“With the domestic prices in the last few months, farmers have been waiting for market signals triggered by the progress of the U.S. crop or political developments in Brazil,” the USDA noted in its report. “As the real has depreciated in the last couple of months, sales picked up and strong exports are expected in the next few months. Brazil already exported 33.9 million tonnes, about 11.5% higher compared to the same period last year.”
The report forecasts the 2017-18 soybean production at 105 million tonnes, down about 8% from production of 114 million tonnes in 2016-17.
“The 2016-17 soybean season in Brazil was almost perfect in terms of production,” the USDA said. “The low incidence of pests along the crop cycle, good rainfall distribution in most of the country, and increased investment in technology, contributed to record yields by a large margin.”
About 60% of the 2016-17 soybean production has been contracted, which is 15% lower compared to the previous season, the report said. Producers are still waiting for “external factors that can impact the domestic price situation.”
“With the current market price levels in Brazil, many farmers can lose money or barely breakeven,” the report said. “Many farmers are betting for weather issues during the U.S. soybean season, which can impact international prices, but most importantly, many are watching closely the political situation in Brazil. As the political volatility continues, the impact on the Brazilian real can be significant. Since the beginning of the year, the Brazilian real has depreciated 6%, in turn increasing domestic prices of soybeans, which are priced in U.S. dollars in the international market.”
Soybeans remain the country’s primary oilseed, with 42.5 million tonnes of soybeans expected to be processed in market year 2016-17. In its report, the USDA indicated the higher forecast compared to 2015-16 is based on higher biodiesel blending standards and lower commodity prices.
“The higher blending mandate for biodiesel (B8) for the next year went into effect on July 1,” the report said. “It is expected to go up to B9 in 2018 and to B10 by 2019. The sector is currently asking for support to accelerate the increase of biodiesel mandate all the way to B15, but tests are currently being conducted before supporting any approval.”