Brazil’s soybean sowings will beat the most pessimistic official forecasts, government scouts believe, with currency weakness meaning Chicago prices would have to hit an eight-year low before farmers were at risk of losing money.
Marcelo Fernandes Guimгres, deputy director of the department of economic studies at Brazil’s agriculture ministry, told the Food Outlook Conference that the government was expecting a 1.7% rise in domestic soybean sowings for 2015-16, to 32.6m hectares.
However, that figure – at the bottom end of the range of 32.6m-33.2m hectares forecast by the official Conab crop bureau – could well end up being revised upwards, to judge by on-the-ground reports.
“Colleagues returning from the field, they are much more optimistic,” Mr Guimгres said, flagging the potential for a rise in plantings of some 2.2-2.5%, and the prospect of an upgrade to the official harvest forecast too.
There was “room for an increase in terms of a move in the production level”, currently forecast at a record 100.1m tonnes.
The comments contrast with some concerns over dryness in major central producing areas including Mato Grosso, the top producing state, although latest data there signalled farmers planting despite less-than-ideal sowings conditions.
Imea, the state’s farm research institute, last week pegged plantings at 14.3% complete, up from 6.1% the previous week, and ahead of the 9.3% seeded a year before.
Farmers are being encouraged to plant by the weakness of the real, which has protected local prices from the weakness in the international market, denominated in dollars.
Indeed, soybean prices could fall to $7-7.50 a bushel and it would “still be profitable for Brazilian farmers” to plant the oilseed, Mr Guimгres told the conference, run by Amis, the agricultural information group set up in 2011 by the G20 group of leading nations.
Chicago soybean futures have not traded at $7.50 a bushel, or below, since May 2007.
US vs Brazilian costs
The margin for Brazilian soybean growers contrasts with the slim pickings facing US farmers, who lack the cushion provided by a weak currency.
Indeed, weakness in Chicago grain futures is attributed in part to the strength of the dollar, which makes dollar-denominated exports less affordable for buyers in other currencies.
Separately, Seth Meyer, chairman of the US Department of Agriculture’s world agricultural outlook board, said that, for corn, prices were “at, near or below the cost of production for US producers”.
However, Mr Guimгres also highlighted that Brazilian farmers are, to protect profitability, scrimping on inputs which, being largely imported, are linked in price to the dollar, and so become less affordable as the real devalues.
Brazilian fertilizer sales had fallen in the January-to-August period by some 6.4% to 18.6m tonnes, the first decline in these months since 2007.
Rural credit disbursements in the first nine months of the year had dropped by 6.8%, the first decline in a decade.
Furthermore, Mr Guimгres flagged the potential threat to southern Brazilian producing states from excessive rains – conditions which looked like being encouraged by the El Nino.
“In the second most important [producing] region for soybeans, we are very concerned about the possibility” of inundations continuing, he said.
(Source – http://www.agrimoney.com/news/brazilian-officials-optimistic-on-soybean-sowings–8914.html)