Apr 16, 2020

USDA Expects Brazil's Soy Acreage to Increase 4% in 2020/21

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

The USDA is expecting the 2020/21 soybean acreage in Brazil to increase 4% to 38.5 million hectares (95.0 million acres). They are estimating the 2020/21 soybean production at 129 million tons compared to their current estimate of the 2019/20 crop at 123.0 million tons.

During the last five years the increase in Brazil's soybean acreage has averaged 2.5%. The bigger increase in 2020/21 is being attributed mainly to a weaker Brazilian currency that has resulted in record high domestic soybean prices in Brazil.

The demand for Brazilian soybean is expected to remain robust both domestically and internationally in spite of the Covid-19 pandemic. Brazilian meat exports are expected to remain strong due to record exports especially to China. As a result, domestic soybean meal demand will remain strong due to increased livestock production. Additionally, China's hog numbers are rebounding now that the African swine fever is essentially controlled and that should result in increased soybean imports from Brazil.

In past years, when international soybean prices were high, Brazilian farmers increased their soybean acreage by as much as 8 to 10% annually, but there is a big difference this time around. Domestic soybean prices are very high in Brazil due mainly to a historically weak Brazilian currency and not because of high international prices for soybeans. In fact, the international price of soybeans is actually quite weak.

Therefore, Brazilian farmers must be cautious because the current high domestic soybean prices are being propped up due to the currency exchange rate and that exchange rate could change going forward.