The Brazilian government's decision last month to stop defending its currency (the real) and to allow it to float came as a surprise to Wall Street, but not as a surprise in Brazil.

The government was wasting billions of dollars each month to defend the value of the real. When government officials in the finance department finally realized it was a hopeless cause, the president declared an economic emergency, and within a week, the real had dropped 34%.

Many are asking how this will impact 1999 soybean crop sales and how it will impact next year's production.

Any major change in economic policy creates winners and losers and a great deal of uncertainty. The uncertainty itself has been a negative influence on soybean prices.

During the next few months, will the devaluation stimulate Brazilian farmers to sell more of their soybean crop? No, according to several sources. The only producers who will sell quickly will be those who have a large amount of short-term debt that is on a variable interest rate loan.

Many producers will hold on as long as they can. Brazil now has adequate storage, and many producers would rather hold onto cash soybeans than convert them into paper money that could continue to drop in value. This remains a buyer's market throughout the world. Processors and exporters, however, are willing to wait to buy soybeans because there are plenty around.

The Brazilian growers who did sell soybeans ahead have been hurt by the devaluation. Many sold in late November. The delivered price was around $5.50/bu, and the real was worth 1.2 to the dollar, so the Brazilian farmer was receiving about 6.6 Brazilian real per bushel.

By mid-January the delivered price had dropped to $5/bu, but the real was trading at 1.55 to the dollar. Growers were getting 7.75 Brazilian real per bushel.

Growers who sold soybeans early made the right pricing decision, but have been blindsided by the currency market. I have listed the obvious winners and losers in the currency devaluation in Brazil so far. This will no doubt change by next year.

Winners:

* Global soybean buyers.

* Producers with fixed-rate loans.

* Producers who made major capitol purchases of tractors or combines last year.

* Producers with long-term, fixed-rate land contracts.

Losers:

* Producers who sold soybeans ahead.

* Producers with variable interest-rate loans.

* Producers with large short-term debts.

* Producers who sold land on fixed-rate contracts.

Looking ahead, it will be difficult to sort out the total impact on Brazilian farmers for the years 1999 and 2000. We do see a good chance that less corn will be planted next year, because it requires more expensive inputs to plant corn than soybeans or wheat. Look for fewer inputs to be applied.

In the current cost-price squeeze, many farmers will go with bin-run seed, less fertilizer, less herbicide and less insecticide. This could have a major impact on production if any weather problem develops, which puts additional stress on Brazilian beans next year. It will create more volatility during the next growing season in South America.