- Posted by Marina
Chicago soybean prices were down much of the week, pending the USDA supply and demand report. This report was released on 12/08 and brought down numbers for the oilseed. However, oilseed prices, contradictorily, have risen since that day, again breaking the $ 9.00 / bushel ceiling. The main reason was the strong presence of China at the buying end.
Analysis of the International Center for Economic Analysis and Agricultural Market Studies.
Thus, on Thursday (13) the first month quoted closed the day at $ 9.07 / bushel, against $ 8.80 a week earlier. The USDA report brought the following numbers for 2020/21:
1) Projection of US harvest of 120.4 million tons, against 112.5 indicated in July, confirming the trend pointed out also in this space that there could be an increase in the final production of that country;
2) Final inventories in the USA, with this, rise to 16.6 million tons, against 11.6 million in July;
3) The average price for US soybean producers drops to US $ 8.35 / bushel, against US $ 8.55 on the average of a year earlier;
4) Soy production in Brazil and Argentina was maintained at 131 million and 53.5 million tons, respectively;
5) Imports from China rose to 99 million tons, from 96 million in the previous report;
6) World soybean production jumps to 370.4 million tons, gaining 8 million tons in relation to that indicated in July;
7) The final world stocks would now be 95.4 million tons, against 95.1 million in July and 95.8 million the previous year.
In practice, the report is bearish and may put pressure on prices in the coming weeks, especially when the harvest begins. But it will all depend on the intensity of Chinese purchases. For now, they are very strong, keeping Chicago at current levels. Even so, the volume purchased by the Chinese remains below what was agreed with the United States at the time of the signing of Phase One of the trade agreement between the two countries, on the far January 15th of this year.
News circulates that China would be exchanging cargoes of Brazilian soybeans, purchased months ago, for US soybeans, which are currently cheaper. (cf. Bloomberg) As this is confirmed and becoming more constant, there will be downward pressure on premiums at Brazilian ports and on the price of oilseeds in the country in general just ahead. That said, some operators believe that such a move may not change the national price framework because the cost of diverting ships would be too expensive.
According to Agrinvest, Brazil no longer has soybeans from the last harvest to export, and is expecting the 2021 harvest as of next February. If Brazil closed total foreign sales at 82 million tonnes in this current harvest, 80% would have been to China. This represents 65.6 million tons. The Chinese would be missing 30.4 million tonnes to close at 96 million tonnes projected by the USDA for this year 2019/20. These will be supplied by the USA and Argentina. Chinese demand is resuming rapidly due to the restoration of local pig plantations after the African swine fever that struck there.
In July alone, China imported 10.1 million tons of soybeans and in the first quarter of 2020 it already increased its imports of corn by 27%, another important component in animal feed. "Brazil had record soybean production this year, while the real depreciated. Brazilian grains are cheap and the crushing margins are large, so the crushers made very active purchases," Xie Huilan, an analyst at agricultural consultancy Cofeed, said. Reuters International. (cf. Agricultural News) In addition, the exchange rate issue further reduced Brazilian logistics expenditure, increasing Brazil's competitiveness vis-à-vis the USA. For example: a
internal logistics of a farm in the Middle North of Mato Grosso, even inside the ship, gave US $ 90.00 per ton, when the dollar was R $ 4.00. At the peak, with that dollar hitting R $ 5.90 / R $ 6.00, it dropped to US $ 60.00. In other words, it was US $ 30.00 per ton, practically US $ 1.00 per bushel, that Brazil gained from competitiveness in the destination. That is why Brazilian soy was the most preferred this year. (cf. Agrinvest)
For now, there would be no room for a reduction in Chinese soy purchases. China would still need to buy between 25 and 30 million tonnes this year to be supplied. On the other hand, soybean crops in the USA continue to improve in quality. According to the USDA, up to 08/09, they reached 74% between good and excellent, with a gain of one percentage point over the previous week. Of the total, 92% were in the flowering phase and 75% in pod formation.
Here in Brazil, the exchange rate depreciated the Real again, which surpassed R $ 5.40 per dollar during the week, even approaching R $ 5.50 at times. With this, and in the face of high premiums (above US $ 2.00 / bushel in many places, at the selling point), prices rose again. Thus, the gaúcho counter closed at an average of R $ 113.38 / bag, while in the other markets prices were between R $ 106.50 and R $ 107.50 in Paraná; R $ 109.00 in Campo Novo do Parecis (MT); R $ 122.00 at the CIF Maracaju (MS); R $ 98.50 in Rio Verde (GO); and R $ 105.00 / bag in Luís Eduardo Magalhães (BA).
With the increasing reduction in the supply of soybeans in Brazil, monthly exports fall. Anec forecasts that external sales of oilseeds, in August, will drop to 6.5 million tons, against 6.7 million in the projection at the beginning of the month. In the case of soybean meal, the month of August should register 1.63 million tons, against 1.49 million previously forecast.
In these volumes being confirmed, in the first eight months of the year Brazil will export 76.3 million tons of soy beans (+ 35.2% over the same period last year) and 11.6 million tons of soy bran (+ 10.4%). In turn, Conab revised its estimates for the last Brazilian harvest, increasing the final volume of soybeans harvested to 120.9 million tons. At the same time, it estimates exports at 82 million tonnes, in line with what traders in the Brazilian market indicate.
On the other hand, soybean prices are so good that producers in Mato Grosso have already started selling soybeans from the 2021/22 harvest in advance, which will only be planted in September next year. Sales, by the end of July, would have reached 1.29% of the total harvest expected for that year. In historical terms, this commercialization should only start in December. For the 2020/21 harvest (the next), which will be sown from next month, anticipated sales in Mato Grosso already reach 50.5% of the projected total, against 23.5% in the historical average (cf. Imea ). Finally, according to the Esalq / BM & FBovespa and CEPEA / ESALQ indicators, taking as reference the port of Paranaguá (PR), soybean prices continue to break historical records, including in real terms. On 08/06, for example, these indicators reached the highest levels since November 2012, in real terms (based on the IGP-DI of Jul / 20). At the time, the current real price closed at R $ 124.31 / bag, against R $ 117.17 / bag in November 2012. In view of the strong exports, the Brazilian milling industries continue to struggle to buy soybeans, with a lot of competition increase in imports from Paraguay and Argentina. At the same time, given the internal grinding difficulties, the production of soy oil for biodiesel is decreasing, a fact that is leading the government to announce a provisional reduction in the mixture of this biodiesel with diesel from petroleum, from 12% to 10%.
More than 70% of Brazilian biodiesel is made from soy oil.