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June 2, 2011

Brazilian Farmers Aggressively Selling 2011/12 Soy Production

Brazilian farmers have been very aggressive in forward contracting their anticipated 2011/12 soybean production. According to the Mato Grosso Institute of Rural Economics (Imea), farmers in Mato Grosso have already contracted 18% of their 2011/12 production. This is the earliest in the year that such a high percentage of the crop has been negotiated. During the last three years, this level of forward sales was not reached until the month of August.

Two factors seem to be behind this trend. First, the farmers want to take advantage of the strong soybean price. Last year at this time, farmers in Mato Grosso were contracting their soybeans for US$ 15 or US$ 16 per sack. Currently, the contract price is US$ 21 to US$ 22 per sack.

The second major reason for the early forward selling is because farmers want to purchase their inputs before prices rise even further. Fertilizer prices in Brazil have already increased 20% to 30% compared to last year and it is anticipated that prices could be even higher before planting begins in four months. Additionally, by purchasing their inputs now, farmers might be able to avoid even further price hikes if the Brazilian currency continues to strengthen against the U.S. dollar.