Brazil soybean basis turns negative for the first time in 19 months

Basis premiums for soybeans in the key FOB Brazil export hub have descended into negative territory for the first time since 2021, Agricensus data shows, as pressure built on the market from a rapidly accelerating harvest, a mounting logistics crunch and expectations of a record crop this season.

The pressure on physical Brazilian cash prices comes at the same time as the CME's soybean futures contract, against which Brazilian soybeans are priced, firmed at the end of last week on concerns about the extent to which a historic drought will damage Argentina’s soybean crop.

The two dynamics have combined to depress physical prices in Brazil while simultaneously supporting prices on the derivative instrument.  

March Paranagua paper traded first at even and then at a minus 1 c/bu discount to CME March futures, with bids Monday said to reach as low as minus 10 c/bu and offers seen at just plus 5 c/bu over futures.

“There are two points in my view: crop size, and larger carry over of all grains. Co-ops and farmers have corn, beans, and wheat, and a bumper soybean crop coming,” said Eduardo Vanin, analyst at Agrinvest Commodities.

While negative premiums are not uncommon, they have not been seen since the end of the harvest period in July 2021, as severe crop losses last year limited the downside to the market.

“Premiums did not turn negative in 2022 because we had strong crop losses while there were no delays to the harvest either,” said Daniele Siqueira of Brazilian consultancy AgRural.


There are also logistical problems in the spot market, according to market analysts, as persistent rains delayed corn shipments in January and February.

Although this is no longer a problem, it helped concentrate soybean shipments in March.

Both Siqueria and Vanin said it was hard to find someone willing to buy in the Paranagua paper market since the charge for logistical bottlenecks had increased, moving demand to other ports and pressuring paper premium levels down.

"Trading houses are changing ports due to length of waiting time,” Vanin said.

“The spread between an offer for a cargo FOB Santos and the Paper Paranaguá for April is more than 20 cents,” he continued.

Currency exchange rates also played a role as the exchange rate reached BRL4.95 to the US dollar, market sources said.

While this makes Brazilian exports less attractive to importers, it also stimulated farmers to sell their stocks before further devaluation occurs.

“The fall to BRL4.95 on February 2 scared farmers and encouraged selling as it rose on the days following, improving commercialization rates,” Siqueira said.

As of Monday, the exchange was at BRL5.17 per US dollar by the time of publication. 

In the destination market, basis premiums on a CFR China were also quoted lower Monday on the back of the falls in the Brazilian FOB market.

March cargoes, which last traded at 148 c/bu late last week, were heard offered at 138-139 c/bu over March CME futures with buying interest at 130 c/bu, while April, which last traded at 140 c/bu over May futures, was offered at 134-135 c/bu with a bid heard at 130 c/bu.

Brazil’s soybean harvest had been delayed by heavy rains at the start of this calendar year, but it has started to gain pace as dry periods in between rains allowed combined harvesters to advance faster in several states, including the key producing state of Mato Grosso.

According to local consultancy Agrural, the soybean harvest reached a completion rate of 17% as of last Thursday, up eight percentage points on the week, although this is still below the 24% reported at the same point in the previous year.

Brazil is expecting a bumper soybean crop this year, with most analysts putting forecasts in the 152-155 million mt region, and the latest USDA figures landing right in the middle of that at 153 million.

That is more than 20 million mt more than last year’s production and it puts Brazil’s export potential at over 90 million mt.