Jul 10, 2020

Domestic Soybean Prices Strengthen in Brazil as Supply Tightens

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

As Brazilian farmers prepare to plant their 2020/21 soybean crop starting in September, they are also paying close attention to the market in order to judge when to sell the last 8-9% of their 2019/20 soybean production. Since the first of the year, farmers have been very aggressive sellers of their soybeans in order to take advantage of record high or near record high domestic soybean prices.

Brazilian farmers had sold 91.2% of their 2019/20 soybean production as of July 3rd compared to 74.4% last year and 76.3% average according to the consulting firm Datagro. Sales of the 2020/21 soybean crop were 36.2% compared to 18.2% last year and 13.9% average.

According to the Mato Grosso Institute of Agricultural Economics (Imea), the available supplies of soybeans in the state of Mato Grosso is selling for some of the highest prices in recent years. Imea reported that the average price of available soybeans in the state last week was R$ 101.58 per sack (approximately $9.00 per bushel), which was 1.5% higher than the prior week when soybeans closed at R$ 100.34 per sack (approximately $8.90 per bushel).

The higher prices last week were the result of a combination of factors including: a dwindling supply of soybeans, higher prices on the Chicago Board of Trade, and a weaker Brazilian currency that traded last week at 5.39 Brazilian reals per U.S. dollar.

Record soybean exports during the last four months has resulted in much tighter domestic supplies. From January through June of this year, Mato Grosso has exported 15.6% more soybeans compared to the same period in 2019. The USDA is estimating that by the end of the Brazilian marketing year, which will be January 31, 2021, the supplies of soybeans in Brazil will be the lowest in four years.