Apr 05, 2017

Brazilian Farmers are Slow Sellers Hoping for Higher Soybean Prices

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

Farmers in Mato Grosso have essentially completed their soybean harvest and now they are focused on marketing their 2016/17 soybean crop and looking ahead to their 2017/18 crop.

The Mato Grosso Institute of Agricultural Economics (Imea) estimates that as of mid-March farmers in the state had sold approximately 61% of their soybeans compared to 66% sold in mid-March of last year. The average selling price thus far in the state has been approximately R$ 66.19 per sack or approximately $9.70 per bushel. This has allowed the framers to make a small profit per sack. The advantage this year compared to last year is that yields are very good and they have more soybeans to sell even though profit margins are very thin.

Many farmers have indicated that they will continue to be relatively slow sellers of their remaining crop in the hope of improved prices going forward. Nationwide, Brazilian farmers have sold 45% of their anticipated soybean production compared to 60% sold last year at this time. The hoped for improved price could result from a weather concern in the United States during the 2017 growing season, which could result in higher international prices for soybeans. Higher prices could also result from a weakening of the Brazilian currency, which would result in higher domestic prices. It remains to be seen if either of those factors will come to fruition.

Most farmers should be able to end the 2016/17 soybean growing season in the black due to the very high yields they achieved this year. It remains to be seen if their 2017 safrinha corn production will be profitable. Thus far, the growing conditions for the safrinha corn have been good as the early planted corn enters into pollination. Corn prices though have not been good and farmers have only forward contracted approximately 40% of their anticipated corn production as of mid-March compared to 80% in mid-March of last year. It is possible that farmers in Mato Grosso may be forced to sell their remaining corn at a loss.

Looking toward the 2017/18 soybean crop in Mato Grosso, Imea is anticipating that the cost of producing soybeans in 2017/18 will decline due to a stronger Brazilian currency, which lowers the prices for imported items such as fertilizers and chemicals. The Brazilian currency is currently trading at approximately 3.1 to the dollar compared to 3.6 last year at this time. If the cost of production actually decreases in 2017/18 it will be the first decrease in several years.

Imea is estimating that it would take an average selling price of R$ 55.71 per sack (approximately $8.16 per bushel) in March of 2018 for farmers in the state to cover their production costs. If that turns out to be the case, they would need to produce approximately 50.6 sacks per hectare (44 bu/ac) to cover their production costs.