South America Calling
Alastair Stewart South America Correspondent

Thursday 08/08/13

Ideas Forming on Brazil's Next Soy Crop

Forecasts for the next Brazilian soybean crop have started to appear over the last two weeks, demonstrating a rough consensus that planted area will grow around 5%, based principally on the fact that the oilseed will offer better returns than corn and the strengthening U.S. dollar that has boosted local prices in recent months.

Production in the 2013-14 season is pegged at between 85 million and 89 million metric tons (mmt), a jump on this season's output that most see at 81 to 82 mmt.

Forward sales of next-crop soybeans accelerated last month, according to Safras e Mercado, a local consultancy.

Farmers snapped deals on inputs in return for delivery of beans post-harvest amid concerns that fertilizer prices would rise later in the year. Also, prices for future delivery look attractive due to projections that the Brazilian real will weaken further during the next eight months.

Forward sales totaled 14.9 mmt, or 17% of the projected crop, higher than the five-year average of 15% for this time of year but well down from the 39% sold at the same stage of last year, said Safras e Mercado.

The tendency in the last couple of years has been for farmers to commit to sell beans much earlier. This has not happened this year, in large part because of uncertainty over logistics costs.

This year, Brazil's strained logistics descended into partial chaos and transport prices soared. The trading companies took the hit on the soy freight hike, which averaged around 20% year-on-year. They are not keen to take on this risk next year, which put the brakes on the forward sales market.

After a busy July, Safras & Mercado says business may slow in August due to the bearish impact of a large U.S. crop on prices.

Posted at 10:36AM CDT 08/08/13 by Alastair Stewart
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