Brazil soybean harvest keep pressure on prices as logistics bite

28 Mar 2023 | Victor Gusmao

The ongoing Brazilian harvest is likely to keep pressure on soybean prices in both domestic and export hubs, with players in the sector reporting storage problems and an urgent need to sell.

Paranaguá May shipment premiums have decreased 35 c/bu over the last week, reaching the mark of negative 75 c/bu under May CME futures.

That means the cash premium for May shipments since March 1 has moved through an 88 c/bu range, sliding from a 13 cent premium to currently stand at a 73 c/bu discount.

The same pattern can also be seen along the curve, with June showing a 67 c/bu reduction while July has moved down by 50 c/bu over the same period.

Looking at CME May futures, levels sank $0.67/bu to $14.29/bu adding extra pressure to outright prices, which fell $57/mt for May shipment during March to $495.25/mt, according to the level assessed on Friday.

Once again, logistics bottlenecks are still a good driver for the trend in Brazil’s export prices, as Paranaguá’s average shipment waiting time reached as high as 32 days while the truck flow through the main road link into the port is still affected by the landslide earlier this month.

Other ports are in a similar situation, with little to no capacity to store more grains in the short term in a dynamic that ends up pressuring stocks in Brazil’s domestic hub, for both sellers and buyers.

As stated by the logistics department of a Brazilian brokerage, “players are doing all they can to free space in their stocks, but many buyers are not even accepting offers anymore due to the lack of space in their storage”.

Consequently, prices in Brazil’s domestic hubs are also falling, as Cascavel and Rondonópolis, in Paraná and Mato Grosso state, lost R$20 for each 60kg bag ($64.1/mt) and R$16/20kg ($51.28/mt) since March first to be assessed at R$144/60kg ($461.5/mt) and R$135/60kg ($432.6/mt) respectively.

With the ongoing harvest still pressuring stocks, “the price doesn’t have much importance, as the logistic and cash needs are forcing farmer’s cooperatives and traders to sell their beans,” declared Aldo Lobo, market analyst from the Brazilian brokerage Granopar.

The most recent update report from Brazil’s government agency Conab shows the national harvest at 69.1%, well behind the typical pace of 75.8% from the same point in 2022.

Internal arb

With more beans yet to come and the main export ports overwhelmed, trades were heard as for supply from Mato Grosso to the drought affected state of Rio Grande do Sul, overcoming the 2,100 km freight barrier through trucks to be exported at the Rio Grande port.

“Since Paranaguá port is facing difficulties as well as Santos and São Francisco port can’t stand with more beans, Rio Grande ends up being an option as long as freight rates from soybean origins doesn’t block the trade,” said Daniele Siqueira, market analyst from the Brazilian consultancy AgRural.

Furthermore, other unusual trades are happening, as “we already had relevant sells to Argentina from Murtinho port, in Mato Grosso do Sul state with rumors echoing that more than one million mt until June shipment were already sold and limited by the port’s capacity,” Siqueira stated.

“So, it’s possible that we see (Brazilian) exports to Argentina through sea routes – as it has already been happening since February departing from many ports, including north states export hubs,” she concluded.

Argentina is expected to produce 25 million mt, a 47.9% reduction to its 48 million mt initially forecasted, according to Buenos Aires Grains Exchange.