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September 19, 2014

Only 10% of 2014/15 Soybean Crop in Brazil has been Sold

The earliest planted soybeans in western Parana are already emerging indicating an early start to the 2014/15 soybean growing season in Brazil. Most analysts believe that an early start favors an even bigger increase in soybean acreage than already anticipated along with the possibility of very good soybean yields if the weather cooperates during the growing season.

Estimates by the state agencies in Mato Grosso, Parana, and Rio Grande do Sul, which are the top three soybean producing states in Brazil, indicate that the soybean acreage in each state will increase 4.3%, 3.0%, and 2.8% respectively. Conab is estimating that the total Brazilian soybean acreage will increase 5% in 2014/15 to 31.62 million hectares and the 2014/15 soybean crop in Brazil will be 95.0 million tons. Private estimates for the 2014/15 Brazilian soybean crop range from 91.0 million tons to 98.0 million tons compared to the 86.7 million tons produced in 2013/14.

Even though they are expecting a big soybean crop, Brazilian farmers have been slow to forward contract their anticipated 2014/15 soybean production due to low prices and the possibility of a weaker Brazilian currency going forward.

Market analysts Flavio Franca Junior from Safras e Mercardo, estimates that approximately 10% of the 2014/15 soybean crop in Mato Grosso has been forward contracted compared to 38.5% last year at this time. Nationwide, he estimates that 10% or less of the 2014/15 crop has been sold which is significantly behind the 22% sold nationwide last year at this time. In addition, farmers are still holding soybeans from the 2013/14 crop as well. Estimates are that 8.7% of the 40.9 million tons of soybeans produced in the states of Mato Grosso and Parana have yet to be sold or a total of 3.6 million tons.

One reason why they are slow to contract their anticipated soybean production is that the Brazilian currency is expected to weaken compared to the U.S. dollar. Since soybeans are priced in dollars but paid in the local currency, any weakening of the Brazilian currency means that farmers will put more money in their pocket for every sack of soybeans they sell. A weaker currency is exactly the same for Brazilian farmers as a price increase. Therefore, the longer they wait to sell their soybeans, the greater the possibility that they will be able to sell the soybeans for a better price.