Brazil to Sow Record Soy Acreage, But Yields Remain in Doubt

The International Grains Council has raised its forecast for Brazil’s soybean sowing for the upcoming 2015/16 season by 3% to a record high of 33 million hectares, marking a ninth consecutive season of increases.

The increase brings Brazil’s acreage within 800,000 hectares of the acreage being sown in the U.S., the world’s top producer, and contradicts previous estimates by U.S. Department of Agriculture (USDA) staff in Brasilia that Brazil will decrease soybean sowing for the first time since 2006/07 because of low global soybean prices, high interest rates, and the economic situation in Brazil.

As the sowing season approaches, the Mato Grosso agricultural economics institute, Imea, has forecast an increase of 2% in the state’s soybean acreage to 9.2 million hectares (22.7 million acres), and Coamo, Brazil’s largest agricultural cooperative, announced it expected to see a 3% increase in soybean planting to 2.44 million hectares.

The weakening currency and an unexpected bumper corn harvest are believed to be the drivers behind the shift in planting by farmers. A 30% drop in value of the real against the dollar so far this year has lifted the value of the crop, which is denominated in dollars, and has inflated domestic market values, while high corn inventories and high cost of inputs for corn production have made corn an expensive crop to grow while price prospects decline.

Although soybean acreage is up, yields could be compromised as farmers scale back on fertilizer purchases in order to cut back on expenditures – Imea indicates that as of the end of July, farmers in the state of Mato Grosso had purchased 82% of their inputs for 2015/2016, while at the same time last year, farmers had already bought 93% of their inputs for the season.

"Seventy percent of the fertilizers used in Brazil are imported and a weaker currency makes those imports more expensive, so the delay has made fertilizers more expensive for farmers," said Michael Cordonnier, the influential corn and soybean analyst.