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BrasilAgro hikes forward soy hedging, exploiting weak real

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BrasilAgro gave evidence of Brazilian farmers' accelerated rate of forward crop sales by revealing it had hedged nearly two-thirds of its next soybean harvest already, even with sowings still in progress.

The Brazilian farm operator revealed it had hedged 64.1% of its forecast soybean crop for 2015-16 as of the end of October - up from a figure of just 16.4% three months before.

The proportion of the crop sold forward was also far higher than the 19.6% of the 2014-15 crop hedged as of the end of October a year ago.

The difference comes amid widespread talk of Brazilian growers locking in soybean prices which, even with benchmark Chicago futures on Thursday hitting a contract closing low of $8.64 a bushel, offer the prospect of a decent profit – thanks to the weakness of the real.

The currency's decline boosts the value, in local terms, of dollar-denominated assets.

Marcelo Fernandes Guimãres, deputy director of the department of economic studies at Brazil's agriculture ministry said last month that soybean prices could fall to $7-7.50 a bushel and it would "still be profitable for Brazilian farmers" to grow the oilseed.

'High pace of commercialisation'

In dollar terms, the price that BrasilAgro achieved for its forward sold soybeans, at $9.20 a bushel, was 14% lower than the value it had achieved a year ago hedging the 2014-15 crop.

However, the real has depreciated by some 38% over the last year, being worth $0.26 as of the close of last month compared with nearly $0.42 a year before.

Earlier this week, US Department of Agriculture staff in Brasilia highlighted a "high pace of commercialisation" by Brazilian farmers of their 2015-16 crop, of which harvesting will start early in 2016, and of which less than 50% has been seeded.

In Mato Grosso, the top soybean producing state, farmers had sold forward 47.9% of their soybeans as of last month, compared with just 15.9% a year before, according to research institute Imea.

Plantings drop

BrasilAgro flagged its enthusiasm for selling soybeans forward even as it revealed that its sowings of the oilseed for 2015-16 at its Brazilian farmers, at 31,203 hectares, would fall by 35% year on year.

The decline reflects the sale of a number of farms, totalling nearly 28,000 hectares, over the last year for R$270m.

"We have to be aware that, while farm sales generate exceptional results, it also leads to operational fluctuations," the group said.

"But we have to accept this aspect with tranquillity, given that it is an integral part of our business model."

Area sown with main-crop corn will slump by 78% to 2,000 hectares, with safrinha seedings - planted as a second crop on land vacated by the soybean harvest – will be limited to 686 hectares, compared with 1,787 hectares last time.

However, the group said that it was increasing its allocation of land to sugar cane by 18.6% to 10,039 tonnes.

These figures exclude 13,655 hectares farmed in Paraguay.

'Great opportunities'

BrasilAgro signalled its willingness to return to land purchases, and exploit potential opportunities created by "an extremely delicate period in Brazil's economy".

"We are in a favorable position with our strengthened cash to undertake major investments.

"More than ever, this moment of crisis will bring great opportunities, leading the company to a position of even greater prominence in Brazil's agricultural sector."

Profits soar

The comments came as the group unveiled a jump in earnings for the July-to-September period, the first quarter of its financial year, to R$44.5m, from R$1.58m a year before.

Revenues rose by 21% to R$61.68m, with results receiving a boost too from gains on financial derivatives.

BrasilAgro shares stood 1.5% higher at R$11.54 in morning deals in Sao Paulo.


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