June 26, 2017

Brazilian Farmers Slow to Purchase their 2017/18 Inputs

The Brazilian National Association of Fertilizer and Agricultural Input Distributors (Andav) recently held a meeting of seed, fertilizer, and chemical distributors and their members indicated that input sales have been slow due mainly to slow selling of the soybean and corn crops. The slow purchasing of the inputs could result in logistical bottlenecks and potential delays in getting the products delivered.

Not only have sales been slow for old crop soybeans, they have also been slow for new crop soybeans as well. The Mato Grosso Institute of Agricultural Economics (Imea) indicated that farmers in Mato Grosso have sold 78% of their 2016/17 soybean crop compared to 91% last year at this time. For the 2017/18 soybean crop, they have forward contracted 4.3% compared to the 21% they had forward contracted before planting started in September of 2016.

Distributors indicate that there is plenty of product available for purchase and that eventually Brazilian farmers will increase their purchases by 10% compared to last year, which has been the average increase over the last three years. Andav estimates that 60% of the needed inputs for the 2017/18 crop has been purchased compared to last year at this time when approximately 80% had been purchased. They are concerned that the delay in purchasing could lead to bottlenecks in getting the products delivered in time for the start of planting in mid-September.

Ironically, farmers who delayed their purchases will end up paying more for the products due to the currency exchange rate in Brazil. Most of the fertilizers and chemicals are imported and they are priced in dollars, so the exchange rate has a huge impact on what farmers pay for the products. Farmers who locked in their inputs several months ago did so with the exchange rate of 3.1 to 3.15 Brazilian reals per dollar. Currently, the exchange rate is approximately 3.35, which means that products purchased earlier in the year were 10% to 12% cheaper than the current price. If the Brazilian currency continues to weaken, the price disparity would continue to widen.