A weak domestic currency means Brazilian farmers are not getting the same price signals as their North American counterparts – something that could have significant implications, especially for the burdensome soybean market.
In a presentation at the Ontario Agricultural Conference earlier this month, AgResource Co chief grains analyst Ben Buckner said the downtrodden Brazilian real is artificially inflating corn and soybean returns for farmers in that country, incentivizing them to plant and produce more at a time when producers in this part of the world are already struggling with weaker prices.
It is a particular problem for the soybean market, given that global supplies are already much heavier, compared to corn.
As part of his presentation, Buckner displayed a graph which showed the spot Chicago Board of Trade (CBOT) soybean price down 21% from a year earlier. But when converted into the Brazilian currency, the CBOT price is little changed on the year. For corn, the CBOT spot price is now basically unchanged from a year ago. But for Brazilian farmers, the currency issue means the CBOT price is 25% higher.