Brazil isn’t pulling its punches when it comes to its corn and soybean forecasts.

Even with sowings of soybeans in their early stages, and those of the key safrinha corn crop still three months or more away, official ag bureau Conab has raised its production forecasts for both the grain and the oilseed.

And to levels above those of other forecasters.

That is a bold call when there is still a lot that can go wrong.

Big ambitions

Not that Conab’s forecasts of 152.4m tonnes for Brazil’s 2022-23 soybean output, and 126.9m tonnes for corn, look unachievable.

The country has a habit of setting production records, as area in cultivation expands, while improved agronomic practices and crop investment support yield growth.

But they do leave scope for downside.

Soaring soy

On soybeans, although production looks likely to beat 2021-22’s dryness-depressed levels, Conab is counting on, at 21%, a chunky rate of recovery.

Such a pace of year-on-year production growth has been achieved only twice before in the last 30 years.

And those occasions required rapid expansion in both area and yields.

Soybean area for 2022-23 is expected to rise by 3.4%, a pace below the five-year average.

Costs vs prices

For safrinha corn, the upgraded forecast of a 96.3m-tonne crop looks a little bit more conservative, relying only on a record area, rather than a record yield as well.

But betting on expansion of nearly 11m tonnes, or 12.4%, year on year, in production on top of the record 2020-21 total of 85.62m tonnes, still looks punchy.

… especially at a time when producers worldwide are facing tests from eye-watering prices of inputs, such as fertilizers, of which corn is a notably needy crop.

Indeed, margins for growing corn look a lot less healthy than a year ago, to judge by data for Mato Grosso, Brazil’s top production state for the grain, and for soybeans too.

While farmers’ bills for the likes of labour, herbicides and fertilizers for growing high-spec crops are up 42% year on year, corn prices are down 9.0%, according to research institute Imea.

Weather factor

Added to this is La Nina roulette, and a further iteration of the disruptive weather phenomenon.

La Nina doesn’t always bring dryness to Brazil’s main corn and soybean belt.

But it certainly can, and was blamed by many for the 2021 dryness which undermined first safrinha corn yields, then soybean sowings.

Planting weather this time looks significantly better, with ample rains in major growing areas. But there is still plenty of time for weather setbacks yet to appear.

Investors should for now treat Conab’s forecasts as on the aspirational side.