Selling corn, soy, wheat in Brazil
With a delayed harvest in progress due to excessive rainfall, farmers in the northern state of Bahia, Brazil have at least one thing less to worry about, the market. Why? As planting season started, the market took off and farmers started forward-sales early.
(Pictured above: Julio Mattos, a Luis Eduardo-based market analyst)
“In October, farmers started taking advantage of the higher prices. As a result, 60% of the new-crop soybeans have been sold on the cash market, since mid-February,” Julio Mattos, Supergraos market analyst in Luis Eduardo, Bahia says.
So far this year, farmers have been receiving between $17-$28 per soybean bag, up 30% from a year ago.
In a normal year, half of the crop would be forward-sold at this same time. In western Bahia, forward-selling is common because this region is made up of bigger farmers that don’t rely on government funding. As a result, the cash is needed to pay off bills and to invest in the next crop’s inputs.
In comparison, smaller farmers in the state of Parana that rely on government monies do not sell forward as much.
“Farmers that finance themselves are careful in capturing the best price. This year, western Bahia farmers are making 2012 soybean sales. Advanced selling is becoming a trend that we’re seeing.”
For 2012 soybean sales, farmers have received between $23-$24 per bag, according to Mattos.
In addition, though farmers in western Bahia are 500 miles from exporting ports, the area has numerous multinational companies that keep local prices competitive.
Unlike in southern Brazil states that sell most of their crops to cooperatives, western Bahia farmers sell to multinational commercial companies. “These multinationals tend to buy their supplies way in advance. So, this is helping this trend of farmers forward-selling their soybeans.”
(Pictured above: Mike McGinnis takes the wheel of a Brazilian truckload of corn.)
Meanwhile, western Bahia farmers have a more difficult time marketing corn. With 100% of the corn consumed locally by the poultry and swine industries, the farmers have little opportunity to forward-price their crops. “Users don’t necessarily like to buy their supply to far ahead,” Mattos says.
BRAZIL WHEAT PRICES STRUGGLE
Brazil is a net importer of wheat. The country brings in about 50% of its own consumption. The issue is, what is produced internally cannot be sold competitively on the domestic market. The industry finds it cheaper to buy wheat from Canada, Argentina, and other countries than to buy it within the Brazilian borders.