It was the worst of times… it was the even worse yet of times, north and south, for Brazilian soybean farmers in April, May and June of last year.

Politicians in the capital cities of Brazil's traditional number-one and number-two soybean states — Mato Grosso and Paraná — may have been some 800 miles apart geographically, but they were all worried about their farmers.

In Mato Grosso, farmers were protesting over heavy indebtedness and the lack of adequate relief from the government. Farther south, in Paraná, soybean farmers lamented two straight years of poor rainfall that had ruined some, and tried to ruin the rest.

In 2005, the second consecutive year of dry weather in Brazil's South, Elmar Corat managed only 9 bu./acre on his 865 acres of soybeans, when the normal-year yield would be closer to 36. “We went through three years of drought, along with poor yields and poor prices,” he says.

No wonder that this year, when some deliveries of inputs were down ahead of planting, many market-watchers forecast big drops in Brazil's planted area for soybeans for 2006-07.

The exchange rate between the U.S. dollar and the local currency sent predictions further downward, as soybean prices worldwide are based off Chicago's dollar-denominated prices. Market watchers added these concerns to already-building worries about northern debt and southern discouragement.

Then the sun broke out. Consultants, who had not given much thought to the abundant rainfall an El Niño year normally provides here, learned that the lack of fertilizer deliveries might have had as much to do with logistical snafus as sluggish orders. Consultants revised their forecasts upward — not back to last year's levels, but closer.

By the end of January, the beans across most of Brazil looked vigorous, farmers said. Planting may have been down slightly overall, but yields were up, due in part to great weather. Sugarcane alcohol plants springing up across the country (42 of them, scheduled for completion by 2010, were in some stage of discussion in one state alone) and biodiesel operations were readying for the mandatory minimum blends to be nationwide the following year.

But some farmers like Corat aren't ready to celebrate just yet. “This year looks normal,” he says when asked about prices and crop vigor. “But we need at least five good years in order to recover.”

For one thing, the exchange rate is a mess, he says. “In 2001, we had about the same exchange rate as today, but diesel fuel costs have doubled since then.” The exchange rate is crucial to soybean farmers, whose crop returns are based on Chicago prices — in dollars.

As for the weather, he says, those with irrational soybean exuberance may just be excited because the rains have finally come back to the South. “The weather is good, but not exceptional,” he says.

While some farmers up in Mato Grosso, far from ports, sold their beans on the futures market for U.S. $4.54/bu., Corat says that's not good enough. “The price is relative,“ he says. “In this area, with fuel and inputs costs where they are, we need at least R$7.85/bu.” With late January prices at his cooperative hovering around only R$5.89/bu., Corat said he was content to wait until harvest is in progress, sometime in April, to decide how much to sell.