Despite experiencing a severe drought that evokes the hardships of the previous growing season, Brazilian soybean producers are cautiously optimistic about the 2024/25 crop. Industry forecasts, bolstered by predictions of increased rainfall from October onwards, suggest a potential 14% increase in soybean production, rising to an estimated 168 million tons from last year’s 147.4 million tons, according to a comprehensive Reuters poll that surveyed ten leading analysts and institutions.
The anticipated rebound is underpinned by expectations of a recovery in productivity, which suffered significantly across various states due to unfavorable weather conditions last season. The National Supply Company (Conab) notes that, although planting may be delayed due to the current drought conditions, the productivity improvements are key to achieving the projected growth.
However, expansion in the soybean planting area is expected to be modest. At a forecasted 46.6 million hectares—a record but only a 1.3% increase from the previous year—the growth rate is the lowest since the 2006/07 season. This restrained expansion reflects the broader industry challenge of lower soybean prices, which are currently near four-year lows on the Chicago exchange, squeezing profit margins and disincentivizing further growth in planting areas.
Luiz Fernando Roque, an analyst from Safras & Mercado, which holds the highest production forecast among the institutions surveyed at 171.5 million tons, emphasized the impact of financial pressures. “This year’s growth is significantly lower than the 5% average seen in recent years,” Roque explained. “The contraction is due primarily to tighter profit margins as a result of the depressed soybean prices.”
Gabriel Faleiros, LATAM research manager at S&P Global Commodity Insights, echoed these sentiments. He highlighted the leveling price for converting pastures to soybean fields in Brazil at around $9.50 per bushel, closely aligning with the recent lows in Chicago, which offers little incentive for producers to expand their cultivated area.
Despite these economic constraints, there is a strong sentiment within the industry that yield recoveries will be robust, especially with climatic models predicting an improvement in rainfall conditions starting in October. Faleiros reassured stakeholders, noting, "Although September's rainfall is below average, historically only about 4% of the crop is planted by the end of this month. From October onwards, we anticipate normal harvest conditions with minimal impact from La Niña, which appears to be weakening."
The strategic decisions regarding how much area to plant will be pivotal. S&P Global projects the smallest area expansion in about 15 years, indicating a cautious approach amid current market conditions. Analyst Daniele Siqueira from AgRural pointed out the critical nature of following climate trends closely. “Discussing productivity at this juncture is premature; the focus should be on the extent of area expansion, given the current economic scenario,” she stated.
As Brazilian soybean producers prepare for the upcoming planting season, the industry remains hopeful that improved weather will enable them to overcome the economic challenges posed by low market prices, securing profitability through enhanced productivity.
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