Jan 19, 2010
Brazilian Soybean Farmers Must Watch Prices And The Currency
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Soybean farmers in Mato Grosso are watching their margins shrink due to a drop in soybean prices and a strengthened Brazilian currency. The actual soybean price today is about the same as it was one year ago, but the big difference is the value of the Brazilian currency. In January 2009, the Brazilian currency was trading at 2.30:1 compared to the U.S. dollar. In January 2010 it is trading at about 1.75:1. Anytime the Brazilian currency strengthens, it is exactly the same as a decrease in soybean price as far as Brazilian farmers are concerned. The problem for Brazilian soybean farmers is two fold, a stronger currency and a drop in soybean prices.
According to AgRural, about half of Mato Grosso's soybeans have been priced (nationwide approximately 25% of Brazil's soybean crop has been priced). For those farmers who have not priced their soybeans, the best possible scenario would be for soybean price to increase and the Brazilian currency to weaken. The worst possible scenario would be for the soybean price to fall and the Brazilian currency to strengthen. Brazilian farmers would be better able to market their crop is the value of the currency at harvest time was the same as when the crop was planted. Unfortunately, the pattern in recent years is for the currency to strengthen between the time the crop was planted and harvested.
In the municipality of Sorriso, located in north-central Mato Grosso, a sack of soybeans (60 kilograms) last year sold for R$ 37.50. Today, a sack of soybeans is selling for R$ 29.00. In Primavera do Leste, located in southeastern Mato Grosso, a sack of soybeans sold for R$ 41.00 last year and today it is selling for R$ 31.00.
The one encouraging thing for Brazilian soybean farmers was the fact that it cost less to plant their 2009-10 crop due to a drop in fertilizer prices. Unfortunately, some of those savings are now being eaten up by increased costs to control soybean rust and insect pests. In the midst of record soybean production in both North America and South America, it appears that soybean margins will continue to be pressured in Brazil.