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November 5, 2014

Slow Forward Selling of Soy in Brazil, Old Crop Corn Sales Increase

Brazilian farmers continue to be slow sellers of their anticipated 2014/15 soybean production. According to the consulting firm Celeres, farmers had only sold 12% of their anticipated soybean crop as of October 31. That was up only 1% for the week and it is significantly behind last year's pace when 32% of the 2013/14 crop had been sold at the end of October.

At the start of October, soybean prices in Brazil were at four and half year lows, but they have improved 12% since then. During October, the Brazilian real also weakened against the U.S. dollar to the lowest point in over nine years. It is currently trading at 2.51 to the dollar and it is expected to weaken even further.

Brazilian farmers are in midst of planting their 2014/15 soybean crop so they are in no hurry to forward contract their crop. Most farmers in Brazil expect the soybean prices to slowly move higher once the U.S. completes harvesting a record large soybean crop. As far as old crop sales are concerned, Brazilian farmers have sold 93% of their 2013/14 soybean crop.

Corn prices are improving in Brazil and as a result, farmer selling of their old crop corn has picked up. Lost in all the negative news about planting delays in Brazil has been the fact that commodity prices are improving in Brazil due to increases on the Chicago Board of Trade and a weaker Brazilian currency. A good case in point are the corn prices in Mato Grosso.

According to the Mato Grosso Institute of Agricultural Economics (Imea), the average corn price in Mato Grosso increased from R$ 12.82 per sack two weeks ago (approximately US$ 2.45 per bushel) to R$ 13.45 per sack last week (approximately US$ 2.60 per bushel). During the same week last year, the corn price in Mato Grosso averaged R$ 10.22 per sack (approximately US$ 2.10 per bushel.

As a result of improved prices and governmental action directed at supporting the corn price, farmers in the state have accelerated their corn sales. Imea now estimates that 79% of the 2014 corn crop in the state has been sold, which is 6% ahead of last year's selling pace. From September to October, corn sales increased 20% compared to two months earlier and corn sales are now at the fastest pace since March.