WASHINGTON, D.C., U.S. — Brazil’s 2015-16 soybean production is forecast at a record 98.5 million tonnes, despite the slow planting start for the second year in a row in the center-west region, according to a report from the U.S. Department of Agriculture’s Foreign Agricultural Service (FAS) released on Oct. 29. The export forecast was increased to 55 million tonnes due to the high pace of commercialization and the weaker Brazilian real. Domestic soybean crush is forecast at 40 million tonnes to meet biodiesel mandates by the Brazilian government and the slight growth by the animal feed sector.

The production forecast is increased to a record of 98.5 million tonnes despite the slow planting start (for the second year in a row) in the center-west region. The slow start is due to hot and dry weather. The planting  area increased to a record 33 million hectares. The change in forecast is a result of area increases (compared to last year) in the states of Mato Grosso (3%), Parana (4%), Rio Grande do Sul (2%), Bahia (15%), and Goais (4%), which are opting to add degraded pasture areas for soybeans or choosing to plant soybeans over corn as a first crop.

Nationally, it is estimated that about 20% of the forecast area has been planted, much slower compared to the 30% average of the last five years. In Mato Grosso, the most important soybean producer state, about 20% was planted as of Oct. 21, about the same during the same time last year but about 30% behind the five-year average. The state of Goais has also suffered from dry and hot weather in October, which has prevented farmers from increasing the pace of plantings. In Goais for example, only 6% has been planted compared to the five-year average of 38%. In contrast, the southern states, mainly Paraná, the second largest soybean producer in Brazil, have benefited from early rains. It is estimated that 57% of the soybeans have been planted as of Oct. 21 compared to the 47% five-year average.

At this point, the late plantings should not have a major impact on crop yields as long as the weather improves for the rest of the growing season. To that end, rains are forecast in the center-west for the last week of October. The window of opportunity to plant soybeans is still good, but if plantings are delayed much more, the situation can impact farmers planning to plant a second crop (safrinha) with corn.

Some of the biggest news in 2015 in Brazil has been the sharp devaluation of the Brazilian real. Since the beginning of the year, the real has depreciated about 48% against the dollar. However, the real depreciation has been compensating farmers by effectively increasing domestic soybean prices and making Brazilian soybeans more competitive in the export market. All this is happening despite the relative lower global soybean prices.

For example, the average monthly soybean price in the state of Paraná has increased by 31% since January. In October, the price averaged about R$78.13 per 60 kilos ($20.03), the highest price since September 2012. The higher domestic prices are creating an interesting dynamic in Brazil. The higher soybean area in Brazil is a result of farmers opting to switch from full-season corn to soybeans in the southern states in Brazil. In addition, farmers in the center-west are also converting degraded pastures to new soybean areas. In regions like MATOPIBA (the area where the states of Maranhão, Tocantins, Piaui, and Bahia meet), some farmers are switching cotton areas for soybeans, particularly in Bahia, and others are clearing new land (even though the rate has slowed down due to the higher costs of production).

The export forecast was increased to 55 million tonnes for the 2015-16 marketing year. The increase is due to the high pace of commercialization and the weaker real expected for the rest of 2015 and through 2016. In Mato Grosso alone, commercialization of the new crop is at 48% as of October, compared to 16% in the same month last year.

Brazilian farm inspectors ended their two-week strike in early October, which brought relief to the sector by lifting the threat to the free flow of soybean exports. All soybeans (and grains) exports require certificates issued by farm custom inspectors. The strike, however, did not significantly affect soybean and corn shipments. As a result, Brazil is expected to continue to export record amounts in the current and upcoming marketing year.