010          2,770        6,220        14.4

  Goiás         18,150           16,400        16,650        11.1      2,230          5,850        3,070        29.2

  Mato Grosso   8,295            9,360         9,560         6.4       540            540          540          2.5
  do Sul                                                                                                        

  Minas Gerais  6,600            6,600         6,600         4.4       1,270          1,270        1,270        6.0

  Bahia         5,344            5,500         5,500         3.7       880            970          970          4.6

  Santa         4,034            4,034         4,034         2.7       530            450          450          2.1
  Catarina                                                                                                      

  Piaui         2,360            2,460         2,460         1.6       120            120          120          0.6

  Amazonas      2,000            2,000         2,000         1.3       450            \-           \-           \-

  Pernambuco    400              400           400           .03       80             400          400          1.9

  Maranhão      \-               \-            2,000         1.3       \-             80           \-           \-

  **Total**     **131,768**      **137,098**   **143,504**   **100**   **18,000**     **18,170**   **21,280**   **100**
  ------------- ---------------- ------------- ------------- --------- -------------- ------------ ------------ ---------

## Input Tables

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

  Item                      2003         2004         2005         2006         2007

  Production                9,353,177    9,733,609    8,533,923    8,777,832    9,815,709

  Imports                   14,683,123   15,424,325   11,724,687   12,101,973   17,529,854

  Sales                     22,796,232   22,767,489   20,194,731   20,981,734   24,608,993

  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/     |
+------+---------------+----------------+---------+-------------------+
| 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              |
+------+---------------+----------------+---------+-------------------+
| 2007 | 24,608,993    | 20.6           | 37.9    | 19.8              |
+------+---------------+----------------+---------+-------------------+
| 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) |               |                |         |                   |
+------+---------------+----------------+---------+-------------------+

#  

# Exports

Soybean exports for marketing year 2007/08 concluded in January at 23.7
MMT, below the 24.7 MMT that were moved last year. Due to this reason,
Brazil will stay in its position this year as the second-largest world
soybean exporter behind the US. China continues to import a larger and
larger percentage of Brazil's exports. Exports to Europe declined in
2007/08. Soy meal and oil exports picked up slightly as the world demand
of food grade oil and animal feed continues to increase. Soymeal and
soyoil exports both increased about 5% in 2007/08.

**Top 15 Brazilian Soybean Exporting States**

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height="4.447916666666667in"}

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# 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 be 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 Western Mato Grosso whose
soybeans travel by barge from Porto Velho, Rondonia. This route is used
primarily by Maggi group soybeans, which move through their port at
Itacoatiara (State of Amazonas). Beans from Pará and Northern Mato
Grosso are frequently shipped further upriver via the Cargill port in
Santarém, Pará.

![](media/image10.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 is planned to expand
southward to Goiania, Goiás by 2012. The most important development for
the Northern Corridor will be the completion of Tegram grain terminal at
Itaquí which will provide the necessary infrastructure for grain
shipments. A strong rate of growth in the region over the past 2-3 years
of both production and processing of soybeans indicates that this port
will be a more widely used option for exporters in the future. Itaquí
not only has room to expand, but is the deepest natural port in Brazil.

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height="3.035416666666667in"}

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height="4.5055555555555555in"}

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# 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/image16.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 following
table).

+----------+-----------+----------------+-----------+----------------+
| ######   |           |                |           |                |
| 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).

**Government Support for the Commercialization of Soybeans (thousand
metric tons)**

+-----------------------------+----------------------+-----------------+
| **Program**                 | **2005/06**          | **2006/07**     |
+-----------------------------+----------------------+-----------------+
| PEP                         | 17,011.0             | \-              |
|                             |                      |                 |
| offered                     | 5,194.6              | \-              |
|                             |                      |                 |
| sold                        |                      |                 |
+-----------------------------+----------------------+-----------------+
| PROP                        | 2,000.0              | 14,099.1        |
|                             |                      |                 |
| offered                     | 587.0                | 2,313.7         |
|                             |                      |                 |
| sold                        |                      |                 |
+-----------------------------+----------------------+-----------------+
| PEPRO                       | 17,061.0             | 19,900.0        |
|                             |                      |                 |
| Offered                     | 3,485.4              | 5,725.0         |
|                             |                      |                 |
| Sold                        |                      |                 |
+-----------------------------+----------------------+-----------------+
| Total Support               | 9,267.0              | 8,039.2         |
+-----------------------------+----------------------+-----------------+
| Production                  | 55,027.4             | 58,391.8        |
+-----------------------------+----------------------+-----------------+
| Participation %             | 16.8%                | 13.8%           |
+-----------------------------+----------------------+-----------------+

Source: Brazilian Ministry of Agriculture/SPA/DEAGRO

## Environmental Issues in the Forefront

## 

During the past year, the environmental repercussions of agricultural
production and expansion have come to the forefront. In January Brazil's
space agency (INPE) announced their findings of accelerated
deforestation of the Amazon, which triggered a wave of concern that put
Brazil's producers once again in the focus of the Brazilian and
international press. Then in early April, the Environment Minister,
along with Brazil's environmental protection agency (IBAMA), decided to
cut off the federal financing of municipalities in 8 states that were
found with illegally cleared land (without the appropriate reserve left
intact). In addition, those farms found with illegally cleared land
would be prohibited from growing or selling, and the deforested areas
would have to be restored. This hit the state of Mato Grosso
particularly hard, and the state is now discussing with Brazil's
executive office the fairness of the assessment (ie if the lands were
cleared before formal forest legislation was in place), and how
realistic the measures are considering that suspending such a large area
of production in Mato Grosso would have a severe impact on its economy.

Not only is there a question regarding how long ago these areas were
deforested, but also which areas are under which forest code. Under
current legislation, areas in the Cerrado (Savannah) Biome must leave
35% in reserve, while in the Amazon Biome, the amount is 80%. Farmers
find it impractical to farm only 20% of their land while leaving 80% in
reserve, and there have been problems with the issuance of illegal
permits and land titles in order to avoid complying with the code. To
further complicate the situation, there is disagreement about what areas
actually come under the Amazon biome classification, and this is a
highly sensitive issue, since some of the major producing areas of Mato
Grosso are either in transition areas or very close to being in the
biome itself.

**Study Contends that Agricultural Expansion Diminishes Rainfall**

Brazil's space agency (INPE) climatology center recently published
research in *Geophysical Research Letters* on the correlation between
agricultural expansion and decreased and altered rainfall patterns in
Brazil and Internationally. The findings infer that the fewer the trees,
the less rainfall due to less evapo-transpiration. This effect is said
to be aggravated during the dry season when soybean area is even more
exposed, causing more solar radiation to be absorbed by the soil,
heating the atmosphere more and causing rains to take longer to develop.

There has been much speculation that the cause of recent droughts in
Southern Brazil and heavier rains during the Center-west's rainy season
is due to deforestation of the Amazon. The INPE study suggests this
exact idea, that as deforested areas create more heat, rainfall patterns
are being altered, creating more rain around the Amazon, and less in
Southern Brazil.

This is the first study to show a consequential relationship between
land clearing and climate change, and translates to more bad news for
Brazil's Ag sector, as public opinion is moved against agricultural
expansion. As long as the Minister of Environment continues to be a
strong and influential figure in Brazil, and as environmental concerns
continue to increase, farmers will likely face resistance to area
expansion in Brazil.

## 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 on purchasing soybeans from newly
deforested areas in the Amazon and will complete two years of the
agreement in July 2008. The Brazilian Vegetable Oil Industry Association
(ABIOVE) and the National Grain Exporters Association (ANEC) both signed
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 effectiveness of the measure was
evaluated July 2007 and it was found that the enforcement with
satellites was working to a reasonable extent. However, land title
confusion in the Amazon has made it difficult to determine exactly who
owns deforested land and who is producing the soybeans.

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 and animal fat. 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 increased domestic production of this fossil fuel and
the growing domestic production and the use of ethanol. 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 was
estimated at 840 million liters per year for 2006 and 2007, and the
projection is for 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. The main deterrent to the development of Brazilian
biodiesel is high international soybean prices, making production
unviable.

[]{#__RefHeading___Toc165864031 .anchor}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)         |               |                     |               |
+---------------+---------------+---------------------+---------------+