September 25, 2006

 

Low corn prices lead southern Brazil's farmers to plant soybean

 

 

August estimates that Brazilian soy growers would reduce their 2006/07 planting intentions by 10 percent or more nationwide have been revised as low local corn prices have farmers turning to soybeans in the southern states.

 

"The southern farmers are moving out of corn and into soybeans, so we used to think the national soy area would be reduced by 7 percent at least, but now it's gone down closer to 6 percent because of Parana and Rio Grande do Sul," said Guilherme Bastos, a soy market analyst at Agroconsult, a local agribusiness consulting firm.

 

Brazil planted 22.2 million hectares in the 2005/06 crop, according to government figures. Brazil starts planting soy in October, though northern Mato Grosso will start planting this week.

 

Parana and Rio Grande do Sul are the no. 2 and no. 3 soy planting states respectively.

 

"A reduction of 15 percent to 20 percent in corn is not unlikely in those states, but soy fields are so massive that that doesn't mean a 20 percent growth in soy field expansion, either," said Andre Pessoa, director of Agroconsult.

 

By most estimates, Parana should expand soy planting area by 3 percent and Rio Grande do Sul by 1 percent.

 

Then there is also the increase in cotton prices in the local market thanks to local demand, steadily rising cattle prices and the wildly popular sugar and ethanol market, which means alternative income for many of Brazil's cash-strapped farmers. But not all ranchers grow soy or cotton, and those that do could decide in the days ahead to plant less soy and make room for cotton and pasture land.

 

"When those prices are better it means the farmers that also have cattle ranches or cotton fields will migrate away from soy in the days ahead, so we could see less soy land in the centre-west in the days ahead," said Seneri Paludo, a soy-market analyst at AgRural, a farmer consulting firm.

 

Right now, the international soy markets are focused on the US soy crop. Most traders have also priced in the fact that the 2006/07 soy crop in Brazil could be as low as 51 million tonnes due to less planted area and a general reduction in agrochemical investments.

 

"The decision for the next soy season has already been taken. These fields are going to expand over corn in the south and reduce elsewhere in favour of pasture and other crops," Pessoa said.

 

Antonio Bulle, a soy farmer in Parana, said he would not increase his soy fields in Parana, but would expand his pasture land on properties in Mato Grosso do Sul.

 

"That pasture land will take over old soy fields," he said.

 

The traditional soy growers will continue planting soy beans because costs have gone down. "Profit margins are still low but most have no other options to plant something else," said Steve Cacchia, a market analyst for brokerage firm Cerealpar.

 

"Some can opt for cotton, or cane, or cattle, but a big switch is definitely out of the question," Cacchia said.