USDA Projects Brazil 2016-17 Soybean Crop At Recrod 101MMT

MUMBAI (Commoditiescontrol) - US department of agriculture projected Brazil 2016-17 soybean crop at record level of 101 million metric tonnes (MMT) due to higher acreage and better yield.

USDA said Producers are expected to slightly increase planted area compared to last year, but many are still concerned about the high cost of production, higher interest rates, difficulty accessing credit lines, and financial difficulties at the farm as a result of last year’s losses.

It is estimated that about 28 percent of the forecast area has been planted as of October 21, much faster compared to last year (about 20 percent). In Mato Grosso, the largest soybean producing state, about 42 percent was planted as of October 21, about double the area during the same time last year.

The good rains in October mainly in the western and central part of the state are encouraging the fast planting pace. However, the northeastern part of the state is still experiencing dry conditions, so the pace is much slower. According to the Mato Grosso Institute of Agricultural Economics (IMEA), this is the fastest planting pace in Mato Grosso’s history, which can potentially benefit producers when planting a second crop right after the soybean harvest.

In other key states in the Central-West region, such as Goais, the weather forecast is favorable and regular rains are expected to start by the first week of November. In some areas of the southern region, excessive rains have slowed down the planting pace. In the northeastern region of Brazil, which produces about 10 percent of the soybean crop, there are concerns about dry weather.

Appreciation of the Brazilian Real in 2016 Brings Domestic Prices Down
Since the beginning of 2016, the Brazilian Real has appreciated by 25 percent against the U.S. dollar. This is rapidly changing the domestic price situation from just a year ago. After domestic soybean prices reached record levels in June, to an average R$90.59 per 60 kilos or 44 percent higher compared to the same month last year, prices have come down significantly (see Table 1) due to lower global prices and the Brazilian Real appreciation (less Reals per U.S. dollars).

Prices have decreased 19 percent between June and September, the beginning of the planting season. This situation has slowed the commercialization of the crop compared to last year. Producers are being more cautious with their selling strategy, expecting a rebound in prices later in the year.



2016/17 Forecast for Soybean Exports to 57 MMT
USDA kept its export forecast at 57 MMT for the 2016/17 marketing year (MY). In contrast to last year, the pace of commercialization is much slower due to producer’s expectations of a weaker exchange rate later in the year. Despite the lower commercialization pace, demand is still expected to remain strong in China, Brazil’s main soybean market.

Higher Biodiesel Demand Expected in 2017
Biodiesel production for 2017 is forecast at 4.4 billion liters based on a modest recovery of the Brazilian economy and the increase of the biodiesel mandate to 8 percent. In March 2016, the Brazilian Government (GOB) approved law #13,263/2016, which increased the biodiesel-use mandate from seven percent (B7) to ten percent (B10) in 2019, as follows: eight percent (B8) in March 2017; nine percent (B9) in March 2018 and ten percent (B10) in March 2019. The total domestic soybean crush for the 2016/17 MY is forecast at 41 MMT. The higher soybean crush forecast compared to last year’s estimate reflects higher demands to meet new biodiesel mandates by the GOB.

(By Commoditiescontrol Bureau; +91-22-40015533)