Brazilian farmers are happy about current soybean prices and are continuing to sell both old-crop and new-crop soybeans. A Brazilian consulting company, AgRural, said recently that farmers had sold 64% of old-crop soybeans (2017-18), as well as 6% of new-crop bean (2018-19) by the end of April.
Soybean cash price in Brazil increased dramatically in the past several months, thanks to Argentina’s dry conditions, a possible trade war between China and the United States, as well as depreciation of Brazil currency, the real, to the U.S. dollar.
“Price is favorable for farmers recently to sell their soybeans,” Carlos Alberto told DTN in mid-April. “Cash soybean price in my town is 74 real per bag ($10 per bushel) this week, compared to 65 reals per bag ($8.67 per bushel) one month ago, an increase of 14% in one month.” Alberto is the general marketing director of CooperFibra, a farmers’ cooperative with 185 members farming 140,000 hectares (almost 346,000 acres) of soybean crop.
Alberto’s job is to help his members market their products. “So far, within our co-op, farmers sold 70% of old-crop beans and 15% of new-crop beans.” He said some farmers regretted selling their crop earlier, as the price kept going up in the past few months.
“Farmers are not only selling on a good price, they also had good production this year,” said Alberto, “Our members harvested an average of 63 bags per hectare (56.2 bushels per acre) this year, five bags (4.5 bpa) higher than what they did last year. Some farmers even achieved a high yield of 68 bags per hectare (60.7 bpa).”
But farmers still hesitate to sell their new-crop beans; they worry about the exchange rate in the following half-year. “There is still a high possibility that (the) Brazil real will depreciate against (the) U.S. dollar. (The) political situation is not stable in Brazil. We are also facing the presidential election in October. The political instability will bring more volatility on (the) economy, which will impact on the exchange rate,” explained Alberto.
Brazil currency keeps depreciating. As of May 8, the exchange rate reached one dollar to 3.59 reals, a new low in the past two years.
A possible tariff on U.S. soybean exports to China provides Brazilian farmers and exporters a good time to increase their soybean premium. Brazil’s FOB premium at the Port of Paranagua normally changes between zero to 60 cents per bushel during the harvest season. But, this year, the market gave Brazil’s exporters a good opportunity to raise their premiums. On April 4, when China announced its intention to impose a 25% tariff on U.S. soybean imports, Brazilian export premiums for June 2018 reached 175 cents per bushel over Chicago.
“FOB price experienced huge volatility during April,” said Marcos Martin, president of MBrazil, a trading house in Sao Paulo. He said that, some days, the FOB price went much higher than the Chicago price. “I have never seen this in my life.”
While the export market is good for Brazilian soybeans, domestic crushing margins are also good, said Martin. “(The) Brazilian government is increasing the mandate of biodiesel blend from B8 to B10 this year. That is an increase of 2% of biodiesel demand in the country, which stimulates soybean oil demand and soybean crushing margins in Brazil.”
The high premiums in Brazil’s ports made some companies look for possibilities to import U.S. soybeans, after seeing some U.S. soybean cargos booked for Argentina crushing plants. “Our logistic protocol does not support import bean shipment,” said Martin, “but, some of the companies may use (the) fertilizer berth to discharge soybean and ship to crushing plants. However, there no real movement on this so far.”