Global Grain blog



Interview with Professor Rodrigo Alexandre Gomes de Oliveira, Chief Trading Officer, Bourbon Brown Trade Management 


Hear more from Professor de Oliveira at Global Grain South America, where he will be speaking.


Published July 2019



The US have recently experienced a challenging corn planting season. How will this impact global and South American markets?

We have to bear in mind that the bad weather that the US is facing is probably the worst they had in the past 35 to 40 years. I truly believe that the world will face a direct impact in rising corn prices because of the US weather problem. Most likley, everyone in the industry will have to come to South America in order to fulfill their corn needs. It will most likely bring a huge higher price pressure to South America. Port premium is predicted to rise and south American corn producers will probably be able to get better prices for their production. But that on the other hand will be harmful for south American beef and meat producers. As I described in a recent piece of my research, food and feed prices walk hand in hand. If feed prices rise, food prices will also rise. And this is also most likley true for North American users of ethanol, as their main matrix is corn, as opposed to Brazilian ethanol that is made from sugar cane. Summarizing, I predict higher prices for feed, food and corn based fuel for the US (ethanol).


How do you feel the African Swine Flu outbreak will impact South American feed production?

I think it will definitely have an impact. Decreased feed needs will most likely result in a surplus of grain and they will probably bring low prices pressure to soybean mainly. My biggest concern regarding the ASF is that it may (and most likley will) be more harmful than the trade war itself. And I defend the theory that claims that alothoug the trade war is a macro-economic issue that could be resolved by a political deal, nevertheles the ASF is a microeconomic issue. And a microeconomic issue in this case is related to the simple fact behind the old theory of supply and demand. If the pork industry in China is not going to consume as many soybean or feed as they usually do, we have a problem that cannot be solved by a political deal. It is a lot harder than that. For example, someone could argue that if China is not going to need as much feed as always, they will certainly need to import more pork, and other countries will end up using more feed. Unfortunately, it is not as simple as that. We cannot forget the pork production cycle. One of the questions to ask ourselves would be how a pork producing country could double or triple its piglets in only one year in order to supply China, for example? Therefore, in my opinion, the ASF could act more as a support system to soybean and feed prices, but not as an ultimate means to help improve future prices.

There has been talk of ‘value-add’ products originating in South America, for example soy bean crushing occurring before shipment to increase the value and price of the product. Will we see more producers move towards this?

The aggregation of value through industrialization is certainly the best way to generate jobs with higher wages, retaining wealth in the country. That definitely is one of the things Brazil should do. Argentina already exports more meal than grains. But by the end of the day, the pressure is on the seller’s side. If buyers say they don’t want to buy meal, but only buy grains, they will probably find a seller willing to sell grain only. If the seller is an important enough market player, able to hold its position and face the risk of not selling anything at all in order to force a “value-add” product sale, this could start moving the market slightly in that direction. However, we have to have in mind that in order to do that, Brazil would have to start increasing investments in new crushing plants and exporting infrastructure. If a country does not have enough plants to crush grains and does not have the infrastructure in place to export value-add products, it should do the homework first, before it starts thinking about becoming a value-added product world supplier.


The industrialization issue is a huge deal between countries. We have to have in mind that a country that is used to importing grain, is also doing it in order to protect its own crushing industries. It will probably do whatever it takes to protect jobs in their own land. Therefore, besides building new crushing plants and exporting infrastructure, it would be a matter of political negotiations on bilateral deals. And that certainly is not easy.

Does South America have the infrastructure in place to fully benefit from the benefits offered by digitalisation?

I am sorry, but that is not part of my market expertise.

Finally, how do you see the global grains and oilseeds markets playing out over the coming 12 months?


Certainly, the weather issue in the US is bringing some relief to soybean prices. If it wasn’t for that matter, I believe we would be close to the worst soybean prices in world history. But I also believe that soybean world stocks are so high that the current US weather frenzy will come to an end in the near future. When players go back to fundamentals and realize that China will most likley not consume as much as they used to and the world stocks remain very high, prices will fall again.

On the other hand, corn is heading in the opposite direction. World stocks are low and the US is a huge producing and consuming player, therefore we should be prepared to see corn prices reaching new highs for the next 12 months or so.




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