(Agrimoney) – The recovery in soybean prices has removed the prospect of Brazilian farmers cutting sowings of the oilseed for the first time in a decade, with plantings now expected to rise, in part at the expense of main-crop corn.
The rise in Chicago soybean futures, until Monday, has helped lift prices in Brazil too, with values in the port of Paranagua ending last week pegged by Cepea at R$70.38 per sack (equivalent to roughly $10.30 a bushel) up more than 6% from mid-June.
“In late June… domestic prices stsarted increasing, nearing the highest levels this year,” said Cepea, the research institute linked to Sao Paulo University, noting the weakness of the real and the “good pace of Brazilian exports”, besides the rally in Chicago.
The rise in prices has, in offering farmers extra incentive to sow the oilseed, quashed ideas of an end to a long trend of rising soybean plantings which has entrenched Brazil as the world’s second-ranked soybean producer, and seen it challenge the US as the top exporter.
‘Pencil in a profit’
“When prices were at their lowest point earlier in the year, some analysts in Brazil were predicting a decrease in soybean acreage in 2015-16 for the first time in a decade,” said Michael Cordonnier, the influential row crop analyst and South American crop-watcher.
“Those estimates have now been revised higher.
“Most analysts are now expecting the soybean acreage in Brazil to increase in the range of 1-5% in 2015-16,” which would take them to a fresh record high.”
Farmers can “now pencil in a profit on their soybean production if the weather co-operates”, he said.
‘Could favour soybeans’
Brazilian growers still have some two months yet before starting soybean plantings, although sowing decisions will need to be made earlier, with some area expected to come at the expense of corn, which is earlier planted, and for which seedings prospects have been undermined by the relatively high cost of growing the crop.
Indeed, the International Grains Council has highlighted the potential for the higher interest rates offered by the latest harvest plan to deter some growers from corn, which has higher fertilizer needs than soybeans.
“Given the higher rate of borrowing for subsidised loans, and with crop production costs higher in general, this could favour soybeans in 2015-16,” the council said.
The harvest plan, worth some $60bn overall, offers interest rates of 7.75% to medium-sized growers and 8.75% for larger farmers, compared with an average lending rate of 6.5% in 2014-15, although still well below central bank’s financing rate of more than 13%.
‘Accelerate input purchases’
Growers in central Brazil will also likely increase soybean sowings through converting further area from pasture, Dr Cordonnier said, adding that “there will be a limited amount of new land cleared for soybean production in north eastern Brazil”.
The increased appetite for soybeans bodes well for encouraging farmers to end the hold-out in farm spending on inputs, which has been lagging significantly.
“Up until recently, Brazilian farmers have been cautious in making the purchases of inputs due to a lack of credit, higher cost for the inputs such as fertilizers, and uncertainty about future commodity prices,” Dr Cordonnier said.
“Some of those uncertainties have now been removed and it is expected that Brazilian farmers will accelerate their input purchases in preparation for the new growing season.”
