Brazil is in the spot in the international scenario due to its native tropical forests and the plating of homogeneous forests, with exotic species. According to FAO (Food and Agriculture Organization), in 2015, Brazil had 59% of its territory covered with 493.5 million hectares of forests (natural and planted), representing 12% of the total in the world. Most of them is natural (485.7 million hectares); however, it is not explored in a sustainable way. FAO also says that, from 2010 to 2015, Brazil reduced its natural forests in 984 thousand hectares.
Brazil is also in the spot because of the planting of homogeneous forests, especially pine and eucalyptus. In 2016, these forests totaled 7.84 million hectares, being 72.3% of eucalyptus and 20.2%, pine. These exotic species allow producing several products, such as cellulose, paper, sheets of wood, sawn wood and firewood, which are traded in different markets.
CELLULOSE – Year after year, Brazil has increased its production of cellulose, which totaled 17.4 million tons in 2015, 18.8 million tons in 2016 and 19.5 million tons in 2017, according to IBÁ (Brazilian Tree Industry). Since 2016, Brazil is the second greatest world producer of cellulose, allocating two thirds of its production to the international market.
This commodity is not traded in the futures market, but it characterized by significant price cycles. Production of cellulose increases by leaps, while the demand for the product increases linearly year by year. There are no new cellulose producing units since 2017, which leads the demand to increase more than the supply.
There are two types of cellulose traded: long fiber pulp (NBSKP) and short fiber (BHKP). In the USA, for instance, NBSKP prices changed from 990 USD per ton in December 2016 to 1,300 USD per ton in April/18, according to Natural Resources Canada. In Brazil, BHKP prices varied from 655 USD per ton in December/16 to 1,050 USD per ton in June/18, soaring 60.3%, according to data from Cepea.
The price rise (in dollar quotes) over the last 18 months, along with periods of Real devaluation against dollar, should push up prices (in BRL) of other products that come from planted forests, considering the price transfer between production chains. However, this is not observed. Why?
PAPER – Brazil is the eighth largest global producer of paper, but its production has not increased over the last years, likewise that observed for cellulose. Brazil produced 10.4 million tons of paper in 2015, 10.3 million in 2016 and 10.5 million tons in 2017. Roughly 80% of the national production is sold to the domestic market, which faced a sharp recession in 2015 and 2016 and a timid growth in 2017 and 2018. This scenario of sales allocated to the domestic market explains also the fact that paper prices in Reais change only a little in an upward trend of cellulose dollar quotes.
REFORESTATION WOOD PANEL – This market has only a few items (MDF/HDF, MDP and HB), produced by only some agents and it is specially focused on the domestic market. According to IBÁ, production changed from 7.5 million cubic meters in 2015, to 7.3 million cubic meters in 2016 and reached 7.8 million cubic meters in 2017. The production raise last year is attributed to an increase of panel exportations. In 2016, roughly 4% of the Brazilian production was exported, changing to 15.9% in 2017.
SAWN WOOD – Two major markets of sawn wood in Brazil are of native essence, which comes mainly from Amazon and Central-West, and exotic essence (pine and eucalyptus). Cepea data regarding prices of these types of wood traded in São Paulo show a slight increase in 2017 and 2018.
Eucalyptus board prices in Bauru (São Paulo), in BRL, dropped 7.7% between December 2016 and May 2018, changing from 1,400 BRL per cubic meter to 1,292.33 BRL per cubic meter. As for pine board, the increase was 2.4% in the same period, at 759.11 BRL per cubic meter (Cepea data).
FIREWOOD AND WOOD CHIP – Cepea data for cut and piled wood at eucalyptus farms indicate a prise rise of 2.5% comparing December/16 and May/18 in Bauru, but a decrease of 1.1% in Sorocaba in the same comparison.
As for prices of standing eucalyptus to produce wood chips, they remained at 34.00 BRL per stere in Sorocaba from December 2016 to May 2018 and changed from 29.00 BRL to 31.50 BRL in Bauru, 8.6% up (standing wood at farms). This scenario was observed although the price increase in Reais of cellulose sold in São Paulo market was 74%.
The market of in natura wood in São Paulo State has faced two disadvantageous situations for farmers over the last two years: supply excess and indexed contracts on wood prices. Differently of what occurs in Bahia, where contracts for wood supply follow IGP-DI, there are many contracts in São Paulo following market prices. However, major purchasers, who own large forests, set these market prices.
IMPORTANT ASPECTS – Producers should focus on two important factors of the wood market: the relative long period of capital return and the type of contract to sell the product. The ideal contract involves a part of the price of in natura wood that follows an inflation indicator, another part by the price of the industrial product that will use the wood and a third part that involves the market price that wood can be alternatively allocated.