Hebei Lansheng Biotech Co., Ltd. ShangHai Yuelian Biotech Co., Ltd.

Weaker currency buoys domestic commodity prices in Brazilqrcode

Jan. 8, 2016

Favorites Print
Jan. 8, 2016
The Brazilian currency is at its weakest point compared to the U.S. dollar since last September when it traded at 4.2 reals to the dollar. It is currently trading above 4 reals to the dollar and the result has been improved domestic grain prices for Brazilian farmers. Since commodity prices are set in dollars but paid in the local currency, as the local currency weakens, Brazilian farmers put more money in their pocket for every sack of soybeans or corn that they sell.
While a weaker currency is good for domestic commodity prices in Brazil, it is also driving up the cost of producing grain in Brazil. Approximately 70% of the fertilizers and most of the agricultural chemicals used in Brazil are imported and as the currency weakens, the cost of these imports increase.
A weaker Brazilian currency could potentially have a big impact on 2016 safrinha corn acreage in Brazil. Mato Grosso is the largest soybean and corn producing state in Brazil and farmers in the state took advantage of the weaker currency last September to forward contract as much as 60% of their anticipated soybean production and over 50% of their anticipated corn production. Unfortunately, Mato Grosso is also the state that has suffered the most this growing season by hot and dry weather. As a result, many farmers in the state are anticipating reduced yields and they are now concerned that they will not be able to fulfill their contracts.
As the soybean crop in Mato Grosso approaches maturity, farmers are weighing their options for safrinha corn production, which is planted after the soybeans are harvested. Prior to the recent weakening of the currency, farmers in the state were very downbeat due to the poor prospects for their soybean crop. They are still worried about their soybeans, but their attitude toward the safrinha corn has improved recently.
The first thing that started to lift their spirits is the improved weather. After months of hot and dry conditions, Mato Grosso is finally receiving enough rainfall to start recharging the depleted soil moisture. If these rains would continue through February, it should insure enough soil moisture for adequate germination and stand establishment of the newly planted corn crop.
The second positive development is now the Brazilian currency. If the exchange rate remains at 4 to one or weaker, it is anticipated that farmers in Mato Grosso may hold their safrinha corn acreage unchanged compared to last year. Prior to the recent weakening, most observers anticipated a reduction in safrinha corn acreage in 2016.
These projections of course are predicated on the weather cooperating between now and when the corn planting window closes in late February or early March. It will also depend on when the rainy season is predicted to end. For the last four years, the rainy season in central Brazil has been extended and it has resulted in record corn production. If it is perceived that the rainy season will end at the normal time (late April or early May), or even earlier than normal, farmers may not be anxious to plant safrinha corn regardless of the price.


More from AgroNewsChange

Hot Topic More

Subscribe Comment


Subscribe Email: *
Mobile Number:  





Subscribe Latin America Focus Bi-weekly to send news related to your mailbox