Sep. 6, 2019
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The Brazilian consulting firm AgRural recently estimated that Brazilian farmers will increase their 2019/20 soybean acreage by 1.1% to 36.3 million hectares (89.6 million acres), which if verified, would be the smallest increase in 13 years. The trend in recent years has been for smaller acreage increases. The average acreage increase for the last ten years has been 5.2%. Over the last five years, the increase has averaged 3.5%. In 2018/19 the soybean acreage in Brazil increased 2.1%.
Analysts from AgRural reported to Reuters that one of the reasons why the increase in soybeans acreage will be modest this year is because some of the largest soybean producers in Brazil conduct their business in dollars and are subject to prices on the Chicago Boada of Trade. For these producers, the trade dispute between the U.S. and China and the subsequent lack of soybean purchases from China, has resulted in very low soybean prices.
Additionally, a strong dollar compared to the Brazilian real works against producers conducting their business in dollar terms. The majority of Brazilian soybean producers conduct their business in Brazilian reals and for them, a weaker Brazilian currency is good news because soybeans are priced in dollars but paid in the local currency so whenever the currency is weaker, they put more money in their pocket when they sell their soybeans. Currently, the Brazilian real is trading at approximately 4.1 to the U.S. dollar.
Another reason for the modest increase is the limited reductions in full-season corn grown in southern Brazil. The trend in recent years has been to plant less full-season corn in southern Brazil and more safrinha corn planted after the first crop of soybeans are harvested. This frees up more acreage for soybean production. The full-season corn acreage in southern Brazil is already quite small, so additional reductions will be limited.
The acreage available for new land clearing to plant soybeans may also be limited somewhat by the recent fires in the Amazon Region and the subsequent negative news coverage. Even though very little deforested areas in the Amazon Region are used for crop production, the negative publicity surrounding the entire topic of land clearing makes land owners reluctant to clear even land that is authorized by the government.
The greatest increase in soybean acreage in 2019/20 will be in some of the most northern states of Brazil, but they are starting from a much smaller base.
With the modest increase in soybean acreage in 2019/20, AgRural expects the Brazilian soybean production to exceed last year's production of 115.0 million tons and the prior record production of 119.3 million tons set during the 2017/18 growing season.