Brazilian soybean farmers are being advised to limit early selling for this season’s harvest and instead stockpile it in silos on projections that the price of the commodity will rise due to weather losses in South America.
Data on Brazil’s national grain storage capacity compiled by the respected agricultural university think tank Esalq, prompted its analysts to recommend that producers hold their harvests as a sales strategy.
Esalq publications are widely read by local producers.
Esalq researcher Fernando Rocha said the drought over Argentina’s grain crop and the difficult weather in parts of Brazil this season are likely to push up international soybean prices beyond levels seen in 2017.
Harvest has not started in Argentina and has not yet hit all areas in Brazil, especially in southern Brazil where drought is expected to hurt yields.
“It’s likely farmers will gain from later sales this year as prices are expected to react” to the eventual losses, Rocha said, while cautioning, however, that high global stocks of soybeans will limit sharp increases in the commodity’s price.
The strategy did not pay off for farmers in 2017, though, Esalq data showed.
Producers who held on to their crops would have only made modest gains in July 2017 and lost money if they were forced to sell in April and September of last year.
The previous harvest was a record 114 million mt.
Forward sales of soybeans in Brazil are well behind last year and historical averages, according to most analysts.
Bunge’s chief Executive, Soren Schroder, said earlier this week that the company will shift its origination policy in the world’s largest exporter of soybeans away from take-or-pay forward delivery contracts to the spot market because of the low level of producer selling prior to harvest and thing crushing margins.
Schroder blamed the strong dollar against the Brazilian real and rising soybean futures prices for the reluctance of producers to sell.
Soybeans and other export commodities are also seen by local farmers as a natural currency hedge against a potential depreciation of the currency.
Brazil will hold presidential elections in October, after impeaching former President Dilma Rousseff for mismanaging government accounts, and the currency markets are expected to become more volatile heading into the polls as no clear candidates have emerged yet.