South America Calling

Brazilian Soy Market Slows

Brazil's soybean market has slowed over the past few weeks with farmers reassessing after heavy selling in July.

Local prices are at record levels due to the dramatic decline of the Brazilian real over the last six weeks. But farmers are cautious, as the currency may have further to slide as political paralysis in the face of economic crisis threatens to put the country in a spiral.

Spot prices in Rondonopolis stood at R$72.50 per 60-kilogram bag ($8.69 per bushel) on Friday, substantially higher than R$58.00 quoted at the same time last year amid continuing firm export demand. For delivery of new-crop soybeans in March, the price is R$64.00, again well up on the year before.

But weighing against sales is the depressed state of futures in Chicago, allied to the sharp jump in input costs as a result of the devaluation. Approximately half of Brazilian soybean inputs are dollar linked.

The Brazilian real slipped 18% since July 1 and 30% since the start of the year.

However, in areas where soybeans are often sold in dollars, in Mato Grosso for example, business is much slower.

The market is also slow for the basic reason that farmers have already sold a lot of their crop. Farmers have already forward sold around a third of their 2015-16 crop against an average of around 20% ahead of planting, which will start in the second half of September or whenever the spring rains return to the Center-West.

In the Center-West, it is common to find farmers who have sold 60% of the crop, or more. As such, they won't be selling anything until crops are in the ground and developing.



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