South America Calling

There is a strong consensus among local analysts that Brazil will once again plant more soybean acres in 2015-16.

With the recent devaluation of the Brazilian real turning projected margins positive, farmers will switch areas from corn that will compensate for any reduction in planting on marginal lands.

Celeres, a local farm consultancy, was the latest to forecast rising area, on Monday predicting a 2.3% increase to 79.5 million acres. Two weeks ago, Safras e Mercado, another local forecaster, predicted area would grow 3.8%.

A depressed price outlook and rising costs had led many to forecast in the first half of 2015 that area would decline -- for the first time in nine years -- or stay pat. But an 11% devaluation of the Brazilian real against the dollar since mid-June, which took the overall devaluation since the start of the year to 21%, means that farmers can now expect to make a small profit from soybeans in 2015-16 and forecasters are now nearly unanimous that area will grow.

Mato Grosso farmers can expect to make R$122 per hectare ($14.31 per acre) in 2015-16, down from R$535 per hectare ($62.78 per acre) last year but still much better than expected, according to the Mato Grosso Agricultural Economy Institute.

With summer corn showing worse margins in the south and southeast, farmers will simply plant soybeans.

As a result, output will rise and could reach 100 mmt, if yields are good -- estimates range from 97 mmt to 100 mmt.

Limited access to credit was seen capping area growth as the Brazilian economy plumbs the depths of recession. But credit appears not to be as sparse as first as farmers are well capitalized, the government is making an effort to maintain official credit levels and barter and swap deals have become more common. Farmer crop input purchases have been strong over the last couple of weeks.

Overall, with the start of planting around six weeks away, it now looks fairly clear that the Brazilian soybean juggernaut will continue to roll forward.

(CZ)

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