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Brazil Soy Area to Hit Record Next Season - Safras & Mercado

By Ana Mano

SAO PAULO, July 13 (Reuters) - Brazilian farmers will expand the area planted with soybeans to a record next season, agricultural consultancy Safras & Mercado predicted on Friday, with strong demand from China boosting the outlook for the coming crop.

The area will likely grow by 2.3 percent to a record-high 36 million hectares (88.9 million acres), the consultancy said, referring to the season that kicks off in September.

As a result, Safras forecasts Brazil will harvest 119.78 million tonnes of soybeans in the coming 2018/19 cycle, a slight 0.3 percent increase from what it estimated local farmers produced this year.

"In the new season, the outlook is once again favorable for soybeans," Safras analyst Luiz Fernando Roque said. "Strong yields in the prior harvest, combined with higher prices this year, allowed farmers to keep reasonable margins despite higher production costs," he said.

In the first six months of the year, Brazil exported 35.9 million tonnes of soybeans to China, according to government data, 1.8 million tonnes more than in the same period last year, suggesting demand from the world's top buyer of the oilseeds remained strong.

The consultancy noted the next few weeks will be crucial to determine planting intentions, adding "it would not be a surprise" if farmers decided to increase area beyond Safras' initial projection.

However, uncertainty related to domestic freight costs and exchange rate volatility are factors potentially restricting further increases in soy area, the consultancy said. Additionally, Safras noted the recovery of corn prices in the past few months may constrain the expansion. (Reporting by Ana Mano; Editing by Dan Grebler and Tom Brown)

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