Oct 19, 2010
Mato Grosso Farmers Have Already Sold 40% of Their Soy Crop
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
In contrast to the slow start in planting their 2010/11 soybean crop, the farmers in Mato Grosso have been aggressively forward selling their anticipated soybean production. According to the Mato Grosso Institute of Agricultural Economics (Imea), approximately 40% of the 2010/11 soybean crop in the state has already been sold. The fastest forward selling is occurring in the western part of the state where the rainfall has been more widespread. The slowest selling is occurring in the north-central part of the state where many farmers are still waiting for enough rain to start planting.
Even though soybean prices on the Chicago Board of Trade have increased significantly in recent months, the continuing strengthening of the Brazilian currency in comparison to the U.S. dollar has compensated for some of the price increases. Currently the Brazilian real is trading at 1.66 vs. the U.S. dollar. Since Brazilian soybeans are sold on the international market in dollars, every time the Brazilian currency strengthens compared to the dollar, Brazilian farmers put less money in the pocket for each sack of soybeans that they sell.
The continued strong Brazilian currency means that Brazilian farmers do not see the same price for their soybeans as do American farmers. They receive a lower price for their soybeans compared to American farmers.
The Brazilian currency started to strengthen compared to the U.S. dollar in the mid-2000's. Prior to that, the Brazilian currency had always weakened compared to the dollar and when that was the case, Brazilian farmers received a higher price for their soybeans compared to American farmers. As a result, soybean acreage exploded in Brazil during the 1980's and 1990's. Soybean expansion in Brazil during the 2000's has been much less and one of the primary reasons has been the strengthening Brazilian real.