July 24, 2007

 

Analysts forecast Brazil to plant more soybeans in 2007/08 crop season

 

 

Brazilian agribusiness consultancy, AgRural, will release its planting intention's estimate for the new 2007/08 soy crop today (July 24), with "no surprises" expected, said Fernando Muraro, AgRural's senior commodities analyst.

 

"There's not going to be any big surprises with Brazil's soy area for next year," Muraro told Dow Jones Newswires.

 

Brazil plants soy in October. Most estimates suggest Brazil will plant between 5 percent and 9 percent more soybeans in the 2007/08 season. High soybean prices on the Chicago Board of Trade, pushing near US$9 a bushel for 2008 contracts, are good news for Brazil. But high production costs and an unfavourable exchange rate between the US dollar and Brazilian real means Chicago has to push higher for soy to be a better return on investment than other crops.

 

Heavy debts in the centre-west and better returns from corn and cotton will make soy a hard sell in many areas throughout Brazil, said Anderson Galvao Gomes, a senior commodities analyst for competing consulting group, Celeres.

 

"Corn and cotton are providing better returns for farmers right now and likely into the near future," Gomes said.

 

"Farmers will be spending the next few months figuring out production costs and seeing which crop is going to return more for their investment," Gomes said. "Soy isn't one of the leaders."

 

Celeres will release its planting intentions estimate on August 6. So far, Gomes said he expects Brazil to increase planted area to 22.8 million hectares from the 20.8 million hectares in the 2006/07 crop. Brazil planted 23.4 million hectares in 2004/05. Area has been shrinking over the last two years because of a weak dollar, high production costs and a general liquidity crunch on Brazilian farms in the centre-west.

 

"The growth in Brazil's soy fields is not going to be as optimistic as most people are thinking and surely will not make up for the cut backs made in US soy fields," said Fabio Meneghin, a soy and corn analyst for Agroconsult.

 

US farmers are planting more corn than soybeans in order to feed local ethanol demand. The US makes ethanol, a biofuel, from corn.

 

Meneghin said Agroconsult's figure puts the number closer to 5 percent growth in 2007/08. Agroconsult's planting intentions report is currently circulating among clients and will be released to the press in August.

 

Meneghin said farm debt and lack of credit was the biggest inhibitor to growth.

 

Flavio Franca, a senior analyst at Safras & Mercado, agreed. He said that the growth will be closer to 5 percent.

 

"Even with Chicago soybean prices above historic averages, the dollar keeps cutting those gains," Franca said. The dollar is currently trading at BRL1.84, down from Friday's close of BRL1.86.

 

"Argentina and Paraguay will have more favourable conditions to increase planted area, but it won't be as much as people are expecting," Franca said. "That's just a hunch."

 

Brazil is the world's No. 2 soy producer behind the US.