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Brazil farmers bag up soy as glut leaves no room at the bin

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Brazilian farmers are discovering a downside to becoming one of the world’s top producers of soybeans: they’re running out of room to store all the unsold supply.

The biggest harvest in the country’s history is poised to leave domestic inventories at a record, data from the processors’ group Abiove show. Local prices to growers are down 29% from a year earlier, so farmers are stashing soybeans anywhere they can rather than sell, which is creating a storage crunch at grain bins just as Brazil’s record corn crop arrives.

“Warehouses are still full of soybeans while farmers start the winter-corn harvest,” said Nelson Antonini, a grower who sits on the board of Copasul, the 800-member farm cooperative in the municipality of Navirai, in the state of Mato Grosso do Sul. “We’ve been facing storage problems.”

So far, Copasul farmers have sold about 50% of their soybean production, well below the 80% they’d normally have unloaded by now, Antonini said. There’s only enough local storage capacity to stockpile 40%. To make room for new arrivals of corn, growers have taken 42,000 metric tonnes of soybeans out of storehouses and put them into plastic silo bags.

Similar problems are showing up across Brazil as harvests in the Southern Hemisphere come to a close. Most of the soybean crop is collected from February through May.

While Brazil trails only the US as a producer, it exports more of the oilseed than any other country. Soybeans are crushed to make vegetable oil and animal feed.

What’s compounding the supply crunch is that the country will also reap a record corn crop, which may surpass 100 million tonnes for the first time, according to local forecasters. The first of two crops arrives in March, followed by a second harvest completed by the end of September. Brazil is the world’s third-largest grower and second-biggest exporter of the grain, behind the US.

Farmers in the South American country collected about 114 million tonnes of soybeans this season, up 18% from a year earlier, the US Department of Agriculture estimated last month. US output and inventories also have been rising. While global output probably is headed lower over the next year, global reserves on Oct 1 will be 21% higher than a year earlier at a record 93.2 million tonnes, the USDA estimates.

Brazil probably can stockpile about 65% of its total grain and oilseed output, according to data from Conab, the agency within the Ministry of Agriculture responsible for supply and demand forecasts.

“We’ve seen a great number of farmers ordering silo bags to store corn in Mato Grosso,” said Frederico Azevedo, a manager at Aprosoja, the state’s farmers group.

The big, white bags can hold about 180 tonnes of grain, keeping the contents mostly dry and protected from damage by weather or pests.

They’re used widely in neighboring Argentina, but haven’t been common in Brazil until now.

That’s partly because plunging prices are discouraging harvest-season sales, forcing farmers to hold onto supply longer.

In Mato Grosso, the biggest soy-growing state, the crop fetched 51.76 reais (US$15.67) per 60-kilogramme bag in the municipality of Sorriso on July 3, down from 72.84 reais a year earlier, according to data from Cepea, a research unit of the University of Sao Paulo school of agriculture.

Corn isn’t any better. Prices in Sorriso have tumbled 50% to 11.42 reais per 60-kilogramme bag. That’s below the government-set minimum of 16.50 reais.

“If they had to choose between saving the soy or corn, they’re likely to prioritize corn sales and hoard the beans,” said Luiz Fernando Roque, an analyst at agricultural consultant Safras & Mercado. “Farmers don’t want to sell at current prices.”