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September 13, 2018

Planting of the 2018/19 Soybean Crop underway in Parana, Brazil

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

Farmers in Parana, which is Brazil's second largest soybean producing state, started planting their 2018/19 soybean crop as of this past Monday, September 10th with the end of the soybean-free period. Rains during late August and early September increased the soil moisture to the point where farmers were confident that the soybeans would germinate and an adequate stand would be established.

Farmers are concerned about the increased cost of producing their soybeans especially if they did not pre-purchase much of their inputs. More than 70% of Brazil's fertilizers and most of the agricultural chemicals are imported and those prices have generally been increasing due to the devaluation of the Brazilian currency. Since the beginning of 2018, the Brazilian currency has devalued approximately 25% making imports more expensive.

Another concern for farmers is the much higher freight rates compared to just a few months ago. In order to end the crippling truck driver strike at the end of May, the government agreed to freight rate increases of 20-40% and in some cases a 100%. Those rates increased another 5% earlier this week due to increases in diesel fuel prices. The constitutionally of the law establishing the higher minimum rates is being challenged in the Brazilian Supreme Court, but a decision is not expected until at least November. Farmers are concerned that the higher freight rates will be reflected in lower prices paid for their grain.

Forward contracting of the 2018/19 soybean crop has been slow due to the uncertainly concerning freight rates. Future contracts for soybeans have been in the range of R$ 80.00 to R$ 81.00 per sack (approximately $9.00 to $9.10 per bushel).

Farmers in Parana have just recently finished harvesting their 2017/18 safrinha corn crop. Corn yields were disappointing especially for the corn that was planted after the ideal planting window closed at the end of February. A prolonged period of dry weather in April and early May resulted in up to a 50% reduction in late planted corn yields and a 20% reduction in yields for the earlier planted corn.

Domestic corn prices in Parana have been strong due to the reduced supply. Current corn prices in Parana are in the range of R$ 32.50 per sack (approximately $3.65 per bushel). This represents a 30-35% increase compared to corn prices a year ago that were in the range of R$ 19.00 to R$ 21.00 per sack (approximately $2.75 to $3.00 per bushel).