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Currency Supports Increased Soybean Selling in Brazil

Soybean planting pace remains below averages.

PORTO ALEGRE, Brazil--Brazil's government devalued the country's currency, the Real, sparking farmers to sell old and new crop soybeans.

Brazil’s Real has reached the lowest value against the U.S. Dollar in its history this week.  

On Wednesday, one U.S. dollar reached the value of R$4.20. Yesterday, it closed at R$ 4.19. Though the impact can be moderate on soybean or corn acreage, a weaker currency is always preferred by Brazilian farmers because their crops are mostly exported, quoted in U.S. dollars. So, the cash they receive and spend is worth more at the end of the day.

Another favorable aspect going on in the Brazilian economy is that the interest rates are also the lowest in history with 5% a year. After a deflated October, the country’s Central Bank reacted with a cut 0.5% percentage points on nominal interest rates. That is what the president of the Brazilian Central Bank, Roberto Campos Neto, attributed for the devaluation. On the other hand, the government has been cutting subsidies for investments in farm machinery.

“All of this will help to increase production a little bit. The trend with limited government subsidy is that farmers are using more barter operations. That is all what Mato Grosso and Mato Grosso do Sul brokers are saying,” said Luiz Pacheco, a consultant in Curitiba, Paraná.

In terms of prices, the Dollar increase has helped to put soybean prices nearly 10% above the same period last year. Sales have been strong for the old and the new crop. In the opinion of Vlamir Brandalizze, an analyst of Brandalizze consuting, a competitive Real can force the Brazilian soybean exports to jump from 75 million metric tons to 77 million metric tons. “China still would have the capability to buy even more,” states the analyst.

The most recent estimate from Brazil’s National Supply Company (Conab) indicates a total soybean output of 120.9 million metric tons, which is 5.1% higher compared to 2018-2019. From the last month, Conab raised the projection of area planted by 494,211 acres to 90.6 million acres. Conab’s forecast for export is at 72 million metric tons.

“The domestic demand for soybeans and other grains tend to grow substantially, due to the fact the economy will speed up,” reads the Conab report.

INTL FCStone also increased the projection of soybean production in Brazil to 121.8 million metric tons, also citing a probable growing demand internally for biodiesel and all types of meat. The forecast for exports coincides with Conab at 72 million metric tons.

Last week, planting jumped 9% and reached 67% of the expected surface, according to Curitiba consultancy AgRural. The number tracks below last year’s planting pace of 82%, and also below the average for the last five years, which was 70%. In Mato Grosso, however, the planting already reached 97%. This leads to the conclusion that harvest in the state could start right after Christmas.

In Parana, there was a significant progress, reaching 85% of the surface planted, but a lot of crops are considered under bad conditions. Yet, there is a growing worry in the state with the re-planting and possibility of Asian soybean rust.

The Parana government allowed soybean re-planting after January 1st, specifically in this season. For Marcio Bonesi, president of the Soybean Growers of Parana, this measure will open door for widespread Asian Rust. “Nothing justifies this measure. This is against all Embrapa recommendations,” affirmed Bonesi.

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