May 21, 2019

Brazil Soy Sales Soar due to Chinese, Dollar, Delays in U.S. Planting

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

Soybean sales in Brazil had been slowing down in recent weeks due to weakening prices, but the trend reversed course over the past ten days. The combination of a weaker Brazilian currency, increased Chinese demand, and the stalled negotiations between the U.S. and China (at least for now) led to millions of tons of soybean sales in Brazil over the past ten days.

The Center for Advanced Studies in Applied Economics (Cepa) reported to Reuters that the Chinese purchased more than 5 million tons of soybeans over the past few days for delivery in June-July-August, which is equivalent to about 100 vessels.

Farmer selling in Brazil had been relatively slow in recent weeks as farmers were hoping for better prices. That seems to have now turned around with the Chinese business being sent to Brazil. In addition to the stalled negotiations, the dollar rose 4% against the Brazilian real last week and there was a swift increase in premiums at Brazilian ports.

Premiums at Brazilian ports had been weakening when it looked like a trade deal between the U.S. and China was reaching a conclusion. That quickly changed when the negotiations stalled. Premiums at the Port of Paranagua last week reached over a dollar per bushel over the July contract on the Chicago Board of Trade, which was more than double from just a few weeks ago and the highest since December 2018.

The Brazilian real weakened last week trading at 4.1 to the dollar on Friday. A weaker currency means that Brazilian farmers put more money in their pocket whenever they sell grain that is priced in dollars. So that too could have stimulated sales.

Another factor that seemed to stimulate soybean sales is the delayed spring planting in the U.S. caused by wet weather. The concern is that if American farmers cannot plant all their intended corn acreage, they may switch some of those acres to soybeans instead, which increases the potential for a larger than anticipated soybean crop in the U.S. That of course would not be good news for soybean prices. Therefore, it looked like Brazilians wanted to take advantage of this brief window of opportunity to lock in prices.