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October 5, 2018

Brazil Farmers expecting at least $10/bu for their 2018/19 Soybeans

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The trade dispute between the U.S. and China has been good news for Brazilian soybean producers. Due to the huge demand from China, the premiums for Brazilian soybeans have remained very strong, which translates to strong domestic prices for Brazilian producers. As a result, some market analysts in Brazil feel that Brazilian farmers will be hesitant to sell their soybeans at anything less than $10.00 per bushel. How much that translates to in reals per sack in the Brazilian interior will depend on the exchange rate between the Brazilian real and the U.S. dollar. The exchange rate has been very volatile in recent weeks in the run up to presidential elections in Brazil on October 7th. The exchange rate rises or falls depending on the most recent poll numbers for the various candidates.

In a recent interview with Noticias Agricolas, analyst Liones Severo from SIMConsult, indicated that he felt there is a possibility that farmers in Brazil could sell their 2018/19 soybeans in the range of $10.00 to $12.50 per bushel. To sell at the higher end of the range several things would need to occur including: wet weather delaying the U.S. soybean harvest, potential lower U.S. soybean yields due to persistent wet weather, slow selling by American farmers due to low prices, Brazil essentially running out of soybeans before the new crop becomes available, further weakening of the Brazilian real, and most importantly, a lack of a trade deal between the United States and China and China's continued reluctance to purchase any soybeans from the United States.

Brazilian farmers feel they are in the driver's seat because China does not want to purchase soybeans from the United States while they are still in negotiations over tariffs. China has stated that they will reduce their imports of soybeans by using other sources of protein in their animal rations. But interestingly, there are reports that China has already booked soybeans from Brazil for December and January shipments in anticipation of an early start to soybean harvest in the state of Parana where the soybean planting is at a record fast pace.

Farmers in the state of Parana started planting their 2018/19 soybeans on September 11th and some of those soybeans will be ready to harvest by the end of December.

The anticipated demand from China for Brazilian soybeans is expected to support domestic soybean prices and encourage farmers in Brazil to increase their soybean acreage. Expectations are that Brazilian soybean farmers will increase their 2018/19 soybean acreage by 3-5% and that they will produce in the range of 120 to 123 million tons of soybeans in 2018/19 compared to 119.5 million tons produced in 2017/18.