September 10, 2013

Farmer Selling in Mato Grosso Continues Slower than Last Year

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

According to the Mato Grosso Institute of Agricultural Economics, (Imea), farmers in the state have sold 31% of their anticipated 2013/14 soybean production. This represents a deficit of 27% compared to the 58% sold last year at this time. The biggest delay in forward selling is in the central part of the state which is 32% behind last year while the southern regions are only 15% behind last year.

Farmer sales had picked up during August as soybean prices increased and the Brazilian currency weakened, but recent strengthening of the currency has made farmers cautious. Farmers will be closely watching the currency for clues as to when to make further sales.

Starting in May, the currency began weakening compared to the U.S. dollar which for Brazilian farmers is the same thing as a price increase when they sell their commodities. The currency reached its weakest point on August 21st at 2.45 per dollar, which represented a loss of 21% compared to a year earlier. Since then, the Brazilian government has intervened to strengthen the currency and it now stands at 2.28 to the dollar or 12.6% less than a year earlier. The rapid fluctuation of the currency has made farmers cautious in making further sales.

At the current price, soybean production is profitable in Mato Grosso, but the same cannot be said for corn production. A record large 2012/13 safrinha corn crop in the state has resulted in burdensome supplies corn prices below two dollars per bushel, which is significantly below the minimum price set by the government (approximately US$ 3.00 per bushel). The government has purchased approximately 4 million tons of corn at the minimum price, but since that is less than 25% of the total corn production in the state, it has not been enough to bring domestic prices up to the minimum.

If corn prices remain at these depressed levels until the end of the year, farmers in the state may reduce their safrinha corn acreage, which they will start planting in January. Safrinha acreage has been increasing steadily over the last several years as farmers take advantage of strong corn prices and last year the safrinha corn crop accounted for 56% of all the corn produced in Brazil.