I spent all of last week visiting farms in Mato Grosso where they are half way complete with the harvest. The northeast region of Brazil won’t begin harvest for at least another month. In short, the soybean yields in Mato Grosso look fantastic. I had to travel about 300 miles before I would find a soybean field that looked less than perfect. Farmers continue to make progress, finding ways to boost productivity and lower costs. In some of the “older” production areas, overall yields of 60 bushels per acre will be fairly common. One of the agronomists that was accompanying me, was downright giddy as they had 5000 acres that averaged about 75 bushels per acre…of course that 5000 acres was only 10% of their overall planted area.

The great advantage of Mato Grosso is that they can plant two crops year. The total areof corn they plant typically is determined by when they get the first crop planted. The first crop is soybeans, and if it goes in early, they can plant greater areto corn or cotton after harvest. Corn and Cotton are the two preferred rotational crops that follow soybeans. Of course, if the first soybean crop goes in later than ideal, it doesn’t necessarily affect the soybean field, rather it will affect the amount of corn or cotton that is subsequently planted. The tallest corn I saw was knee high. It would have had to have been planted before Christmas. For that to happen, the soybeans preceding it would have had to have been planted the end of September. I saw corn planters running right behind the combines. Ideal planting dates for second crops of corn are open to interpretation, but it would appear that you need to be finished by about the first week of February. Since Mato Grosso is only half finished with its harvest, this means that it could plant corn to about 50% of its soybean area. Naturally there will be those that push those limits and pray for rain. But anything that is planted after the first week of February runs an even greater risk of running out of rain. The rainy season will begin to shut off in April and will end in May. This means corn in ideal conditions, only has about 90 to 100 days of rain before chances are Mother Nature will shut off the faucet. Two-thirds of Brazil’s corn crop comes from the second crop. This means that speculation about Brazil’s large “crop” is limited to soybeans for the moment. The only indication regarding corn is that the planting is going well and is off to good start.

While Donald Trump and his cabinet may have been celebrating the fact that they quickly did away with the Trans Pacific Partnership, oddly enough Brazil was cheering even louder. Blairo Maggi, Brazil’s Agricultural Minister and one of the largest soybean producers in the world, expects Trump’s views of US protectionism as huge opportunity for their country, including increasing trade with Mexico. Trump has made Mexico out to be country not worthy of being our next-door neighbor. While the US may have the upper hand, Mexico can and will strike back in their own way. They have identified agriculture imports as an areof weakness and are quickly moving to strengthen it. Mexico has already begun meeting with Brazil to discuss the possibility of importing soybeans, beef, and pork in the absence of US exports. We are not the only breadbasket in the world, and if Trump remains determined on picking fight with Mexico, they can and will go elsewhere.

This whole situation has emboldened Brazil. Where once they dared not steal away our export business, they are looking beyond Mexico to further trade with Asian countries. Brazil is already the largest exporter of soybeans, coffee, sugar, orange juice, beef, and chicken. It is number two in corn. It is foreseeable that Brazil will someday become the number one corn exporter as well. Brazil sent over 38 million tons of soybeans to Chinand mere 129,000 tons to Mexico. This would suggest that there is room to grow and Brazil is poised to fill any void left by the US. This period of renegotiation comes at time when Brazil is looking to reduce their reliance on China. Their commodity dependent economy benefited from the boom of 2007 and was equally penalized by the down turn in 2015. Their new ag minister is keenly aware that they need to find new trade partners and Mexico seems like good place to start. Mexico is the world’s third largest importer of soybeans, second largest in corn and third largest in pork.

Trump has succeeded in getting our attention when it comes to trade. The next few months will be important as it will determine whether Trump can negotiate better trade deal as he has promised… or whether he we will sacrifice our trade markets for other interests.