Does soy have a chance of returning to R$ 80?

After the third consecutive decline in soybean prices, the question is: what are the chances of the oilseed rising again? Could it reach the much-dreamed-of level of R$ 80.00 inland? The answer is market specialist Luiz Fernando Pacheco, from T&F Consultoria Agroeconomia.

“Really, prices are almost there, just as they almost reached R$ 95.00 in 2016 and R$ 85.00 in 2018 and… they turned around, making many farmers lose chances at R$ 92.00 and R$ 82, 00, respectively, to sell at prices of R$ 67.00 and R$ 56.00 thereafter. We are not saying that it is the same situation, but, let's see: of the three factors that make up the price of soybeans in Brazil, two practically cancel each other out and one has a strong downward trend”, he explains.

According to him, the factors that cancel each other out are, on the one hand, Chicago – which could rise if North American President Donald Trump agrees with the Chinese, or even if the American harvest is reduced: “Which is still an unknown. which will only be revealed next Friday, the 28th, with the official USDA report on the planted area for the 2018/19 harvest”, he points out. 

Pacheco also points out premiums as a bearish factor: “They will fall even more if Chicago rises, because they have already fallen in practice compared to last month, for example. On the other hand, the Dollar has a strong tendency to continue falling in the short, medium and especially in the long term, as the government manages to implement the pension reform and if Trump reaches an agreement with the Chinese. The American currency corresponds to more or less 35% of the price of soybeans in Brazil, so it weighs a lot and could also nullify or limit any attempt at an increase by Chicago or the premium”.

The T&F analyst also highlights an opportunity that the future Dollar offers. “For March/20, it closed [on Friday] at R$ 3.90, when all 100 economists consulted by the Central Bank for its Focus Report believe it will be no more than R$ 3.75/US$ in the same month. This is a non-negligible difference of 3.84% which corresponds to more or less R$ 3.00/bag. So, our recommendation would be to set part of your export intentions in the current dollar for May/20”, he suggests. 

He warns, however, that it is not a question of “fixing it and forgetting it: you have to monitor it daily, because, if the position reverses, you will have a chance to correct it. So, we don't see prices rising much higher than the levels they are at. We are not saying that they cannot rise, because there are, yes, some possibilities for growth. Do you know when? When both Chicago and the dollar make a quick upward stretch, which the market calls a rally and which lasts a few minutes only on certain very specific days.” 

“Our recommendation is that farmers leave authorizations with their cooperative or cereal company to close when they reach these levels, because there will not be enough time for them to call everyone to collect these authorizations. And don’t bet everything on this, because if it doesn’t arrive, your frustration will be greater than if it arrives and you no longer have any product”, he concludes.

Post: Marina Carvejani
Author: Leonardo Gottems
Source: AGROLINK

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