When will Brazilian farmers sell their bumper soybean crop?

By Daniele Siqueira, AgRural Commodities Agrícolas

I am writing this article in late December, a time of the year when Brazil is starting to harvest the very first soybean fields of the season — although more significant progress is expected to be seen only in mid-January, as it normally happens. Despite some losses caused by spotty rains in western Paraná, where harvest starts in January, and concerns about below-normal rains in Rio Grande do Sul, where most of the crop is still in vegetative and early reproductive stages, the expectation is for a bumper 2022-23 production.


INMET Millimeters.

If weather conditions improve in dry areas in the south of the country and remain favorable in other states, production will easily surpass the 150 million metric tons mark — 25 million up from last year. Less than one-quarter of the potential production, however, has been sold by producers so far, in the slowest farmer-selling progress since 2008/09, according to AgRural.


CONAB/AGRURAL Million metric tons. *AgRural Dec 2022.

Producers have been cautious in their marketing strategies because Brazilian soybean prices went up during the last three harvests, which is not common, given the big amounts of new product entering the market. Now, they hope that the pattern repeats itself in early 2023. But that might be difficult, considering the size of the crop, the not-so-good Chinese demand and the slow farmer-selling pace itself, since a serious price drop at the beginning of the new year might result in extra selling pressure.

Two factors, however, might help Brazilian farmers in their late-selling strategy. The first of them is the currency. Despite the strong downward correction seen in the U.S. dollar index since late September, the Brazilian Real hasn’t been able to strengthen since then because the new President-elect, leftist former President Luiz Inacio Lula da Silva, inspires caution in the markets, and that caution has kept the Brazilian currency around 5.30 to the U.S. dollar since November.



Although most of the rural sector doesn’t like Lula and fears that he may create export taxes inspired by those that exist in Argentina, the weak Real is good for Brazilian soybean prices, since it makes them attractive for farmers, who sell in the Brazilian currency, and also interesting for importers, who buy in U.S. dollars. There is no guarantee, however, that markets will not become more comfortable with the new President in the coming months, in an accommodation that could end up in a stronger Real and extra negative pressure on Brazilian soybean prices.  

The second factor that might help Brazilian farmers sell the new crop at higher prices in early 2023 lives next door, in Argentina. The neighboring country faces one of its worst droughts in history and, although its 2022-23 soybean crop is still being planted, there are concerns about the size of the crop, which will fill pods mostly in February.

By Dec. 28, 72% of the intended soybean area had been planted in Argentina, compared with 81% in the same period last year and 86% in the five-year average, according to Buenos Aires Grains Exchange, which also rates only 10% of the crop as in good/excellent conditions, versus 57% a year ago.



For now, the exchange puts the 2022-23 production at 48 million metric tons, compared with 43.3 million last season. The USDA works with 49.5 million metric tons. Some private forecasters, however, are already signaling that Argentina might harvest around 40 million, something that would certainly support soybean prices in Chicago and in Brazil. But I’d rather not bet on a failed soybean crop before it enters at least the blooming stage. If the Argentinean crop doesn’t fail, and considering a good crop in other neighboring countries (mostly Brazil and Paraguay), South America will produce 35 million to 40 million metric tons more than last year. It’s too much, especially when we remember that the increase in world demand is not likely to increase at the same rate. If I were a Brazilian soybean farmer, I would’ve taken advantage of the bullish price action seen in Chicago in late December to sell a bigger chunk of the new crop.

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