Agri Commodities Preview: USDA Raises Brazils Soyabean Production Estimate By 2% For MY 2018/19

As per the latest update from United States Department of Agriculture (USDA) , Brazils 2018/19 soybean planted area to increase by two percent, to 35.8 million hectares (ha). The increase in area for the 2018/19 crop is due to expectation of higher prices, higher expected demand by Chinese buyers, and an increase of domestic consumption. Production is forecast to reach 115 million metric tons (mmt), the second largest crop on record. Despite the record planted area, production is forecast slightly lower compared to the previous year based on yields trend. Productivity during the 2017/18 and 2016/17 seasons were way above trend because of ideal weather conditions throughout Brazil and excellent performance by new technologies in the market. Production costs are expected to be slightly higher compared to the previous season because of higher costs of pesticides and fertilizers. However, demand for these products will increase because of higher planting perspectives. It is forecast that fertilizer demand will increase by almost 2 percent to 35 mmt in 2018.Soybean exports for MY 2018/19 (February 2019 to January 2020) are forecast at 67 mmt. FAS/Brasilia expects strong demand by China, Brazils main buyer. The export forecast is slightly lower compared to the previous year due to lower exportable supplies because of higher domestic consumption. Expectations of a weaker Brazilian Real later in 2018 is also keeping exporters optimistic about next year as it could translate to improved domestic prices. The current exchange rate forecast for the end of 2018 is 3.3 Brazilian Real/USD, which is about the same as 2017. However, due to the open race for the presidency unfolding over the next few months, some exchange-rate volatility will be inevitable. The presidential elections are expected to take place in October 2018.