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April 25, 2019

Soybean Premiums decline significantly at Brazilian Ports

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Brazilian farmers who still have soybeans left to sell from their 2018/19 crops are being advised to hold onto their soybeans if possible for improved prices going forward. Farmers in Brazil have sold 52% of their 2018/19 soybeans and the selling pace has slowed down recently. It is no surprise why the selling has slowed - lower prices in Chicago, lower domestic prices in Brazil, and lower premiums at Brazilian ports.

Last year at this time, the premiums for soybeans at Brazilian ports were $2.00 per bushel over Chicago or more due to the strong demand from China. Those soaring premiums have disappeared this year. Over the past 30 days, the soybean premiums at Brazilian ports have declined significantly. In April, the average premium declined 32% from $0.40 over Chicago to $0.27 over Chicago. For July, the premium declined from $0.55 to $0.40 over Chicago.

Not much business is being conducted because sellers are asking for premiums of $0.90 over Chicago for April and May and $1.00 for June and July.

Most advisory firms in Brazil are recommending to their farmer clients to wait on future sales for something to spur prices higher such as: a weather problem during the U.S. growing season, a devaluation of the Brazilian currency, or higher domestic prices later in the year due to short domestic supplies of soybeans.

In contrast, some advisors are recommending that farmers sell their remaining soybeans due to the possibility that the Brazilian Congress may pass pension reforms which could result in a stronger Brazilian currency and even lower domestic soybean prices.

Thus far this year, Brazilian soybean exports have been very strong. Brazil has already exported 23.9 million tons of soybeans in 2019 compared to 20 million tons during the same period in 2018. If you look at the entire soybean complex, Brazil has exported 28.9 million tons thus far in 2019 compared to 25.3 million tons in 2018. The concern is that the exports have been strong enough to result in very tight domestic soybean supplies later in the year and potentially higher prices.

Soybeans have been the number one export item from Brazil in 2019 in total value. The value of Brazil's soybean exports thus far in 2019 is US$ 2.8 billion followed by petroleum at US$ 2.2 billion and iron ore at US$ 632 million.