Higher Soybean Prices in Brazil likely to Encourage Farmers to Plant more as Compared to Last Year

The US Department of Agriculture in its September report has pegged the global soybean production for 2020/21 at 369.7 million metric tons, down 660,000 tons from last month’s estimate. The crop production losses for the United States and Ukraine will be offset for larger expected crops for Brazil, Canada, and India. Prices this year have been quite firm in Brazil this year and compared with a year ago, soybean prices in Brazil have appreciated by 60-65% approximately. Most of the price gains in Brazil since its last crop was sown can be attributed to various factors, including an exchange rate depreciation (down by 15 percent against the U.S. dollar from a year ago) and lowering of shipping costs following the completion of infrastructure projects. Tightening of domestic soybean stocks following a record-breaking export season has been the other major driver for the price appreciation.  

China has imported noticeable quantity of soybeans from Brazil between January and July 2020, with maximum imports during June. As a result Brazilian soybean average offers have remained higher compared with US soybeans since May 2020. This is when the Brazilian harvest started reducing. The new US marketing year began in September. In 2020–21 Chinese demand is projected to shift back from Brazilian to US soybeans, therefore resulting in improvement of US exports. In fact, decreasing soybean supply availability is now compelling some domestic users to import supplies from Paraguay in order to sustain operations at the crushing plants.  

As a result Brazilian farmers are most likely to take up sowing operation in a larger area versus last year. Early November is main soybean planting period in Brazil and continues till December. Soybean harvest normally peaks in late March to early April and continues into May in the southern states, particularly in Rio Grande do Sul. Planting by growers will commence in next few weeks, yet Brazilian growers are reported to have already sold more than half of expected soybean production. The USDA has predicted 2020/21 soybean area in Brazil at 38.6 million hectares—up 300,000 from last month’s forecast and 4.6 percent above the 2019/20 level. If the trend yield forecast is true then the nation may produce a record soybean crop of 133 million metric tons next year, which is up 2 million from the previous projection. Soybean exports from Brazil for 2020/21 are seen 1 million tons higher to 85 million, and a year from now, Brazilian soybean stocks could once again be quite lower.