Brazil economy oranges
The economy of Brazil, the world's top orange juice exporter, is now larger than the UK's. Reuters

Brazil is bullish on its agriculture.

That’s the message on Tuesday from Brazil’s Ministry of Agriculture, Livestock and Food Supply, marking the start of the 2013-2014 harvest season. The ministry anticipates a record year for Brazilian agriculture and the agribusiness sector.

The ministry forecasts a record harvest of 90 million tons of soybeans, which could help it overtake the U.S. as the world’s top soybean producer. The 193 million tons of projected harvested grain also moves Brazil closer to the ranks of the world’s top food producers, a circle dominated by the U.S., China and India, among others.

For Brazil’s massive agribusiness industry, gross domestic product could grow 4 percent in 2014 to about 1 trillion Brazilian reais ($416 billion). If that projection is met, the sector’s GDP will have grown 34 percent in 10 years, according to the Brazilian government. That business accounts for 23 percent of the country’s economy now.

The sector exported goods (including meat, soybean and maize) worth $99 billion last year, or more than 40 percent of all Brazilian products sold to other countries.

But bumper Brazilian harvests could flood global markets and dampen global commodity prices, even as Brazilian exporters see better sales. Large grain harvests in South America and the U.S. should pressure prices by the second half of 2014, London’s Capital Economics wrote in a note on Tuesday.

“We are not anticipating that prices will plummet again, as they did over the last year,” wrote Tom Pugh, their commodities economist. “But we do continue to expect ample supply to pull prices down gradually.”

The drag on prices comes despite strong rising demand for grain. Global oversupply of agricultural commodities has been a key theme for investors and analysts early this year, though uncertain weather in Brazil has boosted commodities like coffee.

“We’ve seen the big influence of weather in the cattle markets, dairy markets and grain markets recently,” Brazil’s Scot Consultoria analyst Rafael Ribeiro told IBTimes. “Hot temperatures and lack of rainfall are important factors for soybean and corn.”

Brazil has seen the hottest January on record in some of its most productive regions, with scarce rain. That has sparked abrupt price swings for some grains and led to revised production forecasts.

Initial estimates for soybean production have been revised anywhere from 10 to 15 percent downwards, to 40 to 50 percent less, depending on the region, according to Ribeiro. That highlights the uncertainty traders face when forecasting grain prices, which depend heavily on fickle weather patterns.

Brazil’s official Conab agency cut its grain harvest projections in a report on Tuesday, and its March report may show further downward revisions, said Ribeiro.

Meanwhile, influential investors like Dennis Gartman have said they are bearish on Brazilian soybeans.

“There’s going to be a huge increase in the amount of acreage planted in soybeans. And it will come out of cotton, it will come out of corn,” said Gartman at a New York commodities conference in September 2013. “You want to look into the 2015 crop year. I think you want to be short of 2015 beans, long of 2015 cotton.”

Brazilian President Dilma Rousseff was on hand on Tuesday to celebrate the coming harvest. She highlighted government investment and credit for the sector, touting this year’s plan as the most comprehensive ever.

“For this season, we have committed 136 billion reais,” said Rousseff. “If we spend more, we´ll have more.”

The U.S. Department of Agriculture also released its latest market-moving World Agriculture Supply and Demand Estimates Report on Monday.