WASHINGTON, D.C., U.S. — A record Brazilian soybean crop of 101 million tonnes is forecast for the 2016-17 marketing year as a result of a slight increase in planted area, the U.S. Department of Agriculture’s Foreign Agricultural Service (FAS) said in a Oct. 3 report.
Brazil is forecast to have the slowest area growth in the last five years, attributed to a higher expected cost of production, tight credit policies, higher interest rates, the economic downturn, and soybean areas shifting back to full-season corn, according to the report.
Although low global soybean prices continue to be a concern for Brazilian producers, the volatility of the Brazilian real may either help producers or put them in a difficult situation, the FAS said. Last year, the Brazilian real devaluation of more than 40% pushed domestic soybean prices up to record levels. The Brazilian real has stabilized since August. However, analysts expect the Brazilian real to devalue by the beginning of 2017, right at the start of the harvest. If this materializes, it may push domestic prices up again in Brazil. Since soybeans are priced in U.S. dollars in the international market, the weaker exchange rate may increase domestic soybean prices (more reals per U.S. dollars) and cushion the overall decrease in global prices.
Crush for market year 2016-17 is forecast at 41 million tonnes to meet the increased biodiesel mandate and demands from the animal feed sector, the FAS said. The higher forecast compared to the previous market year is a result of a slight recovery expected for the Brazilian economy in 2017, the higher biodiesel blending mandates, which will be implemented beginning in March 2017, and stronger demand by the domestic animal sector and the export markets.
As a result of lower available supplies, the report reduced its market year 2015-16 export forecast to 52 million tonnes. In the first four months of the 2015-16 marketing year, Brazil was on its way to hit record exports due to high demand from China. In addition, the relatively weaker Brazilian real pushed domestic prices to record levels, which accelerated the pace of exports to the highest in three years. However, since August 2016, lower available supplies due to weather problems affecting the crop, slowed down the export pace to the lowest since market year 2013-14, according to the FAS.