May 18, 2020

Brazilian Farmers Sold 80% of 19/20 Crop and 28% of 20/21 Crop

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

Brazilian farmers have sold 80.6% of their 2019/20 soybean production compared to the average of 60% for this time of the year and the prior record of 67% set in 2016, according to the consulting firm DATAGRO. Farmers have also forward contracted 28.2% of their anticipated 2020/21 soybean production compared to the average of 6.7% and the prior record of 12% set in 2016. Farmers will start planting their 2020/21 soybean crop in September.

Farmers have also been aggressive sellers of the 2019/20 full-season corn production in southern Brazil. They have sold 66.4% of their full-season corn compared to 47% average. Farmers have also forward contracted 56% of their safrinha production compared to 44% last year and 42% average. The safrinha corn harvest is expected to start in Mato Grosso in early June.

Flavio Roberto de Franca Junior from DATAGRO explained that the devalued Brazilian currency was the main driving force behind the aggressive sales. At one point last week, the value of the Brazilian currency fell to 5.9 reals per dollar and it could fall even further as Brazil enters a steep economic decline caused by the Covid-19 pandemic.

Most analysts in Brazil are advising their farmer clients to sell as much of their old crop and new crops as possible to take advantage of these historical high prices because they cannot last forever.

In an effort to combat the economic decline, the Brazilian Central Bank is expected to continue lowering interest rates which makes the Brazilian currency less attractive compared to the dollar. The future value of the Brazilian currency is very uncertain with some analysts predicting it could fall to 6.3 to the dollar within a few weeks while others are predicting it will strengthen to 5.0 to the dollar by the end of 2020.