July 30, 2020

Brazilian Soybean Acreage could Increase 4.2% in 2020/21

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

Brazilian farmers will start planting their 2020/21 soybeans in mid-September if the conditions are favorable, so it's time to take a first look at the potential 2020/21 soybean acreage. These are my initial estimates and they could easily change before the planting is complete.

2020/21 Brazil Soybean Acreage up 4.2% - Brazilian soybean farmers are coming off a very good year in 2019/20 that left them well capitalized and anxious to invest their record profits in their 2020/21 soybean crop.

The 2020/21 Brazil soybean acreage is estimated at 38.5 million hectares (95.09 million acres), which would represent an increase of 1.56 million hectares (3.85 million acres) or 4.2% compared to Conab's estimate of 36.94 million hectares (91.2 million acres) for the 2019/20 crop.

The 2020/19 Brazilian soybean production is estimated at 131.0 million tons, which would represent an increase of about 10 million tons or 8.3% compared to Conab's estimate of 120.8 million tons for the 2019/20 crop.

Factors that could influence the soybean expansion in Brazil include:

  • Record high domestic soybean prices for their 2019/20 soybean crop resulting from a 30% devaluation of the Brazilian currency during the first half of 2020.
  • Soybean exports during first half of 2020 topped estimates due to strong demand from China. More than 70% of Brazil's soybean exports in 2019 were destined for China.
  • Tight domestic soybean stocks will support domestic prices.
  • Farmers have already forward contracted more than 40% of their 2020/21 soybean production for very good prices. As a result, they have already paid for much of their inputs and production costs for their 2020/21 crop.
  • Low prices for cotton could result in farmers in the state of Bahia switching some of the full-season cotton acreage to soybeans instead.
  • Low prices for ethanol could result in farmers in the state of Sao Paulo switching some of their sugarcane acreage to soybeans instead.
  • A La Nina could result in dry weather in southern Brazil during August and September which could delay the planting of the full-season corn in southern Brazil resulting in some of the full-season corn being switched to soybeans instead.
  • The Covid-19 pandemic resulted in only minor delays in Brazil's grain logistics, which is much better than what had been expected. Therefore, there are no immediate concerns about logistical bottlenecks if Brazil produces a new record large soybean crop in 2020/21.
  • In fact, the completion of Highway BR-163 in northern Brazil reduced the cost of transporting grain to ports on the Amazon River by approximately 25%.

Factors that could limit the soybean expansion in Brazil include:

  • Strong domestic cattle prices that could limit the amount of degraded pastures being converted to soybean and corn production.
  • A strengthening of the Brazilian currency compared to the U.S. dollar that could lead to lower domestic soybean prices.
  • A large 2020 U.S. soybean crop and disappointing Chinese purchases of U.S. soybeans which could lead to lower international soybean prices.

Soybean Planting Sequence in Brazil.

  • Farmers in Brazil will start planting their soybeans in mid-September at the end of the "soybean free" period.
  • October and November are considered the two main soybean planting months.
  • Double crop soybean planting in southern Brazil will end sometime in early December with the completion of the wheat harvest.
  • Mato Grosso is the largest soybean producing state in Brazil and soybean planting in that state must be completed by December 31st and a second crop of safrinha soybeans is expressly prohibited in the state.
  • Soybean planting in northeastern Brazil will start as early as October depending on the start of the summer rainy season and soybean planting will end sometime in January.