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January 5, 2016

Brazil Farmers Waiting Until Harvest Complete to Continue Selling

Brazilian farmers were very aggressive sellers of their anticipated 2015/16 soybean production earlier in the growing season in order to take advantage of the improved domestic soybean price resulting from the devaluation of the Brazilian currency. Since then, the forward selling has been very slow as domestic soybean prices declined and adverse weather has farmers concerned about their potential soybean production. Brazilian farmers are expected to continue to be slow sellers until they complete their harvest and are more secure in knowing their production.

According to a report in SoNotisias, FCStone estimates that farmers in Mato Grosso have forward contracted approximately 55% of their anticipated 2015/16 soybean production with the farmers in Parana forward selling approximately 33% of their anticipated production. Nationwide, it is estimated that 44% of the 2015/16 Brazilian soybean crop has been sold compared to a five-year average of 40% and last year when 26% of the crop had been sold by this time.

The aggressive forward selling could result in significant financial problems for some farmers in Mato Grosso. In the municipality of Sorriso, which is the largest soybean producing municipality in Brazil, approximately 60% of the soybeans have been sold, but prolonged periods of hot and dry weather this growing season has resulted in potential significant yield losses for many farmers. These farmers are now worried that they will not be able to fulfill their forward contracts.

As a result, farm organizations in parts of Mato Grosso are asking the state government to declare a state of emergency in their area in an effort to help them renegotiate their contracts. The president of the local Rural Syndicate in Sorriso, Laercio Lenz, would like to see farmers fulfill their contract obligations over a 3-4 year period instead of all at once when the harvest is complete. He feels an emergency decree by the state will give the farmers a better bargaining position with the grain companies.

For those farmers who were able to plant their soybeans early and had good weather during the growing season, they should be able to sell their soybeans in January for relatively good prices due to a tight domestic supply. Domestic soybean stocks in Brazil are tighter this January compared to the last two years due to strong export totals so processors are expected to bid up the prices for the limited supply.

The president of the Brazilian Soybean Producers Association, Almir Dalpasquale, feels the adverse weather in Brazil (too dry in central Brazil and too wet in southern Brazil) will result in a soybean production of less than 100 million tons. In their December report, Conab estimated the 2015/16 Brazilian soybean production at 102.4 million tons compared to 96.4 million tons produced in 2014/15.