South America Calling

In no desperate need of cash after five profitable harvests, Brazilian farmers aren't selling their soybeans, instead holding out for possible price rallies during the U.S. weather market.

With the Brazilian soybean harvest drawing to a close, farmers have sold 60% of their 2013-14 crop, down from 66% last year, according to Celeres, a local farm consultancy.

Sales remain in line with five-year averages but would have been lower were it not for crop losses. Dry weather in the south, southeast and Goias state meant Brazil produced just 86.1 million metric tons in 2013-14, according to the Agriculture Ministry, well below early estimates of 90 mmt, although still 5.6% higher than last year.

The losses meant despite slow trade in the three months since the harvest started, soybeans sales in Parana at 65% are still ahead of last year when 63% was sold. In contrast, sales in Mato Grosso, the No. 1 soy state, are well back on last year at 67% versus 80%.

Last week's highs on soybean futures in Chicago did raise some interest among Brazilian farmers but the recent strength of the Brazilian real has dampened that enthusiasm. Over the last couple of weeks, the real has been trading in a range of 2.20 to 2.25 to the dollar compared with 2.30 to 2.40 in February and March.

Farmers are betting there may be room for the real to weaken again as a hike in U.S. interest rates gets nearer, while they also see upside in soybean quotes if the U.S. produces anything less than a bumper crop.

However, there are limits to how long Brazilian farmers can hold stocks. The second-crop corn harvest will begin in June and growers will have to sell some soybeans from May onwards to make some room in the silos.

Markets are also about demand and the Chinese are far from active, redirecting Brazilian shipments to the U.S. in recent weeks. Indeed, weak Chinese orders prompted Abiove, the Brazilian soy industry association, to lower its Brazilian soybean export figure by 1 mmt to 43 mmt earlier this week.

Still, Brazilian farmers really can't complain with soybean prices in Mato Grosso 20% higher than at the same point last year.

(AG)

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