Required Report - public distribution

**Date:** 5/13/2004

**GAIN Report Number:** BR4611

BR4611

**Brazil**

**Oilseeds and Products**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Ron Verdonk

U.S. Embassy

**Prepared by:**

Kimberly L. Svec

**Report Highlights:**

Despite record area of nearly 21.5 million hectares, Brazil's yields
fell due to weather problems. Brazilian 2003/04 soybean production is
forecast at 52.58 million tons. Soybean area is forecast to increase by
10 percent to nearly 23.5 million hectares in 2004/05, with production
forecast at 66 million tons. Soybean stocks are expected to be drawn
down dramatically this year due to a smaller than expected crop, growing
domestic use, and strong exports. Exports in 2004/05 are expected to
increase by nearly 17 percent due increased production, greater
exportable supply, and continued strong global demand for soybeans and
meal. Cotton production in 2003/04 is forecast to reach a record 1.25
million tons on 1 million hectares. Post forecasts total cotton
production in 2004/05 at 1.5 million tons on 1.25 million hectares as
producers continue to expand area due to high expected profits.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Brasilia \[BR1\]

\[BR\]

Table of Contents

[**Executive Summary 4**](#executive-summary)

[Economic Indicators 5](#economic-indicators)

[STATISTICAL TABLES 6](#statistical-tables)

[PRODUCTION, SUPPLY & DEMAND TABLES 6](#production-supply-demand-tables)

[TRADE MATRICES 12](#trade-matrices)

[Brazil Export Statistics 12](#brazil-export-statistics)

[Brazil Import Statistics 12](#brazil-import-statistics)

[Brazil Export Statistics 13](#brazil-export-statistics-1)

[Brazil Import Statistics 13](#brazil-import-statistics-1)

[Brazil Export Statistics 14](#brazil-export-statistics-2)

[Brazil Import Statistics 14](#brazil-import-statistics-2)

[Brazil Export Statistics 15](#brazil-export-statistics-3)

[Brazil Import Statistics 15](#brazil-import-statistics-3)

[Brazil Export Statistics 16](#brazil-export-statistics-4)

[Brazil Import Statistics 16](#brazil-import-statistics-4)

[NARRATIVE ON SUPPLY, DEMAND, POLICY & MARKETING
17](#narrative-on-supply-demand-policy-marketing)

[TOTAL OILSEEDS 17](#total-oilseeds)

[Production 17](#production)

[2003/04 Crop Forecast 17](#crop-forecast)

[2004/05 Crop Forecast 17](#crop-forecast-1)

[Soybean Rust 18](#soybean-rust)

[Financing 19](#financing)

[Stocks 20](#stocks)

[Consumption 20](#consumption)

[Trade 21](#trade)

[Policy 23](#policy)

[Minimum Prices 23](#minimum-prices)

[Import Tariffs 23](#import-tariffs)

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

[Biotechnology 24](#biotechnology)

[Biodiesel 27](#biodiesel)

[Key Elements of Domestic Support Programs
27](#key-elements-of-domestic-support-programs)

[2003/04 Agricultural Plan 29](#agricultural-plan)

[Marketing 30](#marketing)

[Soybean Expansion Regions 30](#soybean-expansion-regions)

[The Other Frontier -- The North and Northeast
30](#the-other-frontier-the-north-and-northeast)

[Tocantins 30](#tocantins)

[Maranhao 30](#maranhao)

[Piaui 31](#piaui)

[Para 31](#para)

[Roraima 32](#roraima)

[Amazonas 32](#amazonas)

[Rondonia 32](#rondonia)

[The Center-West 32](#the-center-west)

[Mato Grosso 32](#mato-grosso)

[Mato Grosso do Sul 33](#mato-grosso-do-sul)

[Goias 33](#goias)

[The South \-- Room for Expansion? 33](#the-south----room-for-expansion)

[Rio Grande do Sul 34](#rio-grande-do-sul)

[Parana 34](#parana)

[Infrastructure 34](#infrastructure)

[Railways 35](#railways)

[Ports 36](#ports)

[Paranagua 36](#paranagua)

[Paraguay's Dilemma 38](#paraguays-dilemma)

[Rio Grande 39](#rio-grande)

[San Francisco do Sul 39](#san-francisco-do-sul)

[Santos 39](#santos)

[Santarem 39](#santarem)

[Porto Velho 40](#porto-velho)

[TOTAL MEALS 40](#total-meals)

[Production 40](#production-1)

[Consumption 40](#consumption-1)

[Trade 40](#trade-1)

[Stocks 41](#stocks-1)

[Marketing 41](#marketing-1)

[FEED DEMAND STRATEGIC INDICATOR TABLE FOR BRAZIL
42](#feed-demand-strategic-indicator-table-for-brazil)

[TOTAL OILS 43](#total-oils)

[Production 43](#production-2)

[Consumption 43](#consumption-2)

[Trade 44](#trade-2)

[Marketing 44](#marketing-2)

[Other Oils 44](#other-oils)

[Sunflower 44](#sunflower)

[Castor Seed 45](#castor-seed)

[Peanut 45](#peanut)

[Palm Oil 45](#palm-oil)

[Minor Oils 45](#minor-oils)

# Executive Summary

# 

Despite record area of nearly 21.5 million hectares, Brazil's yields
took a dive due to weather problems. Brazilian soybean production is
forecast at 52.58 million tons for 2003/04. Southern Brazil was hit with
a severe drought, with substantial losses in Rio Grande do Sul, Parana,
and Mato Grosso do Sul. Meanwhile, much of the center-west and southeast
experienced excessive rains, insufficient sunlight, and outbreaks of
soybean rust. The northeast and part of the north were the only regions
to enjoy improved yields this year, due to favorable weather patterns
and good farm management, including preventative spraying for rust.

Soybean area is forecast to increase by 10 percent to nearly 23.5
million hectares in 2004/05. Post forecasts production at 66 million
tons, with yields rebounding under more normal weather conditions.
Strong soybean prices are expected to encourage expansion despite this
year's poor crop. Soybeans entail less risk and enjoy greater liquidity
than competing crops such as rice, corn, and cotton. Additionally,
soaring input costs will favor soybeans over the more input-intensive
crops of corn and cotton. Limited expansion is expected in the South, as
producers open up pasture lands. The center-west will continue to
expand, particularly in Mato Grosso. However, the fastest expansion
rates are expected in the Northeast and North, such as Tocantins,
Maranhao, and Piaui.

Soybean stocks at harvest time this year were higher than normal,
largely due to last year's record crop. However, stocks are expected to
be drawn down dramatically during the year due to a smaller than
expected crop, growing domestic use, and strong exports. Soybean exports
are forecast to increase nearly 10 percent this year, despite the
disappointing crop. The value of the Real, vis-à-vis the U.S. dollar,
and the exemption of soybeans and products from export taxation favor
their exportation. Exports in 2004/05 are expected to increase by nearly
17 percent due increased production, greater exportable supply, and
continued strong global demand for soybeans and meal.

Cotton production in 2003/04 is forecast to reach a record 1.25 million
tons on 1 million hectares. Strong profit prospects induced producers to
increase area 265,000 hectares over the previous year. Mato Grosso and
Bahia led the charge with area in the two states expanding by
approximately 200,000 hectares. Post forecasts total cotton production
in 2004/05 at 1.5 million tons on 1.25 million hectares as producers
continue to expand area due to high expected profits. Bahia should be
the leading state in rate of area and production expansion with new
areas in western Bahia being brought into cotton production. Mato Grosso
will continue as the leading production state and expansion is again
expected to be significant.

Economic Overview

The Brazilian economy grew 1.6 percent in 2001 with inflation at 7.3
percent, due to the effects of the Argentine economic crisis, energy
rationing, political scandals, and the impact of the September 11, 2001
terrorist attacks. In 2002, the economy grew 1.5 percent with inflation
at 12.5 percent because of the strong devaluation of the Real, and
continued high interest rates for commercial loans. In 2003 the economy
struggled and GDP fell --0.2 percent and inflation was 9.2 percent. For
2004, the Brazilian economic and political outlook is guardedly
optimistic. Though Brazil's President, Luiz Ignacio Lula da Silva, known
as Lula, hails from the Labor Party, he has continued the sound
macroeconomic policies of his predecessor, Fernando Henrique Cardoso,
since taking power in January 2003.

Economic growth in 2004 is forecast at 3.5 percent, with inflation
estimated at 6.0 percent. Credit terms have eased substantially with
interest rates falling from 25 percent to 16 percent and thus investment
is on the rise. More investment should create jobs and subsequently
consumption is expected to increase. Evidence of a recovery in the
economy came in the fourth quarter of 2003, which saw 6 percent
annualized growth. Also contributing to the economic recovery is the
booming export sector, to which agriculture continues to be the
principal factor.

The agricultural sector (including agribusiness) accounts for 30 percent
of Brazil's gross domestic product. Agricultural exports represented 34
percent of Brazil's total exports in 2003. Total Brazilian agricultural
exports in 2003 reached US\$24.9 billion, while Brazilian agricultural
imports were only US\$3.8 billion. Brazil\'s agricultural exports to the
United States are seven times higher than U.S. agricultural exports to
Brazil. Primary U.S. agricultural exports to Brazil (2003=\$392 million)
include cotton, wheat, rice, feeds, beverage bases, hides and skins,
planting seeds, snack foods, processed fruit and vegetables and juices,
and live animals. Primary Brazilian agricultural exports to the United
States (2003 = \$2.70 billion) include coffee, sugar, panel products,
tobacco, fruit and vegetable juices, lumber, canned and processed meats,
tree nuts, shrimp, cocoa, and lobster.

## Economic Indicators

+--------------------+-------+-------+-------+-------+-------+-------+
|                    | **1   | **2   | **2   | **2   | **2   | **200 |
|                    | 999** | 000** | 001** | 002** | 003** | 4\*** |
+--------------------+-------+-------+-------+-------+-------+-------+
| GDP Growth (%)     | 0.9   | 4.0   | 1.6   | 1.5   | -0.2  | 3.5   |
+--------------------+-------+-------+-------+-------+-------+-------+
| Inflation (%)      | 8.9   | 6.0   | 7.3   | 12.5  | 9.2   | 6.0   |
+--------------------+-------+-------+-------+-------+-------+-------+
| Average Exchange   | 1.81  | 1.83  | 2.35  | 2.96  | 3.10  | 2.95  |
| Rate (R\$/US\$)    |       |       |       |       |       |       |
+--------------------+-------+-------+-------+-------+-------+-------+
| Total Exports      | 48.1  | 55.0  | 58.2  | 59.6  | 73.1  | 85.0  |
|                    |       |       |       |       |       |       |
| (US\$ billion)     |       |       |       |       |       |       |
+--------------------+-------+-------+-------+-------+-------+-------+
| Total Imports      | 49.2  | 55.7  | 55.5  | 55.3  | 48.2  | 61.5  |
|                    |       |       |       |       |       |       |
| (US\$ billion)     |       |       |       |       |       |       |
+--------------------+-------+-------+-------+-------+-------+-------+

-   \*Forecast

-   GDP growth and export and import forecasts provided by the Ministry
    of Planning

-   Inflation and average exchange rate forecast provided by Central
    Bank of Brazil

# STATISTICAL TABLES

## PRODUCTION, SUPPLY & DEMAND TABLES

![](media/image2.wmf)

![](media/image3.wmf)

![](media/image4.wmf)

![](media/image5.wmf)

![](media/image6.wmf)

![](media/image7.wmf)

## TRADE MATRICES

# 

+---------------------------------+-----------+-----------+-----------+
| ## Brazil Export Statistics     |           |           |           |
+---------------------------------+-----------+-----------+-----------+
| **Commodity: 1201, Soybeans,    |           |           |           |
| Whether Or Not Broken**         |           |           |           |
+---------------------------------+-----------+-----------+-----------+
| **Feb/Jan**                     |           |           |           |
+---------------------------------+-----------+-----------+-----------+
| **Partner Country**             | *         |           |           |
|                                 | *Quantity |           |           |
|                                 | 1000      |           |           |
|                                 | Tons**    |           |           |
+---------------------------------+-----------+-----------+-----------+
|                                 | **2002**  | **2003**  | **2004**  |
+---------------------------------+-----------+-----------+-----------+
| United States                   | 3         | 3         | 2         |
+---------------------------------+-----------+-----------+-----------+
| China                           | 3,192     | 4,143     | 6,201     |
+---------------------------------+-----------+-----------+-----------+
| Netherlands                     | 3,309     | 3,053     | 3,586     |
+---------------------------------+-----------+-----------+-----------+
| Germany                         | 1,551     | 1,623     | 2,235     |
+---------------------------------+-----------+-----------+-----------+
| Spain                           | 1,368     | 1,210     | 1,570     |
+---------------------------------+-----------+-----------+-----------+
| Italy                           | 728       | 521       | 804       |
+---------------------------------+-----------+-----------+-----------+
| Belgium                         | 749       | 692       | 678       |
+---------------------------------+-----------+-----------+-----------+
| United Kingdom                  | 497       | 650       | 655       |
+---------------------------------+-----------+-----------+-----------+
| Japan                           | 768       | 712       | 625       |
+---------------------------------+-----------+-----------+-----------+
| France                          | 449       | 517       | 563       |
+---------------------------------+-----------+-----------+-----------+
| Taiwan                          | 253       | 192       | 556       |
+---------------------------------+-----------+-----------+-----------+
| Others                          | 2,656     | 2,757     | 2,513     |
+---------------------------------+-----------+-----------+-----------+
| World                           | 15,522    | 16,074    | 19,987    |
+---------------------------------+-----------+-----------+-----------+

+--------------------------+--------------+-------------+-------------+
| ##                       |              |             |             |
| Brazil Import Statistics |              |             |             |
+--------------------------+--------------+-------------+-------------+
| **Commodity: 1201,       |              |             |             |
| Soybeans, Whether Or Not |              |             |             |
| Broken**                 |              |             |             |
+--------------------------+--------------+-------------+-------------+
| **Feb/Jan**              |              |             |             |
+--------------------------+--------------+-------------+-------------+
| **Partner Country**      | **Quantity   |             |             |
|                          | 1000 Tons**  |             |             |
+--------------------------+--------------+-------------+-------------+
|                          | **2002**     | **2003**    | **2004**    |
+--------------------------+--------------+-------------+-------------+
| United States            | 0            | 0           | 0           |
+--------------------------+--------------+-------------+-------------+
| Paraguay                 | 854          | 1100        | 1124        |
+--------------------------+--------------+-------------+-------------+
| Colombia                 | 854          | 0           | 0           |
+--------------------------+--------------+-------------+-------------+
| World                    | 854          | 1100        | 1124        |
+--------------------------+--------------+-------------+-------------+

+-------------------------------+------------+------------+------------+
| ## Brazil Export Statistics   |            |            |            |
+-------------------------------+------------+------------+------------+
| **Commodity: 2304, Soybean    |            |            |            |
| Oilcake And Other Solid       |            |            |            |
| Residues Resulting From The   |            |            |            |
| Extraction Of Soy Bean Oil,   |            |            |            |
| Whether Or Not Ground Or In   |            |            |            |
| The Form Of Pellets**         |            |            |            |
+-------------------------------+------------+------------+------------+
| **Feb/Jan**                   |            |            |            |
+-------------------------------+------------+------------+------------+
| **Partner Country**           | **Quantity |            |            |
|                               | 1000       |            |            |
|                               | Tons**     |            |            |
+-------------------------------+------------+------------+------------+
|                               | **2002**   | **2003**   | **2004**   |
+-------------------------------+------------+------------+------------+
| United States                 | 0          | 96         | 34         |
+-------------------------------+------------+------------+------------+
| Netherlands                   | 3,142      | 3,756      | 3,798      |
+-------------------------------+------------+------------+------------+
| France                        | 2,676      | 2,873      | 2,628      |
+-------------------------------+------------+------------+------------+
| Germany                       | 808        | 585        | 924        |
+-------------------------------+------------+------------+------------+
| Indonesia                     | 0          | 471        | 704        |
+-------------------------------+------------+------------+------------+
| Korea South                   | 596        | 579        | 703        |
+-------------------------------+------------+------------+------------+
| Italy                         | 659        | 624        | 660        |
+-------------------------------+------------+------------+------------+
| Thailand                      | 268        | 490        | 603        |
+-------------------------------+------------+------------+------------+
| Saudi Arabia                  | 254        | 335        | 541        |
+-------------------------------+------------+------------+------------+
| United Kingdom                | 559        | 484        | 476        |
+-------------------------------+------------+------------+------------+
| Romania                       | 144        | 191        | 435        |
+-------------------------------+------------+------------+------------+
| Iran                          | 46         | 87         | 387        |
+-------------------------------+------------+------------+------------+
| Spain                         | 364        | 445        | 350        |
+-------------------------------+------------+------------+------------+
| Others                        | 1,596      | 1,765      | 1,296      |
+-------------------------------+------------+------------+------------+
| World                         | 11,110     | 12,783     | 13,542     |
+-------------------------------+------------+------------+------------+

+---------------------------+-------------+-------------+-------------+
| ##                        |             |             |             |
|  Brazil Import Statistics |             |             |             |
+---------------------------+-------------+-------------+-------------+
| **Commodity: 2304,        |             |             |             |
| Soybean Oilcake And Other |             |             |             |
| Solid Residues Resulting  |             |             |             |
| From The Extraction Of    |             |             |             |
| Soy Bean Oil, Whether Or  |             |             |             |
| Not Ground Or In The Form |             |             |             |
| Of Pellets**              |             |             |             |
+---------------------------+-------------+-------------+-------------+
| **Feb/Jan**               |             |             |             |
+---------------------------+-------------+-------------+-------------+
| **Partner Country**       | **Quantity  |             |             |
|                           | 1000 Tons** |             |             |
+---------------------------+-------------+-------------+-------------+
|                           | **2002**    | **2003**    | **2004**    |
+---------------------------+-------------+-------------+-------------+
| United States             | 0           | 0           | 0           |
+---------------------------+-------------+-------------+-------------+
| Paraguay                  | 230         | 372         | 288         |
+---------------------------+-------------+-------------+-------------+
| World                     | 230         | 372         | 288         |
+---------------------------+-------------+-------------+-------------+

+-------------------------------+------------+-----------+-----------+
| ## Brazil Export Statistics   |            |           |           |
+-------------------------------+------------+-----------+-----------+
| **Commodity: 1507, Soybean    |            |           |           |
| Oil And Its Fractions,        |            |           |           |
| Whether Or Not Refined, But   |            |           |           |
| Not Chemically Modified**     |            |           |           |
+-------------------------------+------------+-----------+-----------+
| **Feb/Jan**                   |            |           |           |
+-------------------------------+------------+-----------+-----------+
| **Partner Country**           | **Quantity |           |           |
|                               | 1000       |           |           |
|                               | Tons**     |           |           |
+-------------------------------+------------+-----------+-----------+
|                               | ** 2002**  | **2003**  | **2004**  |
+-------------------------------+------------+-----------+-----------+
| United States                 | 0          | 0         | 0         |
+-------------------------------+------------+-----------+-----------+
| Iran                          | 370        | 728       | 816       |
+-------------------------------+------------+-----------+-----------+
| China                         | 17         | 300       | 607       |
+-------------------------------+------------+-----------+-----------+
| India                         | 392        | 415       | 245       |
+-------------------------------+------------+-----------+-----------+
| Bangladesh                    | 165        | 75        | 107       |
+-------------------------------+------------+-----------+-----------+
| Hong Kong                     | 122        | 79        | 105       |
+-------------------------------+------------+-----------+-----------+
| South Africa                  | 27         | 34        | 89        |
+-------------------------------+------------+-----------+-----------+
| Senegal                       | 41         | 46        | 68        |
+-------------------------------+------------+-----------+-----------+
| Russia                        | 21         | 35        | 58        |
+-------------------------------+------------+-----------+-----------+
| Malaysia                      | 42         | 29        | 56        |
+-------------------------------+------------+-----------+-----------+
| Egypt                         | 107        | 114       | 47        |
+-------------------------------+------------+-----------+-----------+
| Netherlands                   | 10         | 7         | 27        |
+-------------------------------+------------+-----------+-----------+
| Others                        | 302        | 239       | 181       |
+-------------------------------+------------+-----------+-----------+
| World                         | 1,616      | 2,100     | 2,405     |
+-------------------------------+------------+-----------+-----------+

+---------------------------+-------------+-------------+-------------+
| ##                        |             |             |             |
|  Brazil Import Statistics |             |             |             |
+---------------------------+-------------+-------------+-------------+
| **Commodity: 1507,        |             |             |             |
| Soybean Oil And Its       |             |             |             |
| Fractions, Whether Or Not |             |             |             |
| Refined, But Not          |             |             |             |
| Chemically Modified**     |             |             |             |
+---------------------------+-------------+-------------+-------------+
| **Feb/Jan**               |             |             |             |
+---------------------------+-------------+-------------+-------------+
| **Partner Country**       | **Quantity  |             |             |
|                           | 1000 Tons** |             |             |
+---------------------------+-------------+-------------+-------------+
|                           | **2002**    | **2003**    | **2004**    |
+---------------------------+-------------+-------------+-------------+
| United States             | 0           | 0           | 0           |
+---------------------------+-------------+-------------+-------------+
| Argentina                 | 645         | 100         | 31          |
+---------------------------+-------------+-------------+-------------+
| Uruguay                   | 0           | 0           | 13          |
+---------------------------+-------------+-------------+-------------+
| Paraguay                  | 22          | 10          | 3           |
+---------------------------+-------------+-------------+-------------+
| Others                    | 200         | 0           | 0           |
+---------------------------+-------------+-------------+-------------+
| World                     | 867         | 110         | 47          |
+---------------------------+-------------+-------------+-------------+

+----------------------------+-------------+-------------+-------------+
| #                          |             |             |             |
| # Brazil Export Statistics |             |             |             |
+----------------------------+-------------+-------------+-------------+
| **Commodity: 230610        |             |             |             |
| Cottonseed Meal**          |             |             |             |
+----------------------------+-------------+-------------+-------------+
| **Jan-Dec**                |             |             |             |
+----------------------------+-------------+-------------+-------------+
| **Partner Country**        | **Quantity  |             |             |
|                            | 1000 Tons** |             |             |
+----------------------------+-------------+-------------+-------------+
|                            | **2001**    | **2002**    | **2003**    |
+----------------------------+-------------+-------------+-------------+
| United States              | 0           | 0           | 0           |
+----------------------------+-------------+-------------+-------------+
| Belgium                    | 0           | 0           | 6,341       |
+----------------------------+-------------+-------------+-------------+
| United Kingdom             | 6,981       | 500         | 6,200       |
+----------------------------+-------------+-------------+-------------+
| Germany                    | 0           | 871         | 3,500       |
+----------------------------+-------------+-------------+-------------+
| Netherlands                | 0           | 23,460      | 0           |
+----------------------------+-------------+-------------+-------------+
| World                      | 15,522      | 16,074      | 19,987      |
+----------------------------+-------------+-------------+-------------+

+----------------------------+------------+-------------+-------------+
| #                          |            |             |             |
| # Brazil Import Statistics |            |             |             |
+----------------------------+------------+-------------+-------------+
| **Commodity: 230610,       |            |             |             |
| Cotton Seed Oilcake And    |            |             |             |
| Other Solid Residues       |            |             |             |
| Resulting From The         |            |             |             |
| Extraction Of Cotton Seed  |            |             |             |
| Oil, Whether Or Not Ground |            |             |             |
| Or In The Form Of          |            |             |             |
| Pellets**                  |            |             |             |
+----------------------------+------------+-------------+-------------+
| **Jan-Dec**                |            |             |             |
+----------------------------+------------+-------------+-------------+
| **Partner Country**        | **         |             |             |
|                            | Quantity** |             |             |
+----------------------------+------------+-------------+-------------+
|                            | **2001**   | **2002**    | **2003**    |
+----------------------------+------------+-------------+-------------+
| United States              | 0          | 0           | 0           |
+----------------------------+------------+-------------+-------------+
| Paraguay                   | 5          | 1           | 1           |
+----------------------------+------------+-------------+-------------+
| Argentina                  | 0          | 6           | 0           |
+----------------------------+------------+-------------+-------------+
| World                      | 5          | 7           | 1           |
+----------------------------+------------+-------------+-------------+

+----------------------------+---------------+------------+------------+
| #                          |               |            |            |
| # Brazil Export Statistics |               |            |            |
+----------------------------+---------------+------------+------------+
| **Commodity: 151229,       |               |            |            |
| Refined Cottonseed Oil**   |               |            |            |
+----------------------------+---------------+------------+------------+
| **Jan-Dec**                |               |            |            |
+----------------------------+---------------+------------+------------+
| **Partner Country**        | **Quantity    |            |            |
|                            | 1000 Tons**   |            |            |
+----------------------------+---------------+------------+------------+
|                            | **2001**      | **2002**   | **2003**   |
+----------------------------+---------------+------------+------------+
| United States              | 0             | 1,000      | 2,000      |
+----------------------------+---------------+------------+------------+
| South Africa               | 30,408        | 38,900     | 12,075     |
+----------------------------+---------------+------------+------------+
| South Korea                | 0             | 1,000      | 7,200      |
+----------------------------+---------------+------------+------------+
| Iran                       | 0             | 0          | 5,512      |
+----------------------------+---------------+------------+------------+
| Australia                  | 0             | 0          | 3,040      |
+----------------------------+---------------+------------+------------+
| Malaysia                   | 0             | 3,000      | 3,000      |
+----------------------------+---------------+------------+------------+
| China                      | 0             | 2,500      | 2,500      |
+----------------------------+---------------+------------+------------+
| Japan                      | 0             | 0          | 865        |
+----------------------------+---------------+------------+------------+
| Others                     | 19,862        | 11,407     | 7          |
+----------------------------+---------------+------------+------------+
| World                      | 50,270        | 57,807     | 36,199     |
+----------------------------+---------------+------------+------------+

+-----------------------+-------------+--------------+---------------+
| ## Bra                |             |              |               |
| zil Import Statistics |             |              |               |
+-----------------------+-------------+--------------+---------------+
| **Commodity: 151229,  |             |              |               |
| Cottonseed Oil And    |             |              |               |
| Its Fractions,        |             |              |               |
| Refined But Not       |             |              |               |
| Chemically Modified** |             |              |               |
+-----------------------+-------------+--------------+---------------+
| **Jan-Dec**           |             |              |               |
+-----------------------+-------------+--------------+---------------+
| **Partner Country**   | *           |              |               |
|                       | *Quantity** |              |               |
+-----------------------+-------------+--------------+---------------+
|                       | **2001**    | **2002**     | **2003**      |
+-----------------------+-------------+--------------+---------------+
| United States         | 0           | 0            | 0             |
+-----------------------+-------------+--------------+---------------+
| Paraguay              | 1           | 2            | 0             |
+-----------------------+-------------+--------------+---------------+
| Argentina             | 0           | 1            | 0             |
+-----------------------+-------------+--------------+---------------+
| World                 | 1           | 3            | 0             |
+-----------------------+-------------+--------------+---------------+

# NARRATIVE ON SUPPLY, DEMAND, POLICY & MARKETING

## TOTAL OILSEEDS

### Production

#### 2003/04 Crop Forecast

Despite record area of nearly 21.5 million hectares, Brazil's yields
took a dive due to weather problems. Brazilian soybean production is
forecast at 52.58 million tons for 2003/04. Southern Brazil was hit with
a severe drought, with substantial losses in Rio Grande do Sul, Parana,
and Mato Grosso do Sul. Rio Grande do Sul was the most severely
affected, and analysts estimated statewide losses were estimated at
roughly 40 percent. Meanwhile, much of the center-west and southeast
experienced excessive rains, insufficient sunlight, and outbreaks of
soybean rust. The northeast and part of the north were the only regions
to enjoy improved yields this year, due to favorable weather patterns
and good farm management, including preventative spraying for rust.
After being nearly devastated by soybean rust last year, western Bahia
harvested a record crop in 2003/04 with some of the highest yields in
the nation. The region enjoyed favorable weather, took preventative
measures to combat soybean rust, and planted more appropriate seed
varieties. This year's weather difficulties in the center-west and south
lowered quality and reduced protein and oil content.

Brazilian national crop estimates do not include the small, but
numerically significant, winter soybean crop. Parana records the state
soy winter crop, and safrinha soy area in the state has been as high as
57,000 hectares in the last decade. Post notes that even a winter crop
of one-half of one percent in Brazil would be roughly equivalent to
100,000 hectares and 270,000 tons. Soybean seed crop produced under
irrigation should be included in soybean production forecasts, as should
any other winter soy production.

#### 

#### 2004/05 Crop Forecast

Soybean area is forecast to increase by 10 percent to nearly 23.5
million hectares in 2004/05. Post forecasts production at 66 million
tons, with yields rebounding under more normal weather conditions.
Strong soybean prices are expected to encourage expansion despite this
year's poor crop. Soybeans entail less risk and enjoy greater liquidity
than competing crops such as rice, corn, and cotton. Additionally,
soaring input costs will favor soybeans over the more input-intensive
crops of corn and cotton.

Brazilian soybean expansion is likely to continue in the short and
medium term due to the following factors: 1) Growing world soy demand
and consumption; 2) Increasing Brazilian consumption, largely due to
poultry/swine expansion; 3) Income growth in developing countries,
particularly in consuming Asian nations; 4) New industrial uses of
soybeans, such as biodiesel; 5) Mad Cow fears reduce beef consumption
(grass fed in Brazil), but increase soy use for chicken and pork feed;
6) Mad Cow fears increase global demand for soy meal in place of meat
and bone meal; 7) Decreasing subsidies in developed countries would spur
greater production in Brazil; 8) Improving infrastructure in Brazil,
thereby reducing production and transport costs; 9) Large areas of cheap
cerrado land; 10) Development of new region-appropriate soybean
varieties; 11) Southern farmers bringing wealth and technology with them
to the new frontier; 12) While most producing nations have limited
expansion potential, much of the vast virgin Brazilian cerrado can
easily be put into production; 13) Strong prices. Although planting
doesn't begin until October, most farmers will make their planting
decisions within the next 60 days. Producers expect soy prices to fall
from current levels, but remain strong; 14) Lower risk. Soybeans have
high liquidity, unlike most commodities in Brazil, and produced for the
export market earning dollars.

Post recently attended a speech by Embrapa Soja, which estimated
potential Brazilian soybean production at 330-435 million tons on
110-145 million hectares, equal to twice the world production in 2003.
However, the estimates do not take demand into account, and the
limitations to expansion were also discussed, such as 1) high cost of
transport; 2) bad roads and poor infrastructure; 3) high port costs; 4)
insufficient storage; 5) excessive internal taxation; 6) international
taxes and tariffs, particularly on oil and meal; 7) commercialization
difficulties; 8) insufficient funds for financing; 9) insufficient funds
for research; 10) low level of technology adopted by some farmers; and
11) new diseases such as rust; 12) Brazilian environmental laws limit
expansion (Only 20 percent of rainforest land can be cleared, versus 50
percent in transitional areas and 65 percent in the cerrado). Regardless
of the constraints, all parties agree that Brazilian soybean area and
production will continue to expand, barring a collapse in international
prices.

Despite the disappointing crop in 2003/04, soybean expansion is expected
to continue at a strong rate. Producers with only moderate damage were
able to recoup their losses due to higher prices, and most foresee
prices remaining above their breakeven point through next year. Limited
expansion is expected in the South, as producers open up pasture lands.
The center-west will continue to expand, particularly in Mato Grosso.
However, the fastest expansion rates are expected in the Northeast and
North, such as Tocantins, Maranhao, and Piaui. Although the regions'
current production is relatively small, the expansion rate and potential
will continue to draw greater attention.

Cotton production in 2003/04 is forecast to reach a record 1.25 million
tons on 1 million hectares. Strong profit prospects induced producers to
increase area 265,000 hectares over the previous year. Mato Grosso and
Bahia led the charge with area in the two states expanding by
approximately 200,000 hectares. Post forecasts total cotton production
in 2004/05 at 1.5 million tons on 1.25 million hectares as producers
continue to expand area due to high expected profits. Bahia should be
the leading state in rate of area and production expansion with new
areas in western Bahia being brought into cotton production. Mato Grosso
will continue as the leading production state and expansion is again
expected to be significant. (See Cotton and Products Annual BR4610 for
more information).

#### Soybean Rust

CNA, the Brazilian Confederation of Agriculture and Livestock, estimates
crop losses to soybean rust at above \$1 billion, which does not include
the added cost to production of nearly \$800 million for fungicide
applications. Fungicide application to prevent and combat rust costs
roughly US\$40 per hectare. Embrapa Soybean estimates that more than 15
million hectares of this year's crop recorded incidences of the disease.
The losses would have been substantially higher if the private and
public sectors had not embarked on an extensive education campaign to
alert producers to the risks, prevention, recognition, and treatment of
the disease. The radical turnaround in yields in western Bahia is an
example of the results of education on proper prevention and treatment.
Meanwhile, the states with the greatest rust losses this year are those
who did not suffer significant losses from the fungus last year and did
not take proper preventative measures, such as parts of Minas Gerais,
Sao Paulo, Goias, and Mato Grosso. It is difficult to determine which of
this year\'s losses is due to rust versus excessive rains. Furthermore,
the heavy rains prevented many farmers from proper spraying, and images
of sprayed areas versus non-sprayed are dramatic. There were many
obstacles to rust control this year, such as excessive rain, continuous
soy production, shortage and rising cost of fungicide, large farm size,
and farmer skepticism about rust. Meanwhile, the drought reduced the
severity of the rust in the south.

Embrapa stresses the need for better farm management, including
shortening the planting period and avoiding second crop soy. As a means
to combat the spread of the disease, Embrapa is strongly advising
against winter crop soy production. However, winter crop seed producers
and safrinha soy farmers appear to be unresponsive to the advice.
Shrinking the planting window will also be difficult to achieve, as many
producers seek early quick-to-maturity varieties that enable more
successful double cropping. Proper spraying and management is critical,
as Embrapa estimates that the development of rust resistant varieties
will take 8-10 years.

Reports that soybean rust has reached as far north as Roraima are
particularly concerning for US soybean producers, as hurricanes and
trade winds from this northern hemisphere state head towards North
America. Scientists believe that soybean rust arrived in South America
from Africa on transatlantic winds, and likewise, it is only a matter of
time before the disease makes its way to the United States on northbound
winds from Roraima.

#### Financing

Federal funding for the 2003/04 crop year increased by 25.8 percent from
2002/03 to R\$32.6 billion (US\$10.9 billion), of which R\$27.2 billion
is allocated to the Ministry of Agriculture (MAPA) and R\$5.4 billion is
designated for the Ministry of Agrarian Development (MDA). Farm leaders
considered the total amount of rural credit announced by the government
as insufficient to meet the needs of the sector, which is estimated at
R\$56.2 billion (US\$18.7 billion). The amount of R\$27.2 billion
includes all programs managed by the Ministry of Agriculture's Food
Supply Agency (CONAB), such as those under the minimum price policy, and
investment programs jointly managed with the National Bank of Economic
and Social Development (BNDES), at subsidized interest rates. The
subsidized credit is offered at an interest rate of 8.75 percent, which
is considerably lower than the market rate of around 20 percent. A table
in the policy section below provides a summary of these investment
programs.

Due to a spectacular crop and profit in 2002/03, many producers
increased inputs and technology on the current crop. Two-year term
government credit for soybean producers is available up to an amount of
R\$200,000 (roughly US\$70,000) for farmers in the Center-West and North
regions as well as soy producers in Maranhão, Piaui and Bahia. For all
other soy producing states, the limit is R\$150,000(roughly US\$52,000).
The subsidized interest employed for these programs is 8.75% per year.
Government financing covers a greater percent of production in the
South, as farm sizes tends to be much smaller. Medium and large-scale
soybean farmers, which dominate the frontier, depend little on
government programs. Multinationals and seed suppliers provide much of
the credit and inputs for larger producers. Local information indicates
that 90 percent of agricultural chemicals are sold in crop terms (swap),
while traders cover about 50 percent of soybean crop financing.
Commercial banks, using the GOB required cash deposit focused to
agriculture with GOB backing, can cover up to 60 percent of soybean
producers' needs, while input dealers cover up to about 25 percent.

In the frontier, opening costs are much higher and there is a greater
dependence on multinationals. The companies take on the risks normally
associated with banks, however, the value of soybeans has been literally
as strong as gold, thereby encouraging the role as a lender.
Multinationals began financing the soybean crop 8 years ago, largely
through "swaps." This guarantees supply to the industry and allows for
plant operation planning. Furthermore, plants can forward contract sales
of oil and meal, since they have guaranteed supply for roughly 20
percent of production.

Since July 2003, the Bank of Brasil has released R\$17.8 billion (US\$6
billion) for the planting, production, harvest, storage, and marketing
of the 2003/04 total Brazilian grain crop, which ends June 30. The bank
will release an additional R\$2.2 billion before the end of the crop
year, with the total representing more than 60 percent of the
government's farm support plan. The R\$20 billion represents a 40
percent increase in resources from the previous crop year.

### Stocks

Stocks at harvest time this year were higher than normal, largely due to
last year's record crop. However, stocks are expected to be drawn down
dramatically during the year due to a smaller than expected crop,
growing domestic use, and strong exports. Post is forecasting an 11
percent increase in crush and a 10 percent increase in exports. Soy meal
consumption is forecast to increase 7 percent with a 16 percent increase
exports. Domestic soy oil consumption is forecast to increase 4 percent
and exports jump nearly 23 percent. Ending soybean stocks are forecast
to fall 88 percent to only 370,000 tons, while meal stocks fall 44
percent to 388,000 tons, and oil stocks drop 32 percent to 82,000 tons.

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. The physical soybeans, however, may have already
gone to processing or export. Brazil's on-farm capacity is extremely
small, and can currently accommodate only about 5 percent of the local
crop. Although storage space is expanding at all levels, it is not
keeping up with production growth. Over the past several years grain
storage capacity has increased only 10 percent that of grain production.
The grain storage deficit is about 35 percent. Although storage is
increasing in the frontier, many farmers spend their profits buying more
new farmland instead of building on-farm storage. However, soybean
producers are now less inclined to quickly sell production that has not
already been contracted for and are increasingly electing to pay to
store new crop production to await better market prices.

Cooperatives in Parana are investing R\$240 million (roughly US\$80
million) in the construction of storage facilities, which should
increase capacity by 1 million tons to a total of 7.5 million tons by
the end of 2004. ADM is increasing its storage capacity by 285,000 tons
in the center-west, with four new silos in Mato Grosso and one in Mato
Grosso do Sul. The private sector will continue to increase storage
capacity, but production growth will continue to outpace infrastructure
improvements.

### 

### Consumption

The projected MY 2004 soybean crush, at 31.5 million tons, incorporates
a more than an 11 percent increase in processing over the 2003 crop.
Soybeans account for nearly all oilseed consumption. The MY 2004
cottonseed crush, projected at 1.68 millin tons thousand tons, is an
increase of thirty percent over last year's level because of a large
expected boost in the size of this year's cotton harvest. The current
exemption of soybeans and derivatives that are exported from the
domestic interstate movement tax (ICMS) is not expected to change, so
there continues to be an incentive to move as much product through
export channels as possible. While major importing countries continue to
make investments in crushing and processing plants, major multinationals
and local firms operating in Brazil are also expanding domestic crushing
capacity. Demand for vegetable protein meals and market preference for
"non-biotech" product in Europe help pull some of the Brazilian crush.
Increased sales of poultry and pork products, for the domestic and
export markets, contribute to steady demand for meal.

Soybean production is expanding in the center-west and northern regions
of Brazil, yet 60 percent of domestic crush capacity continues to be
located in the states from Sao Paulo southward. The south continues to
lead in processing capacity since it was the traditional production
area, has a higher concentration of agricultural processing in general,
and has better infrastructure and proximity to ports. However, the
frontier areas will continue to expand capacity. Current soybean
crushing capacity by state is shown below.

![](media/image8.png){width="3.5395833333333333in"
height="3.3340277777777776in"}

### 

### Trade

Soybean exports are forecast to increase nearly 10 percent this year,
despite the disappointing crop. Soybeans account for essentially all
Brazilian oilseed trade as most cottonseed is processed for domestic
consumption. The value of the Real, vis-à-vis the U.S. dollar, and the
aforementioned exemption of soybeans and products from export taxation
favor their exportation. Exports in 2004/05 are expected to increase by
nearly 17 percent due to increased production, greater exportable
supply, and continued strong global demand for soybeans and meal. China
and the EU are likely to increase imports and the US, Argentina, and
Brazil will compete for these markets.

Oilseed imports, predominantly soybeans, are forecast to decline this
year, as neighboring Paraguay and Argentina also had poor crops. The
ICMS situation in Brazil and operational considerations result in some
demand by local crushers for imported Paraguayan soybeans, on which ICMS
is not charged, to maintain operations in southern plants rather than
bringing domestic beans in from other states. Much of the resulting
product then moves on to export.

Brazil is usually a major export avenue for Paraguayan soybeans moving
to export via the Paraguayan export terminal at the port of Paranagua.
However, Parana's refusal of biotech soybeans has caused Paraguay to
seek alternative export routes (see section on ports).

Going north to south, the line up of major Brazilian soybean export
points are: Itacoatiara (Amazonas), Santarem (Para), Sao Luis
(Maranhao), Ilheus (Bahia), Vitoria (Espírito Santo), Santos (Sao
Paulo), Paranagua (Parana), Sao Francisco (Santa Catarina) and Rio
Grande (Rio Grande do Sul). The ports of Caceres (Mato Grosso) and
Corumba (Mato Grosso do Sul) are located on the Paraguay River, which
then ship south to Atlantic export points in Argentina. As indicated in
the following table, even though more and more Brazilian soybeans are
grown and processed away from the traditional production areas of the
south, the majority of Brazil's soybean exports are shipped from Santos
and ports southward.

+--------------------------------+-----------------+-------------------+
| **Exports by Port, Soybeans**  |                 |                   |
|                                |                 |                   |
| **(Feb/Jan) (1000 MT)**        |                 |                   |
+--------------------------------+-----------------+-------------------+
| Port                           | 2003/04         | 2002/03           |
+--------------------------------+-----------------+-------------------+
| Santos                         | 5766            | 5045              |
+--------------------------------+-----------------+-------------------+
| Paranagua                      | 5714            | 5130              |
+--------------------------------+-----------------+-------------------+
| Rio Grande                     | 3850            | 1799              |
+--------------------------------+-----------------+-------------------+
| Vitoria                        | 1656            | 1530              |
+--------------------------------+-----------------+-------------------+
| Sao Luis                       | 920             | 650               |
+--------------------------------+-----------------+-------------------+
| Sao Francisco                  | 844             | 787               |
+--------------------------------+-----------------+-------------------+
| Itacoatiara                    | 693             | 913               |
+--------------------------------+-----------------+-------------------+
| Caceres/Corumba                | 147             | 207               |
+--------------------------------+-----------------+-------------------+
| Ilheus                         | 42              | 0                 |
+--------------------------------+-----------------+-------------------+
| Others                         | 354.8           | 13                |
+--------------------------------+-----------------+-------------------+
| Total                          | 19,987          | 16,074            |
+--------------------------------+-----------------+-------------------+
| Source: DECEX/Safras &         |                 |                   |
| Mercados                       |                 |                   |
+--------------------------------+-----------------+-------------------+

China is an increasingly large and important market for Brazilian
soybeans, accounting for nearly one-third of whole bean exports last
year. Exports to China nearly doubled in two years to more than 6
million tons. That said, trade has been bumpy in the past year. China
has complained about quality problems, such as excessive humidity,
aflatoxin, damaged grains, dockage and impurities. China recently
blocked a 58,000 ton shipment because it contained chemically treated
seeds unfit for human or animal consumption. Considerable negotiations
were required before China accepted Brazil's export certificates
regarding biotech content. Brazil's double standard on biotechnology
concerned China, as Brazil had not yet approved the use or safety of
biotech soybeans for its own consumers but wanted China to take its word
that the beans were safe. Brazil claimed that the varieties are the same
as those grown in Argentina and the US, which have been proven safe by
both countries and accepted by China. In late March 2004, China agreed
to allow the import Brazilian soybeans after April 20, when the
provisional rules expire. China accepted a CTNBio document stating that
biotech soybeans pose no risks.

The extremely tight soybean supply situation in the US has been
attracting considerable attention in Brazil, and it appears likely that
the US will import both soybean meal and oil from Brazil this year. Post
is forecasting 80,000 tons in Brazilian soy oil to the US this year,
which would account for the majority of US soy oil imports. The
Carolinas have been importing Brazilian soy meal for several years,
owing to logistical difficulties in pulling it from the US heartland.
Contacts report that more than 200,000 tons of Brazilian soymeal has
been purchased by Carolina swine and poultry producers this year, and
more imports are likely. Post is forecasting a total 300,000 tons of
Brazilian soy meal exports to the US this year. The majority of Brazil's
exports to the US are expected to be oil and meal, although Post is
forecasting 75,000 tons of whole soybean exports, as well.

### Policy

#### Minimum Prices

The following table shows the official minimum prices. The minimum price
does not come into play in the soybean sector. Current soybean prices
are roughly four times the minimum price. In the cotton sector, GOB
actions are more significant.

+------------------------+-----------+-----------+-----------+---------+
| Official Minimum       |           |           |           |         |
| Prices                 |           |           |           |         |
+------------------------+-----------+-----------+-----------+---------+
| Product (Unit) / Crop  | 2003/04   |           | 2002/03   |         |
| Year                   |           |           |           |         |
+------------------------+-----------+-----------+-----------+---------+
| Area                   | R\$       | US\$      | R\$       | US\$    |
+------------------------+-----------+-----------+-----------+---------+
| Cotton (15 kg)         |           |           |           |         |
+------------------------+-----------+-----------+-----------+---------+
| S, SE, CW & BA south   | 44.60     | 14.53     | 33.90     | 11.61   |
+------------------------+-----------+-----------+-----------+---------+
| NE (except BA)         | 44.60     | 14.53     | 33.90     | 11.61   |
+------------------------+-----------+-----------+-----------+---------+
| Cottonseed (15 kg)     |           |           |           |         |
+------------------------+-----------+-----------+-----------+---------+
| S, SE, CW & BA south   | 13.40     | 4.36      | 10.08     | 3.45    |
+------------------------+-----------+-----------+-----------+---------+
| NE (except BA)         | 13.40     | 4.36      | 10.08     | 3.45    |
+------------------------+-----------+-----------+-----------+---------+
| Soybeans (60 kg)       |           |           |           |         |
+------------------------+-----------+-----------+-----------+---------+
| S, SE, CW & RO         | 14.00     | 4.56      | 11.00     | 3.77    |
+------------------------+-----------+-----------+-----------+---------+
| N (except RO) & NE     | 13.00     | 4.56      | 10.40     | 3.56    |
+------------------------+-----------+-----------+-----------+---------+
| Source: Ministry of    |           |           |           |         |
| Agriculture, CONAB     |           |           |           |         |
|                        |           |           |           |         |
| Note: S=South;         |           |           |           |         |
| SE=Southeast;          |           |           |           |         |
| CW=Center‑West;        |           |           |           |         |
| NE=Northeast;          |           |           |           |         |
|                        |           |           |           |         |
| CS=                    |           |           |           |         |
| Center‑South;BA=Bahia; |           |           |           |         |
| MT=Mato Grosso;        |           |           |           |         |
| TO=Tocantins; PA=Para; |           |           |           |         |
| PI=Piaui;              |           |           |           |         |
|                        |           |           |           |         |
| GO=Goias; AC=Acre;     |           |           |           |         |
| RO=Rondonia;           |           |           |           |         |
| MA=Maranhao;           |           |           |           |         |
| DF=Distrito Federal.   |           |           |           |         |
|                        |           |           |           |         |
| Exchange               |           |           |           |         |
| rate:                  |           |           |           |         |
| 1997/98‑R\$1.065/US\$; |           |           |           |         |
| 1998/99‑R\$1.15/US\$;  |           |           |           |         |
| 1                      |           |           |           |         |
| 999/2000‑R\$1.83/US\$; |           |           |           |         |
|                        |           |           |           |         |
| 2000/01‑R\$1.85/US\$;  |           |           |           |         |
| 2001/02 ‑R\$2.35/US\$; |           |           |           |         |
| 2002/03‑R\$2.92/US\$;  |           |           |           |         |
| 2003/04- R\$3.07/US\$  |           |           |           |         |
+------------------------+-----------+-----------+-----------+---------+

#### Import Tariffs

The Brazilian Government's import tariffs on oilseeds and products were
lowered 1.5 percent from last year and are contained in the MERCOSUL
Common External Tariff schedule (TEC). Brazil, Argentina, Paraguay and
Uruguay are members of the MERCOSUL trade pact. Bolivia and Chile are
associate members. The tariff rates are noted below.

  ------------ -------- ------------------------------------------- ---------
  **MERCOSUL                                                        
  Common                                                            
  External                                                          
  Tariff**                                                          

  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

               .90      Other                                       

               .90.10   Refined                                     12

               .90.90   Other                                       10

  1512                  Cottonseed oil                              

               .21.00   Crude                                       10

               .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 
                        oils                                        

               .10.00   Cottonseed meal                             6

  Source:                                                           
  Brazilian                                                         
  Government ‑                                                      
  Aduaneiras                                                        
  Tarifa                                                            
  Externa                                                           
  Comun (TEC)                                                       
  ------------ -------- ------------------------------------------- ---------

#### 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 movements 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 sources 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.

An increase in a Brazilian social security tax is likely to favor
soybean exports. The Brazilian congress is currently debating raising
the Cofins tax from 3 percent to 7.6 percent. Exported soybeans are
exempt from the tax, while soybeans crushed within Brazil are subject to
the tax if the meal and oil are consumed domestically.

#### Biotechnology

Biotechnology continues to be a controversial subject in Brazil. The
Government of Brazil, the scientific community, and consumer groups are
deeply split and grapple with legality issues over biotech crops despite
the recent Draft Bill PL 2401 Biosafety Law now before Congress and the
Provisional Measure (MP) 131 legalizing the planting of biotech
soybeans. The Presidential Decree MP 131 issued on September 25, 2003
legalizing the planting of biotech soybeans in Brazil for the 2003-04
crop was approved by the Congress and was signed into law by President
Lula on December 17, 2003. The Law says that farmers with biotech seeds
can plant them but must declare it. The majority of Brazil's biotech
soybean production is located in Rio Grande do Sul, although some
farmers from nearly all producing states have declared biotech
production.

On October 31, 2003, the Brazilian government released a draft of
Brazil's new Biosafety Law (Draft Bill PL 2401). The text of the Bill
establishes a complicated mechanism for approval of biotech products by
creating a national council attached to the Presidency that would
consider political and economic factors, as well as scientific reports,
before approving biotech research or planting. The Bill also authorizes
the legal production and commercialization on biotech soybeans through
the 2004/05-crop year. This most recent version of the Bill was passed
by the Brazilian Chamber of Deputies on February 5, 2004, and is now
awaiting a vote in the Senate. However, it is unlikely that the Bill
will be voted on by the Senate before the October municipal elections.
Congress goes on recess soon, and once they reconvene, the elections
will dominate their time. President Lula recently pressed for a vote on
the Bill before the Congress breaks for recess, however, it is uncertain
if it will happen. Furthermore, considering the many unresolved
questions in the Bill and points of contention with the agribusiness and
scientific community, the Senate may make changes, which would
necessitate sending the Bill back to the Chamber of Deputies. The
Administration is likely to implement another Provisional Measure (MP)
to allow biotech soybeans for the 2004/05 crop.

Southern farmers have stated that they will not return to conventional
soybeans. Furthermore, even if biotech soybeans were ruled illegal,
there would be insufficient conventional seed supply for Rio Grande do
Sul. As biotech production continues to spread throughout the country, a
return to conventional soybean production is increasingly difficult and
unlikely. The majority of Rio Grande do Sul's soybean crop is biotech,
and as much as 15 percent of the Parana crop is planted to GMOs, despite
the Governor's law forbidding biotechnology in the state. As is
indicated by the table below, biotech soybeans are being planted in
almost every producing state. Total biotech plantings are estimated to
be considerably higher than the chart indicates, as many farmers fear
the consequences of signing the declaration. The chart below notes how
many farmers signed the TCRAC (statement of commitment, responsibility
and conduct adjustment for planting biotech soybeans) by mid-December
for the 2003/04 crop. Note that the TCRAC is by farm, and the smaller
number of TCRACs may account for significant area in the cerrado where
farm sizes are generally very large.

+-----------------------------------+-----------------------------------+
| **Number of TCRACs (statement of  |                                   |
| commitment, responsibility and    |                                   |
| conduct adjustment for planting   |                                   |
| biotech soybeans ) by State**     |                                   |
|                                   |                                   |
| **(As of mid-December 2003)**     |                                   |
+-----------------------------------+-----------------------------------+
| **State**                         | ###### Number of TCRACs           |
+-----------------------------------+-----------------------------------+
| Bahia                             | 18                                |
+-----------------------------------+-----------------------------------+
| > Piaui                           | 47                                |
+-----------------------------------+-----------------------------------+
| Goias                             | 70                                |
+-----------------------------------+-----------------------------------+
| Santa Catarina                    | 121                               |
+-----------------------------------+-----------------------------------+
| São Paulo                         | 130                               |
+-----------------------------------+-----------------------------------+
| Minas Gerais                      | 136                               |
+-----------------------------------+-----------------------------------+
| Maranhão                          | 152                               |
+-----------------------------------+-----------------------------------+
| Mato Grosso do Sul                | 173                               |
+-----------------------------------+-----------------------------------+
| Mato Grosso                       | 189                               |
+-----------------------------------+-----------------------------------+
| Paraná                            | 549                               |
+-----------------------------------+-----------------------------------+
| Rio Grande do Sul                 | 77,415                            |
+-----------------------------------+-----------------------------------+
| **Total**                         | **79,001**                        |
+-----------------------------------+-----------------------------------+

In October 2003, Parana Governor Roberto Requiao signed a law
prohibiting the production, shipment, processing, and export of GMOs in
the state of Parana. Requiao's state law prohibiting biotechnology was
never recognized by the Federal Minister of Agriculture, and was
disallowed by the Federal Supreme Court (STF) in late 2003. However,
attempts by the federal government to force acceptance of biotech beans
for export at Paranagua have been ineffective, and governmental meetings
have been unsuccessful in resolving the issue. The situation has also
caused a bilateral dispute with neighboring Paraguay, who owns an export
terminal at the port of Paranagua. An estimated 15 percent of Parana's
soybean production is biotech.

Mato Grosso Governor Blairo Maggi has stated that farmers in his state
should follow Law #10,814, but since it is illegal to transport biotech
seeds across state lines, only farmers with saved seed can produce. He
noted that his state has not produced biotech soybeans in the past, so
there should be no biotech seed available for planting now. However,
nearly 200 farmers in Mato Grosso have signed agreements under the
provisional measure to grow biotech soybeans in Mato Grosso. This
implies that biotech soybeans were grown in Mato Grosso in 2002/03 and
will be in the future.

The southern states of Rio Grande do Sul and Santa Catarina have agreed
to pay royalties to Monsanto for their use of contraband Roundup Ready
soybeans. Producers who pre-declare their biotech beans pay a royalty of
R\$0.60/bag of 60 kilos (US\$7/ton). Producers who do not declare their
beans will have their cargos tested, and if it is positive, they will be
charged R\$1.50/bag of 60 kilos (US\$17/ton). Furthermore, those
producers pay for the biotech testing. The fee is assessed when the
soybeans are delivered from the farm to an elevator or crushing site.
The elevator or cooperatives deducts the fee directly from the farmer\'s
payment. The elevator, in turn, will pay Monsanto the fee. A few
elevators in Rio Grande do Sul and Santa Catarina will be designated
non-GMO. The others have openly agreed to accept biotech beans and
therefore are willing to collect the fee. The non-GMO elevators will
test every load, and assess the higher fee if GMO content is detected.
The elevators and cooperatives will not see an increase in operating
costs, as Monsanto is funding the start-up costs of the system. Monsanto
does not expect to earn money during the first year due to the start-up
costs. The negotiated fee is set until January 31, 2005. Monsanto is
negotiating the value for 2005/06 and hopes to receive R\$1.20/bag of 60
kilos.

Brazil enacted a new biotech labeling law, which went into effect on
March 27, 2004. On April 2, 2004, the Civil Cabinet of the Presidency
published Normative Instruction Number 1, signed by 4 cabinet ministers
(Civil Cabinet, Justice, Agriculture, and Health) which established the
conditions by which Directive 2,658/03 will enforce the labeling for
products containing genetic modified organisms above one percent limit.
In addition to the federal agencies, Normative Instruction Number 1 also
provides authority to the state and municipal consumer defense officials
to enforce the new labeling requirements.

Embrapa, similar to USDA's ARS, has developed 11 biotech soybean
varieties, which are in the pre-registration stage. If/when
biotechnology is legalized in Brazil, Embrapa will begin producing seeds
for commercial use. The varieties are region, climate, and soil
specific, and are more appropriate for use in Brazil than contraband
seeds from Argentina, which are currently used in Brazil.

While there is controversy surrounding the adoption of biotechnology for
soybean production, Brazilian cotton producers would benefit noticeably
from Bt cotton in terms of lowered input costs and producer risks, as
well as from environmental advantages. Most cotton producers must spray
their crop repeatedly in Brazil, with some areas requiring more than 30
chemical applications. The chemical runoff and residues are of
considerable concern, and could be essentially eliminated with the
adoption of biotech crops. Although sources believe that several
large-scale cotton producers in Mato Grosso are using illegal biotech
cottonseed from Argentina, most of Brazilian cotton production remains
biotech-free.

#### Biodiesel

As the world's leader in alcohol/ethanol (made from sugar in Brazil)
production and consumption, Brazil is now eyeing biodiesel. 0n October
30, 2002, Brazil launched the Probiodiesel program, with Portaria MCT
Number 702, Directive #702 of the Ministry of Science and Technology
(MCT). The program aims to develop technology for the production,
industrialization, and use of biodiesel, and its use in mixtures with
diesel using pure and residual vegetable oils. Brazil wants to reduce
its dependence on diesel imports, as it has successfully done with
petroleum. Although Brazilian consumption of petroleum has been
increasing, imports have declined due to growing domestic production and
the use of ethanol. While most vehicles in Brazil no longer operate on
100 percent alcohol fuel, all Brazilian gasoline requires 25 percent
alcohol content, which considerably reduces petroleum requirements.
However, the situation with biodiesel is quite 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,
sunflower, etc. 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 often 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 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. The President Lula Administration views biodiesel as a
program for social inclusion and job creation, generating up to 200,000
jobs. Northeastern Brazil is encouraging the production of castor seed
by small scale producers for biodiesel production. Other commodities are
being explored in different regions, such as soy, sunflower, biodiesel,
and used cooking oils. Brazil's Probiodiesel program is still in its
infancy, but offers great potential.

#### Key Elements of Domestic Support Programs

The Brazilian government maintains a rural credit system that offers
various instruments to support agricultural production and farm income.
The program which apply to most annual crops, including soybeans, are
summarized below:

1\. Government Commodity Loan Program (EGF):

This program is heavily used by farmers to finance the holding of their
products in accredited warehouses as collateral for the bank lender. The
loan amount is based on the value of product offered as guarantee, based
on a minimum price set annually by the government for various products.
Banks normally provide loans on the basis of 70 percent of the minimum
price. Subsidized interest is available at annual rates of 8.75 percent
interest (commercial rates are 26 percent). The volume of such
subsidized credit available is limited.

2\. EGF-Industry Commodity Loan Program:

This program is similar to EGF, but applicable only to processors of
agricultural commodities under the Minimum Support Price Program, except
for rice and soybeans. Access to this program is available between the
processor and the farmer or cooperative. Financing is limited to 50
percent of the production capacity of the processors, and payment to the
farmer cannot be lower than the government-established minimum commodity
price in effect. Subsidized interest is available at annual rates of
8.75 percent.

3\. Government Commodity Acquisition Program (AGF):

This program is similar to EGF and applicable to farmers who sell farm
products to the federal government. Products must be in accredited
warehouses, cleaned, dried and graded. The government, through the
National Food Company (CONAB), an entity of the Ministry of Agriculture
and Food Supply (similar to USDA/CCC), purchases the product at the
minimum price.

4\. Rural Promissory Note (CDR):

Processors of agricultural commodities can contract a CDR with
accredited banks. Financing is limited to 50 percent of the processor's
production capacity. Processors must prove they have paid at least the
minimum price to the producer. Products eligible for CDR are: cotton,
rice, corn and wheat. Subsidized interest rates are 8.75 percent plus
banking expenses.

5\. Option Contract:

The federal government through CONAB offers a futures price, normally
between harvest periods, for purchase of eligible (wheat, corn, rice,
and cotton) product. The futures price is established by CONAB at the
moment the contract is offered, and the price is always above the
minimum price. The producer may acquire a put option to sell contracts
of 27 metric tons. The producer of the option contract acquires the
right to sell the contracted product to CONAB at a later date and price
specified in the contract.

6\. Other:

Long-term support for production and processing of agricultural products
is centralized in the BNDES - Brazilian Bank for Economic and Social
Development, along with the Special Agency for Industrial Financing
(FINAME). Together these form the BNDES system. The BNDES system's
mission is to foster economic and social development in Brazil, acting
as an agent for long-term investments. The BNDES system provides
financial support to the following sectors of the Brazilian economy:
agriculture, industry, infrastructure, commerce and services. The BNDES
system offers a broad range of services to support various agribusiness
project types. Among those are:

--- FINAME Rural. A credit line destined for acquisition, maintenance
and/or rebuilding of agricultural machinery. The annual interest rate is
14.5 percent for a period of 5 years, with a grace period of two years.

--- BNDES Automatic. A credit line aimed at creating pasture, other
animal production projects, and for production of forest products.
Annual interest rates are similar to the credit line above and terms of
financing are flexible according to each project.

#### 2003/04 Agricultural Plan

Programs covered under the 2003/04 Agricultural Plan are listed below.
Funding in 2003/04 increased to R\$5.75 billion (U.S. \$1.91 billion)
from R\$4.63 billion (U.S.\$ 1.58 billion) in 2002/03.

+-----------+--------------+-------+-------+---+-------+------+-------+
| **2003/04 |              |       |       |   |       |      |       |
| Agr       |              |       |       |   |       |      |       |
| icultural |              |       |       |   |       |      |       |
| Plan**    |              |       |       |   |       |      |       |
|           |              |       |       |   |       |      |       |
| Ministry  |              |       |       |   |       |      |       |
| of        |              |       |       |   |       |      |       |
| Ag        |              |       |       |   |       |      |       |
| riculture |              |       |       |   |       |      |       |
| and       |              |       |       |   |       |      |       |
| Supply    |              |       |       |   |       |      |       |
+-----------+--------------+-------+-------+---+-------+------+-------+
| Program   | Description  | 20    | 20    | C |       | Inte | Ma    |
|           |              | 02/03 | 03/04 | r |       | rest | ximum |
|           | of Items     |       |       | e |       | Rate | Pa    |
|           | Financed     | Fu    | Fu    | d |       |      | yment |
|           |              | nding | nding | i |       | (%)  | P     |
|           |              |       |       | t |       |      | eriod |
|           |              |       |       | L |       |      | (y    |
|           |              |       |       | i |       |      | ears) |
|           |              |       |       | m |       |      |       |
|           |              |       |       | i |       |      |       |
|           |              |       |       | t |       |      |       |
|           |              |       |       |   |       |      |       |
|           |              |       |       | R |       |      |       |
|           |              |       |       | \ |       |      |       |
|           |              |       |       | $ |       |      |       |
|           |              |       |       | 1 |       |      |       |
|           |              |       |       | , |       |      |       |
|           |              |       |       | 0 |       |      |       |
|           |              |       |       | 0 |       |      |       |
|           |              |       |       | 0 |       |      |       |
|           |              |       |       | / |       |      |       |
|           |              |       |       |   |       |      |       |
|           |              |       |       | O |       |      |       |
|           |              |       |       | p |       |      |       |
|           |              |       |       | e |       |      |       |
|           |              |       |       | r |       |      |       |
|           |              |       |       | a |       |      |       |
|           |              |       |       | t |       |      |       |
|           |              |       |       | i |       |      |       |
|           |              |       |       | o |       |      |       |
|           |              |       |       | n |       |      |       |
+-----------+--------------+-------+-------+---+-------+------+-------+
|           |              | ###   |       |   |       |      |       |
|           |              | ### R |       |   |       |      |       |
|           |              | \$ Mi |       |   |       |      |       |
|           |              | llion |       |   |       |      |       |
+-----------+--------------+-------+-------+---+-------+------+-------+
| P         | Fixed or     | 380   | 240   | 2 |       | 8.75 | 8     |
| RODEFRUTA | semi-fixed   |       |       | 0 |       |      |       |
|           | investments  |       |       | 0 |       |      |       |
|           | related to   |       |       |   |       |      |       |
|           | the          |       |       |   |       |      |       |
|           | introduction |       |       |   |       |      |       |
|           | and          |       |       |   |       |      |       |
|           | improvement  |       |       |   |       |      |       |
|           | of fruit     |       |       |   |       |      |       |
|           | varieties.   |       |       |   |       |      |       |
+-----------+--------------+-------+-------+---+-------+------+-------+
| MODERAGRO | Soil         | 570   | 600   | 2 |       | 8.75 | 5     |
|           | improvement, |       |       | 0 |       |      |       |
|           | green        |       |       | 0 |       |      |       |
|           | fertilizer,  |       |       |   |       |      |       |
|           | soil         |       |       |   |       |      |       |
|           | c            |       |       |   |       |      |       |
|           | onservation, |       |       |   |       |      |       |
|           | reclamation  |       |       |   |       |      |       |
|           | of pastures, |       |       |   |       |      |       |
|           | and          |       |       |   |       |      |       |
|           | designation  |       |       |   |       |      |       |
|           | of meadow.   |       |       |   |       |      |       |
+-----------+--------------+-------+-------+---+-------+------+-------+
| PRODEAGRO | Fixed and    | 140   | 60    | 1 |       | 8.75 | 5     |
|           | semi-fixed   |       |       | 5 |       |      |       |
|           | investments  |       |       | 0 |       |      |       |
|           | related to   |       |       |   |       |      |       |
|           | production   |       |       |   |       |      |       |
|           | of flower,   |       |       |   |       |      |       |
|           | goat &       |       |       |   |       |      |       |
|           | sheep, fish, |       |       |   |       |      |       |
|           | honey, pork, |       |       |   |       |      |       |
|           | poultry, and |       |       |   |       |      |       |
|           | rubber.      |       |       |   |       |      |       |
+-----------+--------------+-------+-------+---+-------+------+-------+
| M         | Fixed and    | 300   | 500   | 4 |       | 8.75 | 8     |
| ODERINFRA | semi-fixed   |       |       | 0 |       |      |       |
|           | investments  |       |       | 0 |       |      |       |
|           | directed     |       |       |   |       |      |       |
|           | toward       |       |       |   |       |      |       |
|           | irrigated    |       |       |   |       |      |       |
|           | agriculture  |       |       |   |       |      |       |
|           | and the      |       |       |   |       |      |       |
|           | installation |       |       |   |       |      |       |
|           | or           |       |       |   |       |      |       |
|           | improvement  |       |       |   |       |      |       |
|           | of silos or  |       |       |   |       |      |       |
|           | rural        |       |       |   |       |      |       |
|           | properties.  |       |       |   |       |      |       |
+-----------+--------------+-------+-------+---+-------+------+-------+
| PRODECOOP | Fixed and    | 250   | 450   | 2 |       | 1    | 12    |
|           | semi-fixed   |       |       | 0 |       | 0.75 |       |
|           | investments  |       |       | , |       |      |       |
|           | for          |       |       | 0 |       |      |       |
|           | cooperative  |       |       | 0 |       |      |       |
|           | o            |       |       | 0 |       |      |       |
|           | rganizations |       |       |   |       |      |       |
|           | seeking to   |       |       |   |       |      |       |
|           | aggregate    |       |       |   |       |      |       |
|           | the value of |       |       |   |       |      |       |
|           | agricultural |       |       |   |       |      |       |
|           | production.  |       |       |   |       |      |       |
+-----------+--------------+-------+-------+---+-------+------+-------+
| PROPFLORA | Fixed and    | 60    | 50    | 1 |       | 8.75 | 12    |
|           | semi-fixed   |       |       | 5 |       |      |       |
|           | investments  |       |       | 0 |       |      |       |
|           | for the      |       |       |   |       |      |       |
|           | commercial   |       |       |   |       |      |       |
|           | planting of  |       |       |   |       |      |       |
|           | forests.     |       |       |   |       |      |       |
+-----------+--------------+-------+-------+---+-------+------+-------+
| PROLEITE  | Machinery    | 100   | 100   | 8 |       | 8.75 | 5     |
|           | and          |       |       | 0 |       |      |       |
|           | equipment    |       |       |   |       |      |       |
|           | for dairies. |       |       |   |       |      |       |
+-----------+--------------+-------+-------+---+-------+------+-------+
| M         | Agricultural | 1,000 | 2,000 | N |       | 9.75 | 5     |
| ODERFROTA | tractors,    |       |       | o |       |      |       |
|           | implements,  |       |       | L |       |      |       |
|           | and          |       |       | i |       |      |       |
|           | harvesters,  |       |       | m |       |      |       |
|           | as well as   |       |       | i |       |      |       |
|           | equipment    |       |       | t |       |      |       |
|           | for coffee   |       |       |   |       |      |       |
|           | processing.  |       |       | e |       |      |       |
|           |              |       |       | x |       |      |       |
|           |              |       |       | c |       |      |       |
|           |              |       |       | e |       |      |       |
|           |              |       |       | p |       |      |       |
|           |              |       |       | t |       |      |       |
|           |              |       |       | f |       |      |       |
|           |              |       |       | o |       |      |       |
|           |              |       |       | r |       |      |       |
|           |              |       |       | c |       |      |       |
|           |              |       |       | o |       |      |       |
|           |              |       |       | f |       |      |       |
|           |              |       |       | f |       |      |       |
|           |              |       |       | e |       |      |       |
|           |              |       |       | e |       |      |       |
+-----------+--------------+-------+-------+---+-------+------+-------+
|           |              |       |       | 2 |       | 1    | 6     |
|           |              |       |       | 0 |       | 2.75 |       |
|           |              |       |       | c |       |      |       |
|           |              |       |       | o |       |      |       |
|           |              |       |       | f |       |      |       |
|           |              |       |       | f |       |      |       |
|           |              |       |       | e |       |      |       |
|           |              |       |       | e |       |      |       |
+-----------+--------------+-------+-------+---+-------+------+-------+
| PROGER    | Fixed and    | 100   | 250   | 5 |       | 7.25 | 8     |
|           | semi-fixed   |       |       | 6 |       |      |       |
|           | investments  |       |       |   |       |      |       |
|           | of small     |       |       |   |       |      |       |
|           | farmers.     |       |       |   |       |      |       |
+-----------+--------------+-------+-------+---+-------+------+-------+
| FINAME    | Machinery    | 500   | 500   | 3 |       | 1    | 5     |
| AGRICOLA  | and          |       |       | 0 |       | 3.95 |       |
| ESPECIAL  | equipment    |       |       | 0 |       |      |       |
|           | for the      |       |       |   |       |      |       |
|           | processing   |       |       |   |       |      |       |
|           | of cotton,   |       |       |   |       |      |       |
|           | fruit,       |       |       |   |       |      |       |
|           | seeds, fish, |       |       |   |       |      |       |
|           | and others.  |       |       |   |       |      |       |
+-----------+--------------+-------+-------+---+-------+------+-------+
| **S       |              | **3,  | **4,  |   |       |      |       |
| UBTOTAL** |              | 430** | 750** |   |       |      |       |
+-----------+--------------+-------+-------+---+-------+------+-------+
| **CONST   |              | **1,  | **1,  |   |       |      |       |
| ITUTIONAL |              | 200** | 000** |   |       |      |       |
| FUNDS\*** |              |       |       |   |       |      |       |
+-----------+--------------+-------+-------+---+-------+------+-------+
| **TOTAL** |              | **4,  | **5,  |   |       |      |       |
|           |              | 630** | 750** |   |       |      |       |
+-----------+--------------+-------+-------+---+-------+------+-------+

-   Constitutional funds can be used in any of the above programs or
    other programs.

### 

### Marketing

Brazilian soybeans are widely regarded for their high levels of protein
and oil content. Those favorable characteristics are attributed to the
tropical environment with abundant sunshine, long days and good rain. In
view of the further weakening in the Brazilian Real vis-à-vis the U.S.
Dollar that has occurred since 1999, Brazilian exports have benefited
significantly in the international market.

Brazil uses its "mostly non-biotech" status to try to differentiate
their product. Information indicates that foreign buyers accept a
"soft-IP" (identity preserved) from Brazilian exporters. This is
reported to mean that soybeans and products exported from the port of
Santos (Sao Paulo) north are assumed by the buyer to be mostly
transgenic free. Soybeans shipped from more northern ports tend to be
from production areas in the center-west, north, and northeast regions
where the original contraband planting seed from Argentina is less
suitable. Nevertheless, as noted above, Brazilian export data indicates
that the majority of soybeans exported from Brazil are loaded at ports
to the south of Santos. Likewise, with over 50 percent of the crushing
capacity in their region, the ports south of Santos account for the
majority of meal and oil exports, as well. Further, press reports
indicate biotech soybeans are now being planted further north and sector
comments indicate the planting seed is no longer all contraband from
Argentina but, rather, is to a growing extent produced domestically.

### Soybean Expansion Regions

Post discusses below some of the regions with soybean expansion
potential. The list is not all inclusive.

#### 

#### The Other Frontier -- The North and Northeast

The frontier region of Tocantins, western Bahia, southern Maranhao, and
southern Piaui has been developing quickly, and analysts estimate that
only 10 percent of cultivatable area in the region is in production.

##### Tocantins

The extension of the North/South Railway through Tocantins offers
further incentive for production expansion by facilitating exports
through the northern port at Sao Luis, Maranhao. While most of
Tocantins' soybean production is located in the north, Bunge recently
opened a new elevator in Porto Nacional in south-central Tocantins and
is providing incentives for soybean expansion in the region. Soybean
area in southern Tocantins could jump from 22,000 hectares this year to
more than 100,000 next crop year. Bunge has invested \$63 million in
Tocantins.

##### Maranhao

The Minister of Agriculture, Roberto Rodrigues, owns a soybean farm in
Balsas, Maranhao, a city that rapidly evolved from almost nothing to a
regional agribusiness center. State agricultural officials estimate 1
million hectares of potential soybean area in southern Maranhao.

The latest production boom area in Maranhao is taking place in the
Chapadinha region of northeastern Maranhao, located approximately 250
kilometers southeast of the state capital, Sao Luis. According to
Embrapa Meio Norte (Middle North), there are between 500,000 and 1
million hectares of cultivatable land in the region. Some newly cleared
and planted farms in the region are harvesting yields of roughly 2,800
kg/ha, which is strong for the first year of production. Cheap land and
favorable logistics are encouraging expansion, with the closest port and
crushing facility each only 250 kilometers away. Although the lack of
region-appropriate seed varieties remains a challenge, Embrapa research
is advancing with seed varieties that could yield up to 4 tons per
hectare. Soybean planting in the Chapadinha region begins in
mid-January, versus mid-November to mid-December in the Balsas region,
thereby allowing farmers to produce in both areas and transport their
equipment between regions.

##### Piaui

Urucui is the agribusiness center of Piaui. Bunge installed a crushing
facility in the city in 2003, with a crushing capacity of 658,000 tons
per year rising to 1.3 million by 2007. The Bunge plant, cheap land,
proximity to port of Sao Luis, and regional demand for soybean oil and
meal are driving factors for soybean expansion in Piaui. An estimated 5
million hectares is suitable for soybean production within the cerrado
of southern Piaui.

##### Para

Are soybeans the next boom in Santarem? After a history of booms and
busts with rubber, gold, and wood, Cargill's \$20 million investment at
the Amazon port of Santarem has encouraged soybean expansion in western
Para. Although the region surrounding Santarem is the focal point for
expansion, soybeans have gaining area along the Cuiaba-Santarem Highway
(BR 163), along the Transamazonica Highway (BR 230), along the
Santarem-Curua-Una Highway (PA-370), as well as areas north of the
Amazon river in Para. Cheap land, proximity to Cargill's Santarem export
terminal, and the planned paving of Cuiaba-Santarem Highway 163 are the
driving forces for the expansion.

However, land prices have been rising with increasing demand. Land which
sold for only R\$25 per hectare five years ago currently sells for
R\$1000 per hectare (US\$340/ha). The agricultural expansion is spurring
economic growth in the region, and Santarem's GDP doubled in the last
six years to R\$1.2 billion (US\$400 million).

Environmentalists have expressed concern with deforestation, although
others argue that the two counties of Santarem and Belterra alone
possesses more than 500,000 hectares of previously cleared land in that
can be put into production without destroying more rainforest. Cargill's
new terminal, which has the capacity to export 800,000 tons per year,
has also created controversy, and is being investigated for allegedly
not completing an environmental impact study. Many producers are also
believed to be clearing and farming without proper clearances, although
they blame the formidable bureaucracy for the lack of proper paperwork.
Ibama, with the Ministry of Environment, claims that it does not have
adequate resources to perform its functions, as they only have seven
inspectors to cover 25 counties totaling 1.7 million hectares. Contacts
estimate more than 1 million hectares of arable land available for
soybean production in Para.

The Tapajos River waterway may become an export route for soybeans,
using barges and pushers similar to Madeira river. A R\$141 million
(US\$50 million) lock is being planned upriver from Itaituba in order to
improve navigability and facilitate the flow between the lower and mid
Tapajos. The project would increase soybean shipments from northern Mato
Grosso and western Para to the port of Santarem. Environmental concerns
may block this project.

##### Roraima 

Roraima is the northernmost state in Brazil, and the majority of its
area sits above the equator. Much of the state rests on a high plateau
with a savannah/cerrado ecosystem. Agriculture in the state has been
evolving from cattle ranching to rice and corn production, with soybeans
gaining recent attention. Land prices in Roraima are among the cheapest
in Brazil, with prime farmland available for as cheap as \$100 per
hectare and uncleared land at \$30-40 per hectare. Although current
soybean area is only about 20,000 hectares, potential area is estimated
above 1 million hectares. Soybeans in Roraima are planted in May and
harvested in September. Roraima's production is shipped out northward on
BR-174 highway to Venezuela, or south on the Branco and Negro Rivers to
the Amazon River.

##### Amazonas

Roughly 2 percent of the state of Amazonas is comprised of
cerrado/savannah and natural pastures, which may be suitable for soybean
production. Although production is small, it more than sextupled to
25,000 tons in the last year, with most of the growth in south near the
borders with Mato Grosso and Rondonia. The largest concentration of
production is in the county of Humaita, which sits along the BR-319
Manaus-Porto Velho Highway and the Madeira river, from where the soy
heads upriver to the Amazon.

##### Rondonia

Although many soybeans are shipped up the Madeira river from Rondonia,
most of the beans come from neighboring Mato Grosso. Pastures occupy
more than 5 million hectares, yet Rondonia remains a minor soybean
producer, with the majority of its production located near the border
with Mato Grosso. Due to a government land resettlement plan implemented
during the 1970s-1990s, Rondonia's average farm size is substantially
smaller than most frontier states, thereby reducing the financial
viability of soybean farming.

More than 1 million tons of soybeans are shipped by barges more than 700
miles from Porto Velho, Rondonia northeast to the Amazon River port of
Itacoatiara, Amazonas. At that point, 160 miles east of Manaus,
ocean-going 50,000 ton vessels are loaded and moved out to export
markets. Freight costs indicate that shipping by waterways results in
transportation charges that are 25 to 40 percent less than roadway costs
per metric ton. Additional capacity at Porto Velho will also move
soybeans to the Amazon port of Santarem.

#### The Center-West

##### Mato Grosso

Mato Grosso is synonymous with soybeans, and that relationship will only
continue to grow. Governor Blairo Maggi, who is also the largest
individual soybean producer in the world, notes that Mato Grosso covers
more than 906 square kilometers, and with production on 40 percent of
the area, the state could produce 100 million tons of grain per year. In
other words, Mato Grosso alone could double the nation's grain
production.

Paving BR-163 between Cuiaba and Santarem would bring an estimated
US\$46 million in savings per year in transport costs to Mato Grosso,
which amounts to roughly US\$38/ton. The BR-163 project is spurring
soybean expansion along its route, as well as in northern and
northeastern Mato Grosso. Finishing the BR-163 would significantly lower
transportation time and costs in central, north-central, and
northeastern Mato Grosso. The northeastern region around Querencia and
Vale do Araguaia is often regarded as the latest agricultural frontier
of Mato Grosso. In 18 months, land prices skyrocketed from roughly \$100
per hectare to nearly \$1000 per hectare with jump in demand and little
land remains available for purchase. The area has significant cattle
ranch land, but logistics previously limited the viability of soybean
production. Successful completion of the BR-163 will revolutionize the
region by offering an export outlet for production. Last year, Coinbra
(part of Louis Dreyfus) announced R\$200 million (US\$70 million) in
investments for crushing facilities in Alto Araguaia, Mato Grosso. Grupo
Maggi is among those investing in the region with 83,000 hectares in
contiguous farms and more than 200,000 tons of storage facilities.

Mato Grosso leads the nation in slash and burn hotspots, with more than
twice as many as any other state, and Querencia leads within the state.
Environmentalists are expressing great concern with the advancement of
soybeans throughout the rainforest and cerrado. Querencia is earning
considerable attention, since 40 percent of its land sits within the
Indian reservation, Xingu National Park.

Under Brazilian environmental law, only 20 percent of rainforest land
can be cleared, versus 50 percent in transitional areas and 65 percent
in the cerrado. However, areas cleared before the law went into effect
may farm maintain a higher percentage unforested and can be put into
production. Vast areas of northeastern Mato Grosso were cleared before
the environmental laws were put into place, thereby offering incentive
to soybean producers to purchase and farm the land.

"Traditional" Mato Grosso growing areas are continuing to increase as
well. For example, ADM aims to double capacity of its crushing plant in
Rondonopolis to 2 million tons per year, which would require an
investment of roughly R\$50 million (US\$17 million).

##### Mato Grosso do Sul

Mato Grosso do Sul, a leading cattle producing state, has more than 10
million hectares of degraded pasture. Better soil management, such as
no-till planting, have allowed for productive soybean expansion even in
areas of sandy soils similar to the region in northwestern Parana.
Soybean production is expected to increase, although the rate will
depend on relative commodity prices and crop performance.

##### Goias

In the past five years, Goias has doubled grain production. Improved
pasture management is freeing up more land for crop production, and
Goias has the potential to double soybean area through pasture
conversion. Comigo, a cooperative in Goias, is constructing a R\$50
million (US\$17 million) soybean crushing plant in Rio Verde with a
capacity of 2,500 tons per day, thereby increasing the coop's total
capacity to 3,500 tons per day. Meanwhile, Caramuru Oleos Vegetais,
which already owns two processing plants in Goias, is constructing a
R\$70 million (US\$25 million) plant in Ipamiris, Goias.

#### The South \-- Room for Expansion?

The greatest source of soybean expansion in the south is from the shift
from corn to soybeans during the summer crop, followed by a corn winter
crop, or "safrinha." Better farm management practices, such as no-till
planting, have improved the soils, thereby allowing production in
regions formerly considered unfavorable, such as the southern lowlands
of Rio Grande do Sul and the sandy soiled region of northeastern Parana.
This year's poor crop may encourage some farmers to stick with corn next
summer, which fared far better than soy. Although expansion will be
slower than last year, post expects soybean production to continue to
move into the pastures.

##### Rio Grande do Sul

The lowland meadows and wetlands of southern Rio Grande do Sul are
experiencing an increase in soybean production. As many as 400,000
hectares may be suitable for soybeans, particularly in areas with better
drainage and high elevation. Rice continues to dominate agricultural
production in the area, but soybeans are gaining popularity in crop
rotation in place of cattle ranching, sorghum, and corn. Despite the
lack of appropriate lowland seed varieties, soybeans are expected to
continue to gain force in crop rotation in the lowlands due to its
agronomic benefits to the rice fields.

##### 

##### Parana

The sandy soil and degraded pasture region of northwestern Parana was
once considered good for little more than cattle ranching. However,
soybeans have expanded into the region with relative success largely due
to improved soil management and no-till planting. Analysts estimate 2.3
million hectares of potential area in this region, and the pasture to
soy conversion rate is roughly 35 percent per year.

### Infrastructure

The greatest challenge facing Brazilian soybean producers continues to
be logistical problems and the lack of infrastructure. Logistical
improvements are not keeping up with the expansion in agribusiness.
Brazil is larger than the continental United States, yet the US has
nearly 40 times more distance in paved highways. Brazil's total rail
track is roughly one-sixth that of the United States, however, most of
Brazil's railways run north-south along the coast and few are useful for
transporting grains from the production areas to the ports or
processors. Furthermore, Brazil uses multiple gauges, thereby
complicating transport and necessitating transfer of cargo. Total rail
track has not grown in the past 80 years. More than 60 percent of
Brazil's soybeans are transported by truck, versus 33 percent by rail
and 7 percent by waterway. In comparison, the US transports two-thirds
of its soybeans by waterways, 22 percent by railway, and only 12 percent
by road. No doubt, where available, shipping by railway or waterway in
Brazil is less expensive than by road. Transport costs per 1000
kilometers are 40 percent cheaper by railway than by road. Waterways are
even more cost effective, with savings of 70 percent over road
transport.

Transportation and port infrastructure development will continue to be
critical factors to the growth of Brazilian agriculture. While soils in
the vast Cerrado region of central Brazil tend to be very receptive to
good management, they also tend to be very poor in natural fertility and
nutrients. Thus, in order to produce a soybean or cotton crop, every
essential input, less rain and sunshine, must be transported to the
production areas. Conversely, the resulting agricultural commodities,
depending on location, may need to move in excess of 1,500 miles by
truck to gain access to an export point. The majority of Brazilian
soybeans continue to move great distances by truck over poor roads. The
Ministry of Transportation states that 70 percent of roads are in poor
or irregular condition, and railways are deficient. Current government
investment in roads is only 0.1 percent of GDP compared to 1.8 percent
in the 1970s.

Freight in Brazil has traditionally moved mostly by truck on a vast
system of roads that vary in quality from very good freeways to very
poor mud tracks. Trucks are still the dominant mode used to move inputs
from port and interior origins to production areas and, conversely,
commodities out to processors and export facilities. The privatization
of major roads in several states has led to improved pavement but at a
high cost in road tolls, which increase truck freight costs. This has
also influenced routes used as truckers often seek to avoid toll roads.
At the same time, the design of trucks and trailers used in Brazil has
evolved. From the traditional single 27 metric ton straight-bed trailer,
truckers are increasingly employing a double trailer arrangement that
can carry close to 40 metric tons. It is increasingly obvious that
Brazil has to resolve some of its transportation shortcomings as it
appears that the prevailing infrastructure cannot accommodate much more
growth in production. The logistical problems are the source of Brazils'
negative premium on Brazilian exports, and the discount will grow if
infrastructure doesn't expand more quickly to meet demand.

The government has initiated negotiations on Private-Public Partnerships
(PPP), giving priority to roadways and railways. One of the most
significant examples of a PPP is the Cuiaba-Santarem highway BR-163,
which was launched in June 2003 in an event with President Lula and
Blairo Maggi, Governor of Mato Grosso and the world's largest individual
soybean producer. The BR-163 PPP entails the federal government, the
private sector, and the state governments of Mato Grosso, Para, and
Amapa. A private consortium will have the responsibility for more than
750 kilometers of the roadway between Guaranta do Norte, Mato Grosso,
and Itaituba, Para, while the PPP is responsible for the remainder of
the road. Completion of BR-163 is projected for 2006, however many feel
that this date is too optimistic. The Mato Grosso portion of the project
could be completed fairly quickly, as much of the 700 kilometers in the
state have already been paved, although certain segments need
maintenance. Para's portion of the BR-163 will present quite a
challenge, with 1000 kilometers to be paved and 100 wooden bridges to be
replaced.

Considerable press attention has been given to China's interest in
building infrastructure in Brazil. In February, the Brazilian Ministry
of Agriculture stated that China wants to build railways and other
infrastructure in exchange for Brazilian commodities such as soybeans,
cotton, and sugar-based ethanol. China states that they can build
railways 30 percent more cheaply than Brazil, and that they have US\$400
billion in reserves for foreign investment. More recently, the press
indicates that President Lula will try to attract Chinese capital to
build infrastructure for the "Pacific Export Corridor," which would
allow shipments from the center-west to Pacific ports in Peru and/or
Chile. It is unclear how likely it is that the project will materialize.
Brazil frequently signs memorandums of understanding with countries that
do not result in actual trade. Furthermore, agriculture is in the hands
of the private sector, and the Brazilian government would have to
purchase commodities in order to trade with China. Despite the
difficulties and uncertainties, China is likely to attract greater press
attention in the near future due to its enormous import potential.
Brazil is actively pursuing greater trade and partnerships with
developing countries, such as China, India, and South Africa.

#### Railways

Using railways to move more soybeans is a priority. Transport costs per
1000 kilometers are 40 percent cheaper by railway than by road. However,
total rail track has not grown in the past 80 years. An ambitious plan
to link Goias state with the port of Belem on the Atlantic in Para state
to move soybeans would provide a northbound rail link to complement the
Ferronorte railway which is moving soybeans from the southeast corner of
Mato Grosso to the port of Santos, Sao Paulo. The time to cover the
800-mile trek to Santos was cut from four days to two. Ferronorte plans
to extend its railway from the southeastern tip of Mato Grosso to
Rondonopolis. The extension of the North-South railway will reduce
transport costs and ease exports from Tocantins and Maranhao. Southern
Brazil also has a number of rail projects underway that connect more
western origination points to the main ports of Paranagua, Parana and
Santos, Sao Paulo.

Information on government transportation projects can be found on the
Ministry of Transportation website (www.transportes.gov.br), as well as
maps (mapas) indicating the projects, ports, roads, etc.

#### Ports 

Going north to south, the major Brazilian soybean export ports are
Itacoatiara (Amazonas), Santarem (Para), Sao Luis (Maranhao), Ilheus
(Bahia), Vitoria (Espirito Santo), Santos (Sao Paulo), Paranagua
(Parana), Sao Francisco (Santa Catarina), and Rio Grande (Rio Grande do
Sul). The ports of Caceres (Mato Grosso) and Corumba (Mato Grosso do
Sul) are located on the Paraguay river, which then ship south to
Atlantic export points in Argentina. As indicated in the following
table, even though more and more Brazilian soybeans are grown and
processed away from the traditional production areas of the south, the
majority of Brazil's soybean exports are shipped from southern and
southeastern ports.

+--------------------------------+-----------------+-------------------+
| **Exports by Port, Soybeans**  |                 |                   |
|                                |                 |                   |
| **(Feb/Jan) (1000 MT)**        |                 |                   |
+--------------------------------+-----------------+-------------------+
| Port                           | 2003/04         | 2002/03           |
+--------------------------------+-----------------+-------------------+
| Santos                         | 5766            | 5045              |
+--------------------------------+-----------------+-------------------+
| Paranagua                      | 5714            | 5130              |
+--------------------------------+-----------------+-------------------+
| Rio Grande                     | 3850            | 1799              |
+--------------------------------+-----------------+-------------------+
| Vitoria                        | 1656            | 1530              |
+--------------------------------+-----------------+-------------------+
| Sao Luis                       | 920             | 650               |
+--------------------------------+-----------------+-------------------+
| Sao Francisco                  | 844             | 787               |
+--------------------------------+-----------------+-------------------+
| Itacoatiara                    | 693             | 913               |
+--------------------------------+-----------------+-------------------+
| Caceres/Corumba                | 147             | 207               |
+--------------------------------+-----------------+-------------------+
| Ilheus                         | 42              | 0                 |
+--------------------------------+-----------------+-------------------+
| Others                         | 354.8           | 13                |
+--------------------------------+-----------------+-------------------+
| Total                          | 19,987          | 16,074            |
+--------------------------------+-----------------+-------------------+
| Source: DECEX/Safras &         |                 |                   |
| Mercados                       |                 |                   |
+--------------------------------+-----------------+-------------------+

##### Paranagua

The port of Paranagua in Parana has had a difficult year with
accumulating problems. Paranagua has lost its title as the leading
Brazilian soybean export port. During 2003/04 (Feb/Jan), the post of
Santos surpassed Paranagua by 52,000 tons. However, the difference has
become much more dramatic this marketing year. In February and March
2004, Paranagua exported only 293,500 tons of soybeans, versus 669,200
tons in February and March 2003. During the same time period, Santos'
exports jumped 561,800 to more than 1 million tons, while the port of
Rio Grande's exports leapt from only 200 tons to nearly 200,000 tons.
Brazil's total soybean exports for February and March are 36 percent
above last year, with exports of more than 2 million tons versus less
than 1.5 million tons. Note the chart below using SECEX/Alice data
showing the change in export patterns from March 2003 versus March 2004.

![](media/image9.wmf){width="5.938188976377953in"
height="4.0582677165354335in"}

Brazilian exports regularly suffer a negative premium of roughly \$0.12
per bushel (\$4.40/ton) during harvest due to logistical bottlenecks.
However, the discount at Paranagua hit a record this year of
\$1.50/bushel \$55/ton) due to a combination of difficulties, such as
strikes by port workers and federal inspectors, heavy rains,
restrictions on biotech exports, and the delays caused by biotech
testing.

By March 13, Brazilian soybean producers were receiving up to US\$51/ton
(14.3%) less than US producers due to problems at the port of Paranagua.
Exports from Paranagua were earning only \$305/ton versus \$356/ton from
the Gulf of Mexico. According to analysts, the negative premium was due
to poor liquidity and the delay in operations, primarily due to the
biotech testing at the port and barriers to shipping biotech beans.
Importers and exporters were concerned about the port loading delays,
burdensome biotech testing, and barriers erected to block biotech
shipments. Thirteen trucks suspected of carrying biotech beans were
detained for weeks. The superintendent of the port of Paranagua, Eduardo
Requiao (brother of the Governor of Parana), admitted that there are
problems, but claimed that they are the same as in other Brazilian
ports.

The problems at Paranagua worsened considerably a few days later with
the onset of a strike of federal inspectors, which delayed inspection of
soybean carrying trucks, causing backups of 60 kilometers on the main
highway leading to the port. Early this year, Paranagua implemented a
regulations aimed at reducing the yearly truck backups. The regulation
allows to only receive trucks carrying cargos that have already sold and
their departure by boat is already scheduled. Despite the new
regulations, Paranagua continued to suffer long lines of trucks. Even
worse, the rule resulted in a queue of waiting ships. Average daily
demurrage costs for ships skyrocketed from US\$10,000 to up to
US\$50,000.

On March 19, operations at the Port of Paranagua came to a standstill
with the onset of a lockout/strike by port workers, shipping companies,
and some local businesses. During a television interview, the Port
Workers Union President stated that they were protesting \"an
unreasonable and hostile management style shown by the Port Authority,\"
and demanded the resignation of Port Authority Director Requiao. Lengthy
delays caused by GMO inspections were a key issue in the protest. By the
time an agreement was reach and the port resumed operations in late
March, nearly 50 ships were lined up at sea while thousands of trucks
lined the highway for more than 100 kilometers from Paranagua to
Curitiba. Truckers protested the lack of reimbursement for the delays by
blocking the main highway linking Paranagua and Curitiba.

As if the Paranagua situation was not already confusing enough, the Port
Authority of the Paranagua issued a Service Order on March 22, which
opened a window for biotech exports. Service Order 27 allowed the
segregation and labeling of biotech soybean lots for export. Following
the release of the service order, the Governor of Parana and the port
director declared the service order invalid, stated that the state
remains free of GMOs, and asserted that the port continues to prohibit
the export of biotech soybeans.

Greenpeace has been adding to the problems at Paranagua by blocking
ships coming from Argentina from topping-off at Paranagua. Greenpeace
claims it is trying to keep Paranagua pure, and it cannot be
contaminated by GMO-filled boats from Argentina. Due to shallow waters
in Argentine ports, boats cannot load up to capacity, and therefore
regularly top-off at Brazilian ports.

The Governor of Parana believed that farmers in his state would receive
a premium for their non-GMO soybeans. Unfortunately for Parana
producers, the premiums realized have been negative. Not only are
Parana's exports being sold at a lower price, their farmers are also
receiving less at state elevators than producers in other states. For
example, Parana farmers have been receiving record discounts for their
beans compared to Rio Grande do Sul producers. Parana farmers are
accustomed to receiving greater values for their soybeans than other
states, however the situation changed this year. On April 28, producers
in Rio Grande do Sul earned R\$56 per 60-kilo bag while Parana producers
were earning only R\$52 to R\$53 per 60-kilo bag of soybeans. The
discount is even more extreme when you consider that Rio Grande do Sul's
production costs are 20 to 30 percent lower, owing to their use of
biotech soybeans.

On the bright side for the port, Paranagua is investing in three new
berths and will increase the port capacity by 30 percent. A western
platform will be constructed, and other platforms will be renovated and
extended. The existing berths will be dredged and deepened to a minimum
of 12 meters. The R\$148 million (US\$51 million) investment is
projected to be completed within 2 years, and the port authority states
that it would allow exports to nearly double.

##### Paraguay's Dilemma

Parana's prohibition of GMOs created a bilateral controversy with
neighboring Paraguay, who owns a terminal at the port of Paranagua. Due
to a bilateral agreement between the federal governments of Brazil and
Paraguay, the state government of Parana cannot legally prevent the
transshipment of Paraguayan soybeans to the port of Paranagua. However,
Parana has effectively blocked Paraguayan shipments through a myriad of
barriers, bureaucracies, and difficulties. Paraguay has been seeking
alternative export ports, and has increased shipments through ports in
Uruguay and Argentina, as well as through other Brazilian ports.

##### 

##### Rio Grande

The port of Rio Grande in the GMO-friendly state of Rio Grande do Sul
(RS) has experienced a significant increase of transshipments of
Paraguayan soy, corn, and wheat. The railway company America Latina
Logistica (ALL) transported on 5,000 tons of Paraguayan grains from
Paraguay to Rio Grande in 2002. This year, the port hopes to export at
least 400,000 and possibly up to one million tons of Paraguayan grains,
plus increase exports of grains from northern RS which previously left
through Paranagua, estimated at 300,000 tons. Rio Grande is operating
below capacity and can reportedly easily absorb the additional supply.
Rio Grande aims to compete with other ports by offering fewer delays and
no restrictions on biotech exports. ALL is increasing its investments in
Paraguay, and estimates the nation's soybean production potential at 10
million tons. ALL is currently operating at full capacity on the route
to Rio Grande, transporting 40,000 tons per month, and is planning
infrastructure investments to increase its capacity by 50 percent. ALL
has invested R\$185 million in Rio Grande do Sul infrastructure since
1997, and also operates in Santa Catarina, Parana, southern Sao Paulo,
and part of Argentina.

##### San Francisco do Sul

The port of Sao Francisco do Sul in Santa Catarina is experiencing an
increase in exports of biotech soybeans from Parana, as they can no
longer depart through Paranagua. Roughly 550 producers in Parana signed
the federal declaration of biotech planting, but the state government
does not know the location of size of the farms. The first truckload of
19 tons of biotech beans from southeastern Parana arrived at Sao
Francisco do Sul in early April. However, Sao Francisco do Sul is
operating near capacity and cannot accommodate large amounts of diverted
beans. The port expects to move 5.5 million tons of grains this year,
which is nearly double the amount exported last year. Sao Francisco is
studying the feasibility of building a new pier, which would entail an
investment of roughly US\$20 million. Bunge is investing US\$ 30 million
at Sao Francisco do Sul.

##### Santos

Santos has taken the lead in Brazilian grain exports, and will see
increased demand due to growing Brazilian production and Paranagua's
non-biotech stance. Santos is backing the expansion of three grain
terminals, which should expand handling capacity by 1.4 million tons
over the next ten years. Bunge is investing U\$ 100 million in its
facilities in Santos.

Santos has experienced an increase in transshipments from Paraguay.
Barge movements from the Paraguayan bank of the reservoir north of the
Itaipu Dam, up the Parana and Tiete Rivers to a point just west of Sao
Paulo city, make the port of Santos an attractive alternative loading
point.

##### Santarem

Cargill's new \$20 million grain terminal in Santarem includes a
350-meter access bridge, pier and berths for Panamax-sized international
ships and riverine barge convoys, thereby boosting port's annual exports
from 350,000 tons to 800,000 tons. Soybean production is expanding
rapidly in Mato Grosso and other parts of the massive Center-West, and
Santarem will allow Cargill to get freshly harvested soybeans to Asian
and European customers faster. The Cuiaba-Santarem BR-163 highway
project will significantly boost usage of this port.

##### Porto Velho

Expanding the use of the Madeira River which in 2003 should convey
upwards of million tons of soybeans by barges over 700 miles from Porto
Velho, Rondonia, northeast to the Amazon River port of Itacoatiara,
Amazonas. At that point, 160 miles east of Manaus, ocean-going
50,000-ton vessels are loaded and moved out to export markets. Latest
freight costs indicate that shipping by waterways results in
transportation charges that are 25 to 40 percent less than roadway costs
per metric ton. Additional capacity has been installed at Porto Velho to
move soybeans to the Santarem Cargill facility.

## TOTAL MEALS

### Production

Soybean meal accounts for 98 percent of total Brazilian meal production,
with the remainder mainly cottonseed meal. Brazilian soy meal production
for MY 2004 is projected at 24.75 million tons, up 11 percent from last
season, while MY 2005 production is forecast at 28 million tons due to
expectations of a much larger crop. Cottonseed meal output is forecast
for 898,000 tons in MY 2004 and slightly over 1 million tons for MY
2005, with growth due to increased cotton production.

### Consumption

Meal consumption is projected to move in line with expanding domestic
livestock and poultry production. Soybean consumption makes up more than
92 percent of total meal use. For MY 2004, soy meal demand is
anticipated to reach 9 million tons, up seven percent from last season.
Continued livestock and poultry expansion is expected to create demand
for 10.8 million tons of soy meal and 1 million tons of cotton seed meal
in MY 2005.

Though Brazil's economy has been facing a challenging economic situation
with considerable public sector debt and record interest rates to
borrowers, its trade surplus has never been higher, and soybeans have
led the way as the single largest contributor to the trade surplus.
Increasing exports of poultry and pork products spur higher demand for
feed inputs. Feed sector information indicates the poultry sector as the
dominant consumer of soybean meal at approximately 65 percent, while the
pork sector accounts for an additional 25 percent. The cattle sector
takes nearly all of the cottonseed meal.

### Trade

Except for a small level of cottonseed meal exports, basically all
exports are soybean meal, which are projected to increase 16 percent in
MY 2004 as the higher domestic crush and the potential for strong demand
for vegetable protein meals in the world market present sales
opportunities. The growth is expected to continue in MY 2005.

Brazilian soybean meal exports by port for MY 2002/03 and MY 2003/04 are
reported by the GOB as follows:

+--------------------------------+-----------------+-------------------+
| **Exports by Port, Soybeans    |                 |                   |
| Meal**                         |                 |                   |
|                                |                 |                   |
| **(Feb/Jan) (1000 MT)**        |                 |                   |
+--------------------------------+-----------------+-------------------+
| Port                           | 2003/04         | 2002/03           |
+--------------------------------+-----------------+-------------------+
| Paranagua                      | 5932            | 5524              |
+--------------------------------+-----------------+-------------------+
| Santos                         | 2935            | 2796              |
+--------------------------------+-----------------+-------------------+
| Rio Grande                     | 1881            | 1862              |
+--------------------------------+-----------------+-------------------+
| Vitoria                        | 1359            | 1358              |
+--------------------------------+-----------------+-------------------+
| Ilheus                         | 688             | 533               |
+--------------------------------+-----------------+-------------------+
| Sao Francisco                  | 553             | 653               |
+--------------------------------+-----------------+-------------------+
| Others                         | 193             | 57                |
+--------------------------------+-----------------+-------------------+
| Total                          | 13,542          | 12,782            |
+--------------------------------+-----------------+-------------------+
| Source: DECEX/Safras &         |                 |                   |
| Mercados                       |                 |                   |
+--------------------------------+-----------------+-------------------+

Relative to meal production, oilseed meal imports for MY 2003 are
projected to remain minimal. Depending on price and logistics, very
small quantities of meal may be imported from Argentina and Paraguay.

### Stocks

There are no GOB held meal stocks; all stocks are held by feed millers
and crushers/exporters.

### Marketing

Brazilian soybean meal enjoys a "high-protein" reputation and exports
have benefited from the relative low cost of the Real, vis-à-vis the
U.S. dollar. The non-biotech label is also used by Brazilian exporters
to attempt to differentiate their product from that of other
international suppliers. However, as over 50 percent of the crush
capacity is located in southern Brazil and two-thirds of Brazilian
soybean meal is exported from ports on the southern coast, the
commingling of transgenic and non-transgenic soybeans in the crush
process is possible (See Total Oilseeds, Marketing). A final factor that
results generates demand for meal is some lingering international
concern over the use of animal-based protein sources for livestock feed.

### FEED DEMAND STRATEGIC INDICATOR TABLE FOR BRAZIL

+----------------------------+---------+---------+---------+---------+
| **FEED DEMAND**            |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| **STRATEGIC INDICATOR      |         |         |         |         |
| TABLES FOR BRAZIL**        |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
|                            |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| MEAT PRODUCTION            |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
|                            |         | Last    | Current | Out     |
|                            |         | Year    | Year    | Year    |
|                            |         |         |         | F       |
|                            |         |         |         | orecast |
+----------------------------+---------+---------+---------+---------+
| Calendar Year:             | 2002    | 2003    | 2004    | 2005    |
+----------------------------+---------+---------+---------+---------+
| Poultry                    |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| Poultry Meat:              | 7,      | 7,      | 8,      | 8,      |
|                            | 449,000 | 645,000 | 105,000 | 610,000 |
+----------------------------+---------+---------+---------+---------+
| Eggs:                      | 16,488  | 14,440  | 15,230  | 16,100  |
+----------------------------+---------+---------+---------+---------+
| Pork:                      | 2,      | 2,      | 2,      | 2,      |
|                            | 565,000 | 560,000 | 485,000 | 560,000 |
+----------------------------+---------+---------+---------+---------+
|                            |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| COMPOUND FEED SECTOR       |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
|                            |         | Last    | Current | Out     |
|                            |         | Year    | Year    | Year    |
|                            |         |         |         | F       |
|                            |         |         |         | orecast |
+----------------------------+---------+---------+---------+---------+
| Calendar Year:             | 2002    | 2003    | 2004    | 2005    |
+----------------------------+---------+---------+---------+---------+
| Compound Feed Capacity     | N/A     | N/A     | N/A     | N/A     |
+----------------------------+---------+---------+---------+---------+
| Total Compound Feed        | 41,600  | 43,870  | 46,070  | 48,400  |
| Produced                   |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| \-\-\-\-\-- by integrated  | N/A     | N/A     | N/A     | N/A     |
| producers                  |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| \-\-\-\-\-- by commercial  | 41,600  | 43,870  | 46,070  | 48,400  |
| producers                  |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
|                            |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| FEED GRAIN USE             |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
|                            |         | Last    | Current | Out     |
|                            |         | Year    | Year    | Year    |
|                            |         |         |         | F       |
|                            |         |         |         | orecast |
+----------------------------+---------+---------+---------+---------+
| Marketing Year:            | 2002    | 2003    | 2004    | 2005    |
+----------------------------+---------+---------+---------+---------+
| Corn (Domestic             | 33      | 34,     | 35,     | 33,     |
| consumption: feed)         | ,00,000 | 000,000 | 000,000 | 800,000 |
+----------------------------+---------+---------+---------+---------+
| Other (specify)            | N/A     | N/A     | N/A     | N/A     |
+----------------------------+---------+---------+---------+---------+
|                            |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| PROTEIN - ENERGY USAGE     |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
|                            |         | Last    | Current | Out     |
|                            |         | Year    | Year    | Year    |
|                            |         |         |         | F       |
|                            |         |         |         | orecast |
+----------------------------+---------+---------+---------+---------+
| Marketing Year:            | 2002    | 2003    | 2004    | 2005    |
+----------------------------+---------+---------+---------+---------+
| Total Protein Meal (feed   | N/A     | N/A     | N/A     | N/A     |
| waste domestic             |         |         |         |         |
| consumption)               |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| Soy Bean Meal (feed waste  | 7,      | 8,      | 9,      | 10,     |
| domestic consumption)      | 980,000 | 400,000 | 000,000 | 800,000 |
+----------------------------+---------+---------+---------+---------+
| Other Protein Meal, e.g.   | N/A     | N/A     | N/A     | N/A     |
| Palm Kernel Meal, Rape     |         |         |         |         |
| Meal (feed waste domestic  |         |         |         |         |
| consumption)               |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| Fish Meal                  | 16,328  | 18,700  | 20,100  | 22,300  |
+----------------------------+---------+---------+---------+---------+
| Palm Crude Oil (feed waste | 15,360  | 16,960  | 22,080  | 25,280  |
| domestic consumption)      |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
|                            |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| TRADE (Metric Tons)        |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
|                            |         | Last    | Current | Out     |
|                            |         | Year    | Year    | Year    |
|                            |         |         |         | F       |
|                            |         |         |         | orecast |
+----------------------------+---------+---------+---------+---------+
| Year:                      | 2002    | 2003    | 2004    | 2005    |
+----------------------------+---------+---------+---------+---------+
| Corn                       |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| Imports:                   | 800,000 | 450,000 | 400,000 | 400,000 |
+----------------------------+---------+---------+---------+---------+
| Exports:                   | 4,      | 4,      | 4,      | 4,      |
|                            | 620,000 | 000,000 | 500,000 | 000,000 |
+----------------------------+---------+---------+---------+---------+
| Soy Beans                  |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| Imports:                   | 1,      | 800,000 | 1,      | 1,      |
|                            | 124,000 |         | 000,000 | 000,000 |
+----------------------------+---------+---------+---------+---------+
| Exports:                   | 19,     | 21,     | 2,      | 2,      |
|                            | 987,000 | 900,000 | 560,000 | 800,000 |
+----------------------------+---------+---------+---------+---------+
| Soy Bean Meal              |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| Imports:                   | 288,000 | 250,000 | 300,000 | 300,000 |
+----------------------------+---------+---------+---------+---------+
| Exports:                   | 14,     | 16,     | 17,     | 19,     |
|                            | 000,000 | 300,000 | 500,000 | 000,000 |
+----------------------------+---------+---------+---------+---------+
| Fish Meal                  |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| Imports:                   | 11,546  | 13,572  | 13,900  | 14,600  |
+----------------------------+---------+---------+---------+---------+
| Exports:                   | 3,900   | 534     | 2,300   | 3,500   |
+----------------------------+---------+---------+---------+---------+
| Palm Crude Oil             |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| Imports:                   | 9,270   | 24,375  | 22,320  | 25,000  |
+----------------------------+---------+---------+---------+---------+
| Exports:                   | 7,310   | 640     | 8,200   | 12,300  |
+----------------------------+---------+---------+---------+---------+
|                            |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| PROTEIN PRODUCTS TARIFFS   |         | Bound   | Applied | Other   |
| AND TAXES                  |         | Rate    | Rate    |         |
+----------------------------+---------+---------+---------+---------+
| Report Year: 2004          | Product | (%)     | (%)     | Import  |
|                            |         |         |         |         |
|                            | Desc    |         |         | Taxes   |
|                            | ription |         |         | /Fees\* |
|                            | 1/      |         |         |         |
+----------------------------+---------+---------+---------+---------+
| 0505.90                    | FEATHER | 45      | 8       | 18      |
|                            | MEAL    |         |         |         |
+----------------------------+---------+---------+---------+---------+
| 1501.00.00.60              | YELLOW  | 45      | 8       | 18      |
|                            | GREASE  |         |         |         |
+----------------------------+---------+---------+---------+---------+
| 1502.00.00.40              | I       | 45      | 8       | 18      |
|                            | NEDIBLE |         |         |         |
|                            | TALLOW  |         |         |         |
+----------------------------+---------+---------+---------+---------+
| 1511                       | PALM    | 55      | 10      | 18      |
|                            | OIL     |         |         |         |
+----------------------------+---------+---------+---------+---------+
| 1518                       | ANML/VG | 70      | 10      | 18      |
|                            | FTS     |         |         |         |
|                            | &OILS   |         |         |         |
+----------------------------+---------+---------+---------+---------+
| 2301.10                    | MEAT    | 55      | 6       | 18      |
|                            | AND     |         |         |         |
|                            | BONE    |         |         |         |
|                            | MEAL    |         |         |         |
+----------------------------+---------+---------+---------+---------+
| 2301.20                    | FISH    | 55      | 6       | 18      |
|                            | MEAL    |         |         |         |
+----------------------------+---------+---------+---------+---------+
| \*ICMS( State Value Added  |         |         |         |         |
| Tax) assessed on the value |         |         |         |         |
| of the product after       |         |         |         |         |
| unloading at the port,     |         |         |         |         |
| which includes the CIF     |         |         |         |         |
| cost plus the Applied Rate |         |         |         |         |
| (Import tariff).           |         |         |         |         |
+----------------------------+---------+---------+---------+---------+

## TOTAL OILS

### Production

Soybean oil dominates Brazilian oil production. Meal demand is the most
important crush driver, and oil prices have served to maximize output to
the extent possible. Brazilian soy oil production is forecast for 6.08
million tons in MY 2004 and 6.8 million tons in MY 2005. Cottonseed oil
production is expected to reach 265,000 tons and 311,000 tons in MY 2004
and MY 2005, respectively.

### Consumption

Utilization of soybean oil is forecast at 3.23 million tons in MY 2004,
while cottonseed oil consumption is forecast for 211,000 tons. The
forecast for MY 2005 is for increased consumption of both oils. Soybean
oil remains the principal home cooking oil in Brazil. Cottonseed oil
goes largely to industrial uses, such as margarine. Other refined oils,
such as corn, sunflower seed, canola and olive are readily available in
many urban markets across Brazil.

### 

### Trade

Soy oil exports for MY 2004 are projected at 2.94 million tons, up
markedly from last year, due to the increased soybean crush. Out year
exports are forecast to increase significantly due to an expectation of
increased production and crush.

Exports of soybean oil by port are reported by the GOB as below.

+--------------------------------+-----------------+-------------------+
| **Exports by Port, Soybean     |                 |                   |
| Oil**                          |                 |                   |
|                                |                 |                   |
| **(Feb/Jan) (1000 MT)**        |                 |                   |
+--------------------------------+-----------------+-------------------+
| Port                           | 2003/04         | 2002/03           |
+--------------------------------+-----------------+-------------------+
| Paranagua                      | 1414            | 1150              |
+--------------------------------+-----------------+-------------------+
| Rio Grande                     | 515             | 545               |
+--------------------------------+-----------------+-------------------+
| Sao Francisco                  | 379             | 370               |
+--------------------------------+-----------------+-------------------+
| Santos                         | 2               | 1                 |
+--------------------------------+-----------------+-------------------+
| Others                         | 95              | 35                |
+--------------------------------+-----------------+-------------------+
| Total                          | 35,933          | 30,956            |
+--------------------------------+-----------------+-------------------+
| Source: DECEX/Safras &         |                 |                   |
| Mercados                       |                 |                   |
+--------------------------------+-----------------+-------------------+

As is the case for meal and oilseeds, imports of vegetable oil are
expected to stay small and will continue to originate predominantly from
MERCOSUL countries.

### Marketing

Brazilian soybean oil exports have benefited from the devalued Real,
vis-á-vis the U.S. dollar. The non-transgenic label is also used by
Brazilian exporters to attempt to differentiate their product from that
of other international suppliers. However, as over 50 percent of the
crush capacity is located in southern Brazil and nearly all of Brazilian
soybean oil is exported from ports on the southern coast, the
commingling of transgenic and non-transgenic soybeans in the crush
process is a virtual certainty (See Total Oilseeds, Marketing).

### Other Oils

#### Sunflower

Conab estimates Brazil's 2003/04 sunflower area at 48,500 hectares, with
production at 72,200 tons. Sunflower area increased more than 12 percent
from 2002/03, but production is expected to jump 28 percent due to a
14-percent yield increase. Goias is the leading sunflower producing
state in Brazil, with nearly 60 percent of the nation's planted area and
64 percent of production. Mato Grosso do Sul, Rio Grande do Sul, and
Mato Grosso account for an additional 17 percent of area and 21 percent
of production.

Although Brazil remains a minor sunflower producer, production has
jumped from less than 16,000 tons in 1998. Sunflower has gained
particular appeal as a winter crop in Goias, and other states are
looking at its attractiveness in diversification and crop rotation. The
sunflower planting season differs by region in Brazil. Plating in the
center-west runs from January through mid-February, while Sao Paulo
plants in February and March. Rio Grande do Sul plants sunflowers in
July and August, and Parana plants from August to October. Harvest
begins 90-130 days after planting, depending on the seed variety.
Brazilian sunflower oil production is estimated at 56,000 tons per year.

#### Castor Seed

Brazil is experimenting with castor oil for biodiesel production in the
arid Northeast. Conab estimates Brazil's castor bean production at
102,500 tons in 2003/04, on an area of 128,500 hectares. The state of
Bahia accounts for nearly 98 percent of national production, although
government incentives should stimulate greater production throughout the
Brazilian Northeast. Castor seed oil estimated at 40,000 tons per year.

#### Peanut

Conab estimates Brazilian peanut production at 207,000 tons for 2003/04,
on an area of 89,000 hectares. The state of Sao Paulo accounts for more
than 80 percent of national production. Other significant states include
Bahia, Minas Gerais, Parana, and Rio Grande do Sul, which combine for an
additional 15 percent of production. Although production has increased
13 percent since 1998, area has fallen 11 percent. Nearly 85 percent of
production occurs as a summer crop, although Sao Paulo dominates both
the summer and winter crops. The Southeast produces a summer crop while
the Northeast production occurs in the winter. Brazilian peanut oil
production is roughly 28,000 tons per year.

#### Palm Oil

Brazil producers roughly 110,000 tons of palm oil per year, on an area
of 66,000 hectares. Para is the leading palm producer, with roughly 80
percent of the national acreage. Bahia is the second largest palm
producer. Brazil is not self sufficient in palm oil, and imports 180,000
tons of palm oil and derivatives annually.

Brazil's leading palm oil producer, Agropalma, plans to increase its
capacity from 250 tons to 350 tons per day. The company is investing
R\$1 million (US\$340,000) in its Belem refinery, and hopes to increase
its exports, particularly to the United States. Agropalma is producing
palm oil biodiesel to fuel its diesel engines and supply energy needs in
a poor neighborhood in Belem. Agropalma accounts for roughly 80 percent
of Brazil's palm oil production and is centered in Para.

#### Minor Oils

Brazil produces roughly 15,000 tons of rice oil, 2,000 tons of coconut
oil, 15,000 tons of rapeseed/canola oil, and 46,000 tons of corn oil.