Brazil's soybean sowing season looks set to begin with a whimper, thanks to a triple setback from price, tight credit and dryness – and with some worries about seed quality on top.
September 15 fires the starting gun on Brazilian plantings of the oilseed, in bringing an end to a soybean-free period, when live crops are not allowed in fields in major growing areas in an effort to curtail the spread of pests and disease.
However, expectations of the rise in sowings suggest a sharp slowdown from the 1m-hectare increase for last season, with the US Department of Agriculture this week near-halving its forecast for the increase 600,000 hectares.
At 1.8%, this would represent the slowest pace of growth in Brazil's soybean area in a decade.
The USDA overnight, explaining the reasons behind its downgrade, said that the revision reflected the relatively weak price of the oilseed compared with corn, soybeans' arch rival in the sowings campaign.
Forecasts for Brazilian soybean sowings and (production) 2016-17, and date of forecast
USDA: 33.7m hectares, (101.0m tonnes), Sept 12
AGR Rural: 33.4m hectares, (104.0m tonnes), Sept 6
Carlos Cogo Consultoria: 33.6m hectares, (103.5m tonnes), Sept 6
Informa Economics: 34.1m hectares, (105.0m tonnes), Sept 6
Horizon: n/a, (103.3m tonnes), Sept 5
INTL FCStone: 33.56m hectares, (101.85m tonnes), Sept 1
"The price ratio for soybeans relative to corn is now depressed to a five-year low."
The ratio of soybean prices, as measured at the port of Paranagua, compared with a corn price index kept by research institute Cepea has fallen to 1.9 times, from more than 2.2 times two months ago.
A year ago, it stood at nearly 2.7 times, implying a bigger incentive for growing the oilseed than corn.
The USDA's comments follow a caution two weeks ago from broker FCStone over tight credit conditions, amid Brazil's worst recession in decades, at a time of concern anyway over farm finances.
The broker forecast soybean plantings rising by just 315,000 hectares to 33.56m hectares.
At Soybean and Corn Advisor, Michael Cordonnier said that "the financial situation of many farmers in central Brazil is troublesome.
"They had a bad growing season last year and many farmers are having trouble paying their production loans or fulfilling their forward grain contracts.
"These farmers are being advised to be cautious in their plating plans to avoid the possibility of having to replant."
Meanwhile, weather looks set to prevent in farmers making swift early headway in what they do decide to sow, with dryness in central areas, including the main growing state of Mato Grosso, making for poor plantings conditions.
"Meteorologists and farm groups though have advised farmers in Mato Grosso and central Brazil to be cautious about rushing out to the field with their planters due to the uncertain weather forecast," Dr Cordonnier said.
"There were some rains in Mato Grosso during the second half of August, which helped to recharge some of the soil moisture, but it has been dry since then and there is little rainfall in the forecast until the last week of September.
"Meteorologists in Brazil are forecasting that significant summer rains may not materialise until the second half of October."
There are concerns too over the availability of seed this year, after last season's disappointing harvest.
Dr Cordonnier, flagging "doubts about the seed supply", said that "soybean seed production was also impacted by last year's adverse weather", although this was likely to affect most farmers needing to replant failed crops.
"There is a concern that if a farmer needs to replant their soybeans, he may not be able to purchase the variety he likes or the germination may be sub-par."
The poor quality of last year's soybean crop has been cited too as fuelling a surge in Brazilian soyoil prices, which rose 16% last month according to Cepea, which noted a "high percentage of below-standard" beans, particularly in the Centre West region.
"Most batches of soybeans available for sale in Brazil were [of] below-quality standard."
The weak quality of the beans "reduced the supply of Brazilian soyoil" and increased competition in late August for higher specification supplies in particular.
In an extra blow farmers, the USDA cautioned that, despite the weaker prospects for Brazil's 2016-17 soybean harvest - which it downgraded this week by 2m tonnes to 101m tonnes – this would not be reflected in inventories, implying weaker pricing prospects ahead.
"A smaller crop may not further tighten soybean ending stocks in Brazil due to less dynamic prospects for export demand," the USDA said in its briefing overnight.
"This fall, more formidable US competition and limited old-crop supplies will constrain soybean shipments from Brazil."
The USDA also underlined the weaker prospects for soybean purchases by China, the top importer, thanks to a stronger domestic crop, sales from state reserves and a dent to feed demand from the broiler industry, thanks curbs on buy-ins of foreign breeding birds.
However, there is some concern in Chicago that some Chinese importers may be more tempted to buy agricultural commodities from non-US sources, after Washington on Tuesday revealed it was taking China to the World Trade Organization over grain production subsidies.
In fact, there is talk that China, the top soybean importer, "has been an active buyer of new-crop Brazil soybeans this week", Futures International's Terry Reilly said.
Chinese buyers might only be encouraged to turn to the US's biggest soybean export rival, if they have taken umbrage at Washington's decision to take China to the WTO over some crop subsidies.
"Now there are people wondering if trade implications will affect US soybean shipments in 2017," said Terry Reilly at Chicago broker Futures International.
He also noted talk that "China has been an active buyer of new-crop Brazil soybeans this week".
By Mike Verdin