Brazil's 2017-18 soybean production and potential exports have both been marked down in a USDA attaché report, ahead of tomorrow's all-important Wasde figures.
The report estimates production for the 2017-18 marketing year, starting in February 2018, at 105m tonnes or 8% lower than the 114m tonnes harvested in the current 2016/17 marketing year.
The large 2016-17 crop resulted from "near perfect" growing and harvesting conditions, and has already seen a sharp increase in exports.
The attaché expects a record full year export total of 64m tonnes, marginally lower than the official USDA figure of 64.1m tonnes, which may change in the WASDE.
Indeed, Brazil's soybean exports for the first four months of the current marketing year are already 11.5% ahead of the previous one.
"The low incidence of pests along the crop cycle, good rainfall distribution in most of the country and increased investment in technology, contributed to record yields by a large margin," noted the attaché.
The average 2016-17 crop yield is put at 3.34 tonnes a hectare.
However, using a trend yield to estimate 2017-18 soybean production reduces the figure, despite a 1.2% increase in the crop's planted area to 34.4m hectares.
While this is a record soybean area for Brazil, it also marks a slowing in the rate of area growth - it is the smallest area increase in the last five years.
The local attaché estimate is also below the official USDA figure of 34.7m hectares.
The US analyst says farmers have slowed their growth in soybean plantings due to lower crop prices, the ongoing political uncertainty in Brazil and its related currency volatility.
Prices have been falling since the start of the year – the 9% year-on year drop in January had widened to a 30% reduction by June when the crop was worth R$63.59 per 60 kilogramme bag.
The uncertainty means more farmers are holding on to their harvested soybean crop, as devaluation increases the domestic value of their product (priced in US dollars) against the export value.
The attaché estimates that 60% of the 2016-17 crop has been contracted, about 15% less than at the same stage a year ago.
But with more soybeans in crop stores, there could be pressure on space to store the corn harvest.
Looking ahead to next season, the local attaché estimates 2017-18 soybean exports of 62.0m tonnes, down 3% year-on-year and lower than the official USDA figure of 63.5m tonnes.
This is in line with a smaller harvest and higher domestic processing volumes as higher biodiesel blending mandates come into force.
China is expected to remain the largest export customer.
By Jamie Day