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Corn+Soybean Digest

USDA Report Changes the Picture for Farmers

By August, we were just starting to look for those first rains that would soon signal the start of planting season. And people here had just read the USDA report, lowering price predictions for corn and beans.

Some, like Agriculture Minister Reinhold Stephanes, may not have been worried about the fall of commodity prices after the August report. At least that's what he told a poultry producer group here. “Prices are still high,” he says, “and there is no reason for them to continue to fall” further than the approximately 10% hit they took here on release of the report.

But the view of Brazilian farmers in the field was a little less rosy. A lot of farmers had already set their plans and even bought their inputs based on those plans. And their planting intentions were, in turn, often based on the record-high commodity prices that prevailed in June and July. The Midwest floods, it turns out, didn't hurt the crop as much as predicted.

One farmer in Brazil's south said, “I was going to plant a third of the farm to corn. But due to costs and price prospects, I decided to plant just soybeans. It was a difficult decision…because technically I need to rotate crops. But the possible cost/benefit made me opt for soybeans.”

Despite the drop right after release of the report, though, that decision was hardly an “I coulda hadda V-8” moment. Brazil's Agencia Estado reported that, in the 30 days leading up to the USDA report that lowered estimates of near-term prices for corn and soybeans, CBOT soybean prices had already dropped by 25%, and corn by a little more than that.

MEANWHILE, BY MID-AUGUST some input costs were beginning to drop — or at least stabilize — along with commodity prices. Rogerio Nogueira, an agronomist in Brazil's north, says, “The ag inputs market is steady, and fertilizer (prices) are falling…as demand has lowered and there could be less credit available.”

And farmers here will be glad for any break they can get on input costs. A soybean producer in Mato Grosso state laments that his fertilizer costs from last year to this year shot up from $375/metric ton to $760. Glyphosate costs, he says, have increased $11/gal. over the same period.

The key, of course, is the word available. One political party estimates the official farm debt in just one Brazilian state to be above $2.5 billion. And federal congressman Luiz Carols Heinze, who sponsored a bill to roll some farm debt over, says there are about 3.2 million outstanding loans made to agriculture through official channels (not counting private loans such as processors financing input costs with beans in the ground for collateral). Of those loans, about 240,000 with production farms are in default.

It's hard to say if the squeeze of higher inputs, possibly harder-to-get-your-hands-on credit and a less spectacular price outlook are enough to slow Brazil down in its corn planting this year. But it looks like, at least for the first crop, corn will have a little more competition from beans than previously thought.

James Thompson is a writer and marketing consultant based in Uberaba, Brazil, a center of soybean, corn, cattle and sugarcane production. You can contact him at [email protected].

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