July 6, 2015

Brazilian Farmers seen as Increasing Soy Acreage 1%-5% in 2015/16

Brazilian farmers will start planting their 2015/16 soybean crop in about two months and they have been encouraged by the recent increase in soybean prices. At the end of 2014, domestic soybean prices in Brazil were at their lowest point in four years, but they have since moved higher thanks to a strong reaction at the Chicago Board of Trade resulting from lowered expectations for the 2015 U.S. soybean crop.

The international price increase, coupled with a devalued currency in Brazil, has resulted in an increase of R$ 5 per sack of soybeans in Brazil. Soybean prices at Brazilian ports earlier last week were in the range of R$ 70 per sack (US$ 10.25 per bushel using an exchange rate of 3.1 Brazilian reals per dollar).

When prices were at their lowest point earlier in the year, some analysts in Brazil were predicting a decrease in soybean acreage in 2015/16 for the first time in a decade. Those estimates have now been revised higher and most analysts are now expecting the soybean acreage in Brazil to increase in the range of 1% to 5% in 2015/16.

Up until recently, Brazilian farmers have been cautious in making the purchases of inputs due to a lack of credit, higher cost for the inputs such as fertilizers, and uncertainty about future commodity prices. Some of those uncertainties have now been removed and it is expected that Brazilian farmers will accelerate their input purchases in preparation for the new growing season. Soybean prices have improved and farmers can now pencil in a profit on their soybean production if the weather cooperates. Additionally, credit from the new Harvest Plan started to become available last week and some farmers have already received their money.

The projected increase in soybean acreage in Brazil will result from three sources. Farmers in southern Brazil will continue to reduce their full-season corn acreage in favor of more soybean production. The full-season corn acreage will be switched to safrinha corn production which has done very well in recent years. Farmers in central Brazil will continue to convert some of their degraded pastures to row crop production and there will be a limited amount of new land cleared for soybean production in northeastern Brazil.