Mar 27, 2012
Excellent Soybean Prices Encourages Rapid Selling in Brazil
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The soybean harvest in Mato Grosso is approximately 95% complete and it is expected to be 100% complete within several weeks. In the large soybean producing municipalities such as Sorriso, Lucas do Rio Verde, and Sinop, the harvest is complete and farmers have turned their attention to planting their safrinha corn crops.
They have also taken advantage of the near record soybean prices to quickly sell their 2011/12 production. The Mato Grosso Institute of Agricultural Economics (Imea) estimates that statewide approximately 80% of the 2011/12 soybean production has already been sold. The percentage is even higher in western and central Mato Grosso where approximately 85% and 83% of the 2011/12 crop has been sold respectively.
These excellent prices have also encouraged Brazilian farmers to start forward contracting their 2012/13 production as well. According to reports in Brazil, 20% to 25% of the anticipated 2012/13 soybean production in Mato Grosso has already been forward contracted for delivery in May of 2013. The pace of forward contracting has accelerated over the last two weeks as soybean prices continued to strengthen. Forward sales are also reported to be brisk in western Bahia as well.
These two areas, Mato Grosso and western Bahia, are characterized by very large soybean operations, which are usually more aggressive in forward contracting their production compared to smaller producers in southern Brazil. These large producers execute the forward contracts with multinational grain companies in exchange for the needed inputs to plant their 2012/13 soybeans.
Reports are that some of the forward contracts are in the range of R$ 46.00 per sack of 60 kilograms for delivery in May of 2013. While these are good prices, they are not at record levels, but they are certainly good enough to cover the cost of pSroduction. Since soybeans are priced in dollars, but paid in Brazilian reals, farmers are hoping for a further weakening of the Brazilian currency in comparison to the U.S. dollar.
When the local currency weakens in comparison to the U.S. dollar, Brazilian farmers put more money in their pocket each time they sell a sack of soybeans. For example, if the price of soybeans was US$ 13.00 per bushel, they would pocket R$ 48.60 per sack if the exchange rate was 1.7 reals per dollar. If the exchange rate was 1.8 per dollar, they would pocket R$ 51.50 per sack and R$ 54.40 per sack if the rate was 1.9 per dollar.