Brazil's outright prices surge after USDA report and China demand

11 Jul 2023 | Victor Gusmao

Outright prices for Brazilian soybeans loading in August rose sharply on Tuesday, amid expectations of higher Chinese demand for the country’s beans in the second half of 2023 following the release of the USDA’s prospective planting report on June 30.

The report caught the market by surprise after it lowered the US soybean planted area to 83.5 million acres, 5% under last year’s 87.45 million acres and well below analysts’ expectations that ranged from 87 to 88.5 million acres prior to the report.

That was said to be one of the reasons pushing CME’s soybean futures up all along the curve, with the August futures contract rising $1/bu since June 29 to $14.64/bu on Monday, July 10.

At the same time, the Brazilian August loading basis was slightly down 10 c/bu during the same period, assessed at 50 c/bu on Monday.

However, that was not enough to offset the higher futures influence on the outright price, which rose $33/mt at the same time, from $486.50/mt on June 29 to $519.50/mt on July 10.

A trader mentioned that many cargoes were sold last week, while the lower area in USDA’s prospective planting report should boost Chinese demand for Brazilian beans.

Agricensus heard that last week, between 15 and 20 cargoes were traded from Brazil on a CFR China basis from August to November loading, with a basis ranging from 165 c/bu to 194 c/bu over November CME’s future contract, depending on the shipment month.

The buying was likely to be a sign importers are trying to guarantee their supply in the domestic market, while Brazil could probably expect to have year-round soybean exports, depending on what happens with the US soybean crop, a trader said.

In the FAS Paranaguá hub, “many trades happened on Tuesday, Wednesday and Thursday as prices are surrounding BRL150/bag ($512.29/mt)”, said Aldo Lobo, Granopar’s market analyst.

Even yesterday, FAS Paranaguá trades were reported as high as BRL149/bag ($508.87/mt) with August loading.

China might need to shift part of its buying intentions from US to Brazil for September and October loadings after the US lowered its sown area, Lobo added.

However, the US drought and its effects on the country’s soybean crop will also play a role in the demand shifting in the coming weeks.

“For October loading, Chinese buyers could shift part of its US demand to Brazil, but they would wait for a further US crop definition in August before boosting their buying activity,” Daniele Siqueira, AgRural’s senior market analyst, told Agricensus.

“China is refilling their stocks after the great volumes shipped during May and June,” Siqueira added.

Used exchange rate as USD1.00 to BRL4.88.