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November 11, 2014

Forward Sales of Soy in Brazil Improving but Still Lag Last Year

The combination of improved soybean prices on the Chicago Board of Trade and a weaker Brazilian currency compared to the U.S. dollar has encouraged Brazilian farmers to be a bit more aggressive in selling some of their anticipated 2014/15 soybean crop.

According to a report from AgRural, they estimate that by the end of October Brazilian farmers had sold 21% of their anticipated soybean production compared to 13% at the end of September. Even though forward sales have picked up, they still lag last year when 34% of the crop had been sold by the end of October 2013.

In the center-west region of Brazil, which includes the states of Mato Grosso, Mato Grosso do Sul, and Goias, farmers had sold 25% of their soybean crop by the end of October (15% had been sold at the end of September), but that still trails last year when 42% had been sold by the end of October 2013.

Up until the end of September, Brazilian farmers had only sold the bare minimum of their crop due to the lowest soybean prices in about four and a half years. Since then, soybean prices have improved on the Chicago Board of Trade and the Brazilian currency has also weakened significantly over the last several months.

The Brazilian currency is currently trading at about 2.55 to the dollar, which is considerably weaker than the 2.2 it was trading several months ago. Every time the Brazilian currency weakens compared to the dollar, it results in a price increase for Brazilian farmers when they sell their grain. Analysts expect the exchange rate to hit 2.60 to the dollar or more by the end of the years.