Last year, Brazilian soybean production was projected early on at 100 million metric tons by USDA, and outside analysts projecting an even larger crop. Production ended below expectations, coming in at 95.5 mmt -- just over 3.5 billion bushels. Production was hit by drought that dragged down production.

GoAgro is pegging Brazil's new-crop soybean production at 100 million metric tons (3.67 billion bushels) with an outside chance that production could bump up to 105 mmt (3.85 bb) if yields are good.

Brazil's corn crop is expected to rebound from a disastrous year that led the country to import from the U.S. The first corn crop is expected to see acreage bumped up to 10% to 16.5 ma. Brazil's first crop is projected to produce about 1.38 million bushels while the second-season crop could come in between 1.97 bb and 2.2 bb. The big question mark for Brazil will be rainfall available for the country's second crop.

Soybean and corn production will continue to rise, however. Brazil has added 24.1 ma of soybean acreage in the last five years alone with 30% coming from Mato Grosso, 14% from Rio Grande do Sul and 13% in a four-state area known as Mapitoba. What's looming out there, however, is that Brazil has the potential to expand yet another 24 ma or so over the next decade, with roughly half of those acres coming from Mato Grosso. With that in mind, Brazil alone could increase production another 1.47 bb by 2025.

Regarding corn, Mato Grosso also is projected to increase corn production by 790 mb over the next decade as well.

ARGENTINA OUTLOOK

The change in export duties is already changing planted acres in Argentina.

Argentina's soybean acreage is pegged at 48.4 ma, about a 2.4% decline from last year. The decline comes from a shift in government policies to eliminate the export tax for corn. Roughly 35% of Argentina's soybean crop is in the ground.

Farmers also may be a little more upbeat for income margins for soybeans as the export tax for soybeans has declined from 35% to 30%.

Gobbee also added that Argentina is looking at "excellent water availability" for the soybean crop. "If the humidity persists in February, Argentina can achieve record yields."

Argentina's corn acreage is forecast to increase 27% to 12.1 ma, the first time in 10 years Argentina has seen a significant bump in corn planting. Production could grow 20% to just under 1.5 bb.

While U.S. farmers are struggling for positive returns, Argentina farmers and investors are seeing projected rates of return over 20%, Gobbee said.

With the export tariff lifted and an incentive to plant, Gobbee said Argentina farmers could see a rate of return on corn from 15% to 20% this year. Production costs for corn, per acre, including rent, are averaging just over $404 an acre ($1,000 per hectare). "For Argentina farmers, corn could be very profitable if you have good weather conditions this year," he said.

Soybeans are more attractive, Gobbee said, with input costs averaging $283 to $323 per acre ($700 to $800 per hectare).

Argentina is also expected to increase its combined corn, soybean and crop acreage by as much as 20 ma over the next decade as well.

Corn production is forecast to increase in Argentina by just over 900 mb over the decade as well.

"So Argentina will again become an important exporter of corn," Gobbee said.

TRANSPORTATION OUTLOOK

One of the failures in South American production is the competitiveness in transportation costs to China. The U.S. has a $100-per-ton advantage in transportation costs compared to Brazil and a $30 advantage compared to Argentina, mainly because of poor highway access for Brazil facing competition from the U.S. barge system.

"So this is something that needs to be solved," Gobbee said.

By next year, however, a new highway in Brazil to the port of Villa do Conde is expected to cut Brazilian freight costs by 40% and reduce the shipping time to Europe by five days, he said.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(AG/ES)

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