A weak domestic currency means Brazilian farmers are not getting the same price signals as their North American counterparts – something that could have significant implications, especially for the burdensome soybean market.
In a presentation at the Ontario Agricultural Conference earlier this month, AgResource Co chief grains analyst Ben Buckner said the downtrodden Brazilian real is artificially inflating corn and soybean returns for farmers in that country, incentivizing them to plant and produce more at a time when producers in this part of the world are already struggling with weaker prices.
It is a particular problem for the soybean market, given that global supplies are already much heavier, compared to corn.
As part of his presentation, Buckner displayed a graph which showed the spot Chicago Board of Trade (CBOT) soybean price down 21% from a year earlier. But when converted into the Brazilian currency, the CBOT price is little changed on the year. For corn, the CBOT spot price is now basically unchanged from a year ago. But for Brazilian farmers, the currency issue means the CBOT price is 25% higher.
The bottom line is the weak real is offering Brazilian farmers CBOT corn and soybean prices equivalent to $5.75 and $12.50/bu for producers here.
The repercussions for the soybean market could be severe, given that Brazil is already on track to produce a record-large crop in 2024-25 and the USDA is projecting world soybean ending stocks to climb to over 128 million tonnes. If accurate, that would be up 14.2% from 2023-24 and almost 27% above just two years ago.
“The soybean market is telling the farmer not to plant any more because we’ve got enough of it,” Buckner said. “But the Brazilian farmer is not getting that message because of this currency issue.”
In fact, it has been the relatively weaker Brazilian currency that has played a central part in the country’s exploding crop production over the past number of years, he added.
On the other hand, market signals appear to be getting through in the US and Canada, with producers widely expected to cut back on soybeans and increase corn plantings in 2025.
If Brazil’s 204-25 soybean crop is as big as expected – projected by the USDA at 169 million tonnes – and if Chinese demand continues to be tepid, Buckner said there is a risk the soybean market will eventually have to fall to a level that discourages planting, even in Brazil.
“I’m not sure what that (CBOT) price is; probably sub-$9 for sure. Maybe it’s $8.50.”
Meanwhile, Buckner said he expects Brazilian producers will maximize corn acres, when they plant the bulk of the country’s crop in February and March.
The main soybean planting window in Brazil is November-December, although the timing varies by region.
