The soybean bag reached R$200 in Brazil, a record not imagined until last year, and premiums at the ports are also six times above the average for this time of year, as a reflection of a dispute between foreign and domestic markets. With a 15% increase accumulated in 2022 in Chicago’s stock market, the oilseed will is getting closer to the historical value reached in the first half of 2021, of $16.42 per bushel. And the coming months may be even tenser.
The persistent drought that affects the South of Brazil, Argentina, and Paraguay, caused by the La Niña weather phenomenon, tends to make production in the three countries lower than previously calculated. As a result, for fear of product shortages, soybean importers, mainly China, are intensifying purchases from the U.S.
“China needs to buy a sizable percentage in April and May. This has created an uncommon situation, which is the simultaneous increase in values and export premiums,” says analyst Cristiano Palavro, with Pátria Agronegócios.
On Wednesday, in Passo Fundo (Rio Grande do Sul state), industries were already offering R$202 per soybean bag, according to consultant Vlamir Brandalizze.
And the premium in Paranaguá (Paraná state) – national reference – was between $1.10 and $1.20 for March, when the prices for this time of the year usually stay between $0.20 and $0.30 a bushel, says Etore Barone, with StoneX consultant.
“With shortages from other suppliers, the 2020/21 ending stocks in the U.S. will be reduced. And with the smaller crop here, the 2021/22 crop is already tighter. If there is no area increase in the U.S. for the April season, or if something goes wrong during the cycle, we will have a worldwide problem,” Mr. Etore adds.
In the last few days, a new round of estimates pointed out that the harvest loss in Brazil will be even greater than expected. At the beginning of the cycle, 140 million tonnes were expected. Then, with the drought problem, the expectation went to a range between 130 million tonnes and 135 million tonnes. Now, it has dropped one more level, to 125 million tonnes, among the main consulting firms.
According to Mr. Barone, the harvest loss in Argentina may reach up to 6 million tonnes, and it may reach between 4 million tonnes and 5 million tonnes in Paraguay.
“The dream of the Brazilian producer was for the bag to reach R$100, which happened in August 2020. Last year’s average was between R$150 and R$170 and now we foresee that it may reach more than R$ 200,” he evaluates.
The producer also has the exchange rate in his favor, still attractive despite the recent fall. “The dollar at R$5.30 makes the Brazilian soy bag very profitable,” adds Mr. Barone.
There is a fight today to keep the product in the domestic market, since the main crushers are in Paraná and Rio Grande do Sul, the states most affected by the drought, according to Mr. Barone and Mr. Palavro. In Paraná, StoneX’s initial harvest forecast was 22 million tonnes, but now is 15 million tonnes. In Rio Grande do Sul it went from 22 million tonnes to 12.5 million tonnes.
With such attractive figures, Mr. Palavro says that soybean negotiations in Brazil have regained pace. However, part of the farmers is delaying business to wait for even higher prices.
Source: Valor International