South America Calling
Alastair Stewart South America Correspondent

Monday 07/14/14

Brazil's Soybean Market Firm

Chicago soybean futures may have taken a huge hit over the last month, but Brazilian prices have remained pretty firm.

Beans were quoted at 55.50 Brazilian reals per 60-kilogram bag ($11.55 per bushel) on Friday in Sorriso, Mato Grosso, stable on the week before and just 3% down on one month ago.

Underpinning local prices is demand from abroad and stockpiling at home.

Enquiries from Chinese buyers continue to come in thick and fast. This sustained interest prompted ABIOVE, the Brazilian soybean crushers association, to recently raise its 2014 bean export forecast from 43 million metric tons (mmt) to 44 mmt and has also contributed to a jump in premiums at port.

At Paranagua port, soybeans are quoted at 150 cents per bushel over Chicago for July and August delivery. That's roughly 70 cents above two weeks ago.

Intensifying interest in Brazilian beans is the limited availability out of Argentina, where farmers are stockpiling amid the economic stability caused by the threat of a sovereign debt default.

Brazilian farmers also aren't making many soybeans available. The market has been slow for the last few weeks as well-capitalized farmers hold on to remaining stocks in the hope of further price peaks. Given the bearish nature of Chicago in recent times, it seems like a dangerous strategy. But they aren't just looking at futures. They are also eyeing the exchange rate.

The Brazilian real has strengthened significantly over the last three months. On Monday, the currency was quoted at R$2.22 to the dollar, or nearly 10% stronger than in February.

But economists believe this trend will reverse in the second quarter amid continuing poor economic performance and election uncertainty. Farmers believe this may create a window to sell the rest of their crop well.

At present, farmer sales of the 2013-14 crop are roughly in line with previous years. Brazilian farmers had sold 82% of their 2013-14 soybean crop as of July 11, down from 84% last year but the same as the five-year average of 82%, according to Safras e Mercado, a local farm consultancy.

Safras pegs the 2013-14 soybean crop at 86.6 million metric tons (mmt), leaving 15.5 mmt available for purchase.


Posted at 11:17AM CDT 07/14/14 by Alastair Stewart
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