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July 31, 2013

Brazilian Farmers more focused on Soybean Acreage than Corn

Even with the recent declines in soybean prices, farmers in Brazil are still hoping for a relatively good soybean year. Some of the best soybeans in the state of Parana are produced in the municipality of Toledo in the western part of the state. The land is generally flat, the soils are fertile, and if the weather cooperates, producers can expect soybean yields in the range of 60 sacks per hectare (3,600 kg/ha or 52 bu/ac). Unfortunately, the weather has not cooperated the last several years and yields have been disappointing, but farmers are always optimistic and they are hoping for better weather this growing season.

Some farmers in the region have already forward contracted part of their anticipated 2013/14 production for R$ 55 to R$ 57 per sack (approximately US$ 11.35 to 11.75 per bushel) and their hope is that prices may go to R$ 60 or R$ 62 per sack. One of the factors helping out Brazilian farmers is the weakened Brazilian currency. Starting this past May, the currency has lost value compared to the U.S. dollar and the weakening of the currency equates to a price increase for Brazilian farmers. Most market observers are expecting the currency to continue weakening for the remainder of 2013 and into 2014, which would generally be good news for Brazilian farmers.

The downside to a weaker currency is the fact that imported inputs such as fertilizers and chemicals are more expensive. Fortunately for many farmers in western Parana, they purchased their inputs for the 2013/14 crop before the currency started to devalue.

Soybean planting in the region will start at the end of September and last for about a month. Last week, the region was impacted by very cold temperatures and widespread frost and freezes. While the cold temperatures may have hurt some of the winter wheat in the region, it has helped to control insects and invasive weeds.

Farmers may start planting some of their full-season corn in southern Brazil before the end of August, but no soybeans will be planted before the end of the 90-day soybean free period which will end on September 15th. I continue to expect a decline in Brazilian corn acreage in 2013/14 (minus 10-15%) and an increase in Brazilian soybean acreage in 2013/14 (plus 3-5%).

Safras & Mercado announced on Monday that they expect the Brazilian soybean acreage to increase 3.7% in 2013/14 and the soybean production to be 88.1 million tons. In their first look at the 2013/14 crop, Ag Rural estimates that the Brazilian soybean acreage will increase 9% and the total production in 2013/14 will be 89.1 million tons.

With that in mind, below is a ten-year history of corn and soybean acreage and production in Brazil.