Brazilian Farmers are Cautious Sellers of Old and New Crop Soy
Brazilian farmers have sold 79.2% of their 2020/21 soybean production compared to 92.9% last year and 78.2% average according to a recent report from Safras & Mercado. This represents an increase of 3.6% over the past month.
For the 2021/22 soybean crop which will be planted starting in September, farmers have forward contracted 21.5% of their anticipated production compared to 39.8% last year and 17.6% average. This represents an advance of 2.3% for the month.
For both the old crop and new crop, Brazilian farmers are cautious with their sales due to the tremendous volatility in the market and the uncertain future of the Brazilian currency.
A 30% devaluation of the Brazilian currency in late 2020 and early 2021 helped propel domestic grain prices in Brazil to record highs. Over the last several months the currency strengthened to approximately 4.9 reals per U.S. dollar. Recently, it has started to weaken again, and it is now trading in the range of 5.17 to the dollar.
Brazilian soybean farmers had a very profitable 2020/21 growing season. One mistake many farmers made was that they sold too much of their anticipated soybean production too early when prices were much lower, but at the time, they were happy with the price. By the time the 2020/21 soybean crop was being harvested, domestic prices were approximately double compared to a year earlier.
Apparently, they do not want to make the same mistake twice, so Brazilian farmers are forward contracting at about half the pace of last growing season.
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