July 19, 2012
Domestic Soybean Prices in Brazil Hit Record Highs
Brazilian farmers are eagerly watching domestic soybean prices climb to record levels day after day due to the severe drought in the U.S and a the weakening of the Brazilian currency. In Mato Grosso for example, nearly all the 2011/12 soybean crop has already been sold and there is strong competition for the remaining supplies. The state produced 21.36 million tons of soybeans in 2011/12 and only 0.37 million tons of soybeans remain to be sold. As a result, domestic soybean prices continue to set new records, as high as R$ 73 reals per sack this week in Rondonopolis, which is located in southeastern Mato Grosso.
As a result, farmers in the state are expected to increase their 2012/13 soybean acreage by converting pasture land to additional soybean production. This trend started several years ago due to new restrictions on the clearing of virgin land for row crop production. There are no restrictions on the amount of pastureland that can be converted to row crop production. Farmers who complete this conversion generally reduce their cattle herds by placing more of their cattle in feedlots.
The long range forecast is for an early start to the rainy season sometime in September. If the forecast verifies, farmers will start planting soybeans on September 15th, which is the expiration of the 90-day soybean-free period in the state. The soybean-free period was instituted a number of years ago as a way to control the spread of soybean rust and farmers are not allowed to plant soybeans until it expires.
If the soil moisture is adequate during the second half of September, they will plant early-maturing soybeans that will be ready for harvest during the first half of January. Immediately after the soybeans are harvested, the farmers will plant a second crop of corn called the safrinha.
Farmers in central Brazil are going into the 2012/13 growing season well capitalized. They had a good soybean crop in 2011/12 which they sold for near record prices. Additionally, safrinha corn yields in central Brazil were extremely high in 2012 and they are selling that crop as well for relatively good prices as well.
Farmers are now concentrating on forward contracting their 2012/13 anticipated soybean production in exchange for the purchase of needed inputs for the 2012/13 crop. Forward contracting has been running at an accelerated pace as farmers take advantage of these record prices.