Highlights

Post forecasts the 2016/17 soybean production at a record 101 million metric tons. The export forecast for Marketing Year 2016/17 is 57 MMT despite the slower pace of commercialization. The domestic soybean crush is forecast at 41 MMT to meet new biodiesel mandates set by the Government of Brazil.

Oilseed, Soybean

(Local)

2014/2015

2015/2016

2016/2017

Market Begin

Year

Brazil

Feb 2015

Feb 2016

Feb 2017

USDA

New

USDA

New

USDA

New

Official

Post

Official

Post

Official

Post

Area Planted

32100

32100

33300

33300

33800

33700

Area Harvested

32100

32100

33100

33300

33800

33700

Beginning Stocks

1656

1656

1240

1279

4450

1979

Production

97200

97200

96500

95500

102000

101000

MY Imports

325

325

410

450

350

300

MY Imp. From US

0

0

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

99181

99181

98150

97229

106800

103279

MY Exports

54635

54635

51100

52000

58700

57000

MY Exp. to EU

6000

6000

6000

6000

6200

6500

Crush

40348

40309

39100

40300

41000

41000

Food Use Dom. Cons.

0

0

0

0

0

0

Feed Waste Dom. Cons.

2958

2958

3500

2950

3600

3050

Total Dom. Cons.

43306

43267

42600

43250

44600

44050

Ending St ocks

1240

1279

4450

1979

3500

2229

Total Distribution

99181

99181

98150

97229

106800

103279


Production, Supply, and Distribution

O kept its planted area forecast at a record 33.7 million hectares (HA). Producers are expected to slightly increase planted area compared to last year, but many are still concerned about the high cost of production, higher interest rates, difficulty accessing credit lines, and financial difficulties at the farm as a result of last year's losses.

It is estimated that about 28 percent of the forecast area has been planted as of October 21, much faster compared to last year (about 20 percent). In Mato Grosso, the largest soybean producing state, about 42 percent was planted as of October 21, about double the area during the same time last year. The good rains in October mainly in the western and central part of the state are encouraging the fast planting pace. However, the northeastern part of the state is still experiencing dry conditions, so the pace is much slower. This is the fastest planting pace in Mato Grosso's history, which can potentially benefit producers when planting a second crop right after the soybean harvest.

In other key states in the Central-West region, such as Goais, the weather forecast is favorable and regular rains are expected to start by the first week of November. In some areas of the southern region, excessive rains have slowed down the planting pace. In the northeastern region of Brazil, which produces about 10 percent of the soybean crop, there are concerns about dry weather.

Prices

Appreciation of the Brazilian Real in 2016 Brings Domestic Prices Down

Since the beginning of 2016, the Brazilian Real has appreciated by 25 percent against the U.S. dollar. This is rapidly changing the domestic price situation from just a year ago. After domestic soybean prices reached record levels in June, to an average R$90.59 per 60 kilos or 44 percent higher compared to the same month last year, prices have come down significantly due to lower global prices and the Brazilian Real appreciation (less Reals per U.S. dollars).

Prices have decreased 19 percent between June and September, the beginning of the planting season. This situation has slowed the commercialization of the crop compared to last year. Producers are being more cautious with their selling strategy, expecting a rebound in prices later in the year.

Trade

2016/17 Forecast for Soybean Exports to 57 MMT

Post kept its export forecast at 57 MMT for the 2016/17 marketing year (MY). In contrast to last year, the pace of commercialization is much slower due to producer's expectations of a weaker exchange rate later in the year. Despite the lower commercialization pace, demand is still expected to remain strong in China, Brazil's main soybean market.

Consumption

Higher Biodiesel Demand Expected in 2017

Biodiesel production for 2017 is forecast at 4.4 billion liters based on a modest recovery of the Brazilian economy and the increase of the biodiesel mandate to 8 percent. In March 2016, the Brazilian Government (GOB) approved law #13,263/2016, which increased the biodiesel-use mandate from seven percent (B7) to ten percent (B10) in 2019, as follows: eight percent (B8) in March 2017; nine percent (B9) in March 2018 and ten percent (B10) in March 2019. The total domestic soybean crush for the 2016/17 MY is forecast at 41 MMT. The higher soybean crush forecast compared to last year's estimate reflects higher demands to meet new biodiesel mandates by the GOB.

Policy

New Discussions on the Soybean Moratorium

In July 2006, the members of the Brazilian Vegetable Oil Industry Association (ABIOVE) and the Brazilian Grain Exporters Association (ANEC), pledged not to trade and finance soybeans originated in deforested areas within the Amazon Biome for ten years. In May 2016, the Soybean Moratorium was extended another 10 years until 2026 and it has now become one of the main initiatives in the fight against illegal deforestation in the Amazon Biome.

In an event that took place this month in São Paulo to celebrate the success of this program, the Minister of Environment mentioned the need to extend this program to the Cerrados Biome, which includes the largest soybean producing state in Brazil. These statements, which came as a shock for many in the sector, started a new discussion about the future of the program in a region of Brazil responsible for about 50 percent of the soybean production.