Jan 23, 2020

Mato Grosso Farmers have Sold 4.9% of their 2020/21 Soybean Crop

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

According the Mato Grosso Institute of Agricultural Economics (Imea), farmers in the state are taking advantage of strong soybean prices to sell part of their 2020/21 soybean crop that will be planted later this year. Imea indicated in their recent bulletin that farmers in the state have already forward contracted 4.9% of their anticipated 2020/21 soybean production and they have purchased 33% of their needed inputs for their 2020/21 crop.

It is a common practice in Brazil for farmers to calculate their costs based on how much soybeans they need to sell in order to purchase a product such as fertilizer, chemicals, a tractor or a combine. By calculating costs in such a manner, it accounts for currency fluctuations when imported products are priced in dollars such as fertilizers and chemicals.

Currently, farmers in Mato Grosso are paying the equivalent of 21 sacks of soybeans (18.6 bushels) to purchase a ton of 0-18-18 fertilizer, which is 11% less than last year when they started purchasing inputs for the 2019/20 crop. The reduced amount of soybeans needed to purchase the fertilizer could be due to higher prices for soybeans, lower prices for fertilizers, a stronger Brazilian currency, or all three.

Brazilian farmers want to take advantage of the current strong soybean prices given the uncertainty going forward surrounding the advance of African swine fever around the world and the recent Phase 1 accord between the U.S. and China. The fear is that the demand for Brazilian soybeans may soften if China lives up to its purchasing commitments or if the hog disease continues to spread.

Spot sales of soybeans last week in Mato Grosso were in the range of R$ 73.40 per sack (approximately $8.30 per bushel), which was a decline of 2.8% from the previous week.