WASHINGTON, D.C., U.S. — Brazil’s 2015-16 soybean production is expected to reach a record 98 million tonnes, the U.S. Department of Agriculture’s (USDA) Foreign Agricultural Service (FAS) said on Jan. 27.

Area planted for soybeans is estimated at 33 million hectares. The dry and hot conditions late last year in Mato Grosso and other states in the center-west and northeast of Brazil raised concerns about yields of the early planted soybeans. However, favorable rains in January have lessened the anxiety in some areas and should help with the progress of re-planted soybeans or late planted soybeans in areas in the northeast.

The volatile weather in Brazil continues (and will continue) to be the story for the 2015-16 soybean season. The Seasonal Climate Prediction Working Group of the Ministry of Science, Technology and Innovation released in early January the weather forecast for the months of February through April. The forecast confirmed the strong influence of El Niño in Brazil. According to the report, rains will slow down in the semiarid areas of Brazil’s northeast, but an increase in precipitation is expected for the south and southeast regions.

In Mato Grosso, the rains arrived too late in the north and northeast regions of the state and early planted soybeans were affected. In the other regions of the state, crops are developing satisfactorily and without major problems. The return of the rains in early January, especially in the center part of the state, should help the areas that were replanted or planted in late October and into November of last year.

In the south, mainly Rio Grande do Sul and Parana, despite heavy rainfall recorded throughout November and December, the crop conditions are reported to be favorable. The main concern so far has been the lack of sunshine due to the persistent wet weather, but it is hard to know the impact on yields at this point.

After the reported dry weather conditions during November and December, the harvest season has started in some areas of the country; however, rains have slowed down the pace. As of the week of Jan. 25, it is estimated less than 2% of the forecasted area nationwide has been harvested, compared to 3.5% last year and 2% for the five-year average.

The 2015-16 market year soybean exports are forecast to reach 55 million tonnes, a record. The expected demand in China and the strong dollar will continue to incentivize exports. The dollar appreciated close to 40% in relation to the Brazilian real (BRL) in 2015 and it is not expected to recover in the first half of 2016, making exports lucrative for producers despite low global prices. In addition, the strong forward contracting of the last six months in Brazil is another indication of the desire for producers to take advantage of the export market.

For the 2014-15 market year, the report increased its estimate to 54.25 million tonnes based on trade data and the strong dollar in relation to the BRL. China was the main destination of the Brazilian soybean exports, with close to 75% of the total exports.

It is important to note that out of the total soybean exports in 2014-15 market year, about 12.6 million tonnes or 23% were exported out of the ports of the so-called Arco Norte (Northern Arc). That is a 21% jump compared to last year. The ports of the Northern Arc (above the Parallel 16 south) are Ilhéus (state of Bahia), São Luis (Maranhão), Itacoatiara (Amazonas), and Barcarena and Santarém (Pará).

According to the Brazilian Food Supply Company (CONAB), linked to Brazil’s Ministry of Agriculture, the expansion of the flow of grains and oilseeds through these ports in 2016 will continue to increase and will likely reduce freight costs by $50 per tonne.

The report increased its domestic crush forecast for 2015-16 market year to 40.2 million tonnes and its 2014-15 market year estimate to 40 million tonnes, as a result of higher domestic and export demand.

Soybean meal production increased in 2014-15 and is expected to slightly increase in 2015-16 as a result of the higher demand by the poultry and pork sectors. Soybean meal is the second largest animal feed ingredient in Brazil. Soybean meal exports also increased in 2014-15 market year as a result of higher demand by Indonesia, Vietnam, and Thailand. Soybean oil is also contributing to the higher soybean crushing demand as a result of the higher domestic production of biodiesel.