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August 22, 2018

Brazilian Soybean Prices supported by Weaker Brazilian Currency

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Political uncertainty surrounding the presidential election in early October has made the money markets in Brazil very nervous. The Brazilian currency is now trading just short of 4.0 reals per dollar, which is the weakest in several years. As a result, domestic soybean prices in Brazil continue to be supported by the weaker currency. Since exported soybeans are priced in dollars, but paid in the local currency, a weaker local currency means that farmers put money in their pocket whenever they sell a sack of soybeans.

As a result, available soybean supplies in Brazil are being priced very attractively. At the far southern Port of Rio Grande, the current price for available soybeans is R$ 89.50 per sack (60 kilograms) with payment at the end of August (approximately $10.43 per bushel). If payment is delayed until the start of October, the price is R$ 90.70 per sack (approximately $10.57 per bushel). If payment is pushed back until the end of October, the price is R$ 92.00 per sack (approximately $10.72 per bushel).

For new crop soybeans, which will be planted in October and November, the price is R$ 86.00 per sack for delivery in April and payment at the end of May (approximately $10.02 per bushel). If the soybeans are delivered in May with payment in mid-June, the price is R$ 87.00 per sack (approximately $10.13 per bushel).

These prices are very attractive for Brazilian farmers. As a result, it is expected that Brazilian farmers will increase their soybean acreage 3-4% for the 2018/19 growing season.

While a weaker currency is good for domestic grain prices, it also makes imports such as fertilizers and chemicals more expensive, thus increasing the cost of production. More than 70% of Brazil's fertilizers are imported and the weaker currency makes imported fertilizers more expensive. Additionally, the cost of the freight is also higher this year due to the new mandatory minimum freight rates. Therefore, farmers are paying more for their fertilizers this year than in previous years.