August 17, 2007

 

High US dollar won't increase Brazil's soy planting area

 

 

Brazil's s soy farmers won't increase their planting areas because of the high dollar and the high soy prices, experts for the Brazilian soy market believe.

 

Instead, farmers use the favourable moment to sell soy from the 2006/07 and 2007/08 crops. The dollar operated above the 2.10 Brazilian reals barrier Thursday (August 16).

 

"Now is a good moment for soy producers to sell soy from their stocks and on the future market," Leonardo Menezes from agribusiness consulting firm, Celeres said. "But we still stick to our planting area projection," he added.

 

Celeste believes that Brazil's soy planting area will increase 5.4 percent for the 2007/08 crop, to 21.944 million hectares.

 

The planting area for the 2006/07 crop was 20.8 million hectares, shrinking from the 23.4 million hectares in 2004/05.

 

"The high prices and the high dollar lead to accelerated sales right now," Fabio Meneghin, a soy and corn analyst for Agroconsult, said.

 

"We have prices of US$9.17 a bushel for the May 2008 delivery, which is very high. But the soy farmers face many problems and therefore won't increase their planting area just because of the good moment," Meneghin said.

 

Prices for fertilizers increased dramatically over the last year, and with a higher dollar, these products now become even more expensive for Brazilian farmers, Meneghin believes.

 

And more, "With all this turmoil going on the international markets, farmers cannot take the risk to invest heavily now in order to expand their planting area - who knows what the dollar is going to be next year?"

 

Another problem is the soy farmers accumulated debts. "Even if the farmers wanted to expand their planting area on a big scale, they simply don't have the money to do it," Meneghin said.

 

For example, the average debt per hectare in Mato Grosso State, Brazil's No. 1 soy producing state, is BRL272 (US$129.12), according to the analyst.

 

Many farmers in Goias State, Brazil's fourth biggest soy producing state, are now planting sugar cane instead of soy, as it is more lucrative to do so.

 

Experts forecast the 2007/08 crop to hit 61.5 million tonnes, up 5.6 percent over the 58.2 million tonnes harvested in the 2006/07 crop.

 

Brazil's new 2007/08 soy crop has already been 15 percent sold as of Aug. 10, while the old crop, or 2006/07, has been 80 percent sold, Celeres said Monday.

 

This year's sale numbers are higher when compared to the same period in 2006, when only 8 percent of the then-new crop was already sold.

 

New sales numbers from Celeres will be out only by next Monday, August 20.

 

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