October 6, 2011


Brazil's soy growers to sow record crop



Despite increasing worries on economic fallout from a Greek debt default, Brazilian soy growers still plan to sow a record crop.


Analysts say global supply and demand fundamentals are strong and Brazilian growers are in good shape to face some potentially leaner days if prices continue to fall.


Fernado Terao, at Informa Economic FNP grain consultants said that Brazil should gain market share in China at the cost of US, which will likely export less over the season.


Rainy weather is a couple weeks later than ideal in Brazil's main centre-west grain belt, but nonetheless appears to be on its way. The re-emergence of drier La Nina weather patterns still remains a risk to watch for, forecasters say.


Local growers are coming off the best of a series of five profitable harvests, four of which produced record outputs, and they are flush with cash.


The sharp decline in soy futures prices started just over a month ago, right before the start of Brazil's soy planting season that kicked off on September 15.


But soy farmers have received a timely boost from the Brazilian real's plunge of 16% over the last month against the dollar, its biggest dive since the initial wave of the global crisis hit in 2008.


Although producers are getting fewer dollars for soy exports due to the commodity's drop in price, those dollars are worth more reaps.


Flavio Franca Jr., chief analyst at agricultural consultants Safras e Mercado said they were expecting soy area to grow by about 2% back in July but looks like it's going to expand more than that now.


Safras' July forecast sees the soy area growing to 24.7 million hectares from 24.2 million hectares last season, producing a record 75.3 million tonne harvest.


On Monday (Oct 3), grains analysts Celeres forecast the new crop at 75.2 million tonnes, up from 74.9 million for the last crop.


Safras is due to release a second forecast for the new crop on October 21. The government's crop supply agency Conab is due to release its first forecast of the new grain crop on Thursday morning.


Standard Chartered said that the sharp fall in international grain prices is also likely to bring big importers to the market such as Egypt and China to rebuild depleted inventories.


This is highlighted by local soy trade. Sales for forward delivery of the new crop to be harvested in early 2012 have been moving at a good pace over the past weeks.


Sales reports by Celeres said that 25% of the new crop that will be harvested in early 2012 had been sold by producers, up from the average of 19% at this time of year. Safras' forward sales numbers were equally high.


Producers are not struggling under higher costs for inputs either, as they were in 2004/05, one of the worst years for local growers when the local currency strengthened at an inopportune time.


Most farmers bought all of their dollar-linked inputs such as fertilizers and herbicides when the local currency was still strong, prior to the recent market volatility that began strengthening the dollar in September.


Terao said that producers got a good price in relative terms on their main costs, and despite the fall in international grain prices the dollar's climb has offset that.