October 24, 2012

Brazil's 2012/13 Soy Crop 47% Sold vs. 31% Last Year

Brazilian farmers have been very aggressive in forward contracting their 2012/13 soybean crop, but with the recent decline in soybean prices, farmers have basically stopped contracting any more of the anticipated crop.

Nationwide, it is estimated that 47% of the 2012/13 soybean crop has already been negotiated, which is 16% more than last year. Forward contracting is more commonly practiced in central Brazil where soybean producers generally have very large operations. In southern Brazil where the farms are much smaller than in central Brazil, an estimated 35% of the 2012/13 soybean crop has been sold.

In Sorriso, Mato Grosso, which is the largest soybean producing municipality in Brazil, it is estimated that 60% of the 2012/13 crop has been forward contracted and that is not expected to go any higher until farmers are more certain of their production. If farmers contract more than 60% of their anticipated production, they run the risk of not having enough soybeans to fulfill the contract if they run into adverse weather during the growing season.

Most of the forward sales in Sorriso were done in July and August in the price range of R$ 42 to R$ 43 per sack of 60 kilograms. By the end of August, the prices had increased to R$ 54 per sack and a few more soybeans were conducted. No further sales are anticipated until the harvest of the new crop starts early next year.

In Campo Novo do Parecis, which is located in western Mato Grosso, half of the anticipated soybeans were contracted by the end of August at prices in the range of R$ 48 to R$ 60 per sack. In recent days, the soybean price fell back to R$ 40 to R$ 42 per sack.

Farmers have also sold nearly all of their 2010/11 production as well. It is estimated that only 3% of last year's crop is still available in Mato Grosso and 8% to 10% of the crop in Parana2 is available. For farmers still waiting to sell their 2010/11 crop, pricing opportunities may be at a discount to the international price because the soybean export season has basically ended in Brazil. The last vessel loaded with soybeans has already departed from the Port of Paranagua and any new shipments probably will not begin until next February. That leaves only the domestic crushers to bid for soybeans, but most of them have closed down earlier than normal for their annual maintenance due to a lack of soybeans.