In Brazil, Some Yields Fall Short

While national soybean yields are forecast up, some regions suffer dry weather

Here's an insight to what Brazilian farmers are thinking about now. Last week, Chicago prices were said to be down nine percent versus the same week of last year, but Brazil's local currency—the real—was up 14 percent against the U.S. dollar, according to The Mato Grosso Agricultural Economics Institute. So Brazilian producers were happy to hold onto their expected 2013-14 soybean production a little longer in the hopes of further strengthening of the dollar, or of stronger Chicago-based prices. Or both.

Such is the mindset of the Brazilian soybean producer: One eye on the sky, one eye on the fields…and one eye on exchange rates.

In Brazil as in the U.S., weather tops the worry list—and if the weather is bad enough, it can wipe out all other considerations.

Take Olavo Borges, who produces beans and sugarcane in the panhandle of Minas Gerais state, a triangle of land encroached upon by the Brazilian states of Goiás and São Paulo. So much of the southern Goiás weather bleeds over onto his lands. And that's got him down even as Mato Grosso farmers—far to the north—are celebrating good yields on early beans despite an abundance of rain.

Borges is facing the opposite problem. "We've gone 20 days since the last rain," he says, "and the crops are losing yield potential as a result. I'm going to say losses in the longer-cycle beans will be up to 30%. And in the beans that are being harvested now in the area—the early beans—we're not getting more than 13 to 18 bushels per acre."

No Insurance
Borges, like most farmers across Brazil, doesn't carry crop insurance because he finances his crop from his own pocket. Crop insurance isn't a widely-used tool in Brazil yet—adopted mostly by those lucky producers who get their cropping costs financed through the federal subsidized ag loan system, which requires it.

So he'd better hope the sugarcane can handle the dry weather a little better than the beans.

Meanwhile in Mato Grosso, yields even on the short-cycle beans are up, and the biggest challenge right now is getting crop out of the field and a second crop into the field with rains called for over the next two weeks.

So don't talk to Borges about the national soy crop being up 10% this year - he doesn't want to hear it. Right now, he's struggling to get keep on operating, with both eyes on the weather.

In his situation, pest pressure and the exchange rate have dropped far down the list of his concerns.

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