Porto Alegre, August 6, 2020 – The Brazilian soybean market posted rising prices but little business in July. The month was marked by the distance between export parity and prices in the interior due to the lack of product and a more withdrawn position of growers. The prices charged in the Brazilian market beat records again.
Sellers took advantage of the favorable conditions in the first half of the year – particularly in May, when the dollar touched BRL 6.00 – and traded almost the entire 2019/20 crop and much of the soybeans that had not even been planted. As a consequence, growers are well-capitalized and wait for even better quotes.
Demand remains firm, and supply is running out. As a result, prices continue to rise, despite the dollar’s decline in July and the slight increase in futures contracts in Chicago. Export premiums continue to appreciate, reflecting this picture of product scarcity. In some places in the interior of the country, the premiums paid in the domestic market already exceed the premiums paid for exports. The scarcity of supply until the arrival of the new crop must keep supporting prices in the coming months.
In Rio Grande do Sul, a 60-kg bag jumped from BRL 114.50 to 119.00 in Passo Fundo in July. In Rio Grande, prices jumped from BRL 117.50 to 122.00. In Paraná, prices rose from BRL 110 to 113.50 in Cascavel and from BRL 117.00 to 120.00 at the port of Paranaguá.
In Rondonópolis (MT), prices went up from BRL 109.00 to 115.00 in the period. In Dourados (MS), prices rose from BRL 107.00 to 114.00. In Rio Verde (GO), a bag surged from BRL 105.00 to 110.00.
On the Chicago Board of Trade (CBOT), contracts maturing in November appreciated by 1.16% in July, ending the month at USD 8.92. Over July, the prices exceeded USD 9.00 per bushel amid signs of recovery in the U.S. demand, despite favorable forecasts for the U.S. crop, which is in development stage.
The dollar fell by 5% in July, ending the month at BRL 5.2160. The injection of resources in important world economies and favorable information around a vaccine to fight the coronavirus helped put pressure on the currency, but global uncertainties still deserve attention.
As mentioned, the scarcity of supply in the Brazilian soybean market is expected to remain the main factor supporting prices in the coming months, even if there are negative adjustments in Chicago and the exchange rate. Yet, business must continue at a slow pace, as more than 90% of the physical crop and more than 40% of the new crop have already been traded. In August, growers must concentrate on the preparations for the planting start of the new Brazilian crop in September. We recall that the initial estimates point to new record area and production potential in the country, which may surpass the mark of 130 million tons of soybeans for the first time in history.