Brazil soybean premiums crash as sellers fear trade war resolution

8 Nov 2018 | Andy Allan, Johnny Huang

Brazil soybean premiums for delivery into China have collapsed this week, with a series of consistently lower trades heard for December loading as sellers hit Chinese low bids in an attempt to shield themselves against a collapse in premiums — should a resolution to the trade war emerge.

Over the past 48 hours, four deals were heard for loading in December out of Brazilian ports, falling from 290 cents to a low of 283 cents per bushel over January futures.

This means premiums have fallen 50 cents in the space of just a week.

With January futures rising 34 cents per bushel over the same period, Brazilian sellers are taking ever lower prices.

“The Board has gone up, premiums have gone down so it’s neutral. But there is a feeling that sellers are now factoring in a deal,” said one Brazil trader.

“Some sharks smell an agreement,” said one Argentinian source.

On a flat price basis, soybeans for loading the next month in Brazil and delivered into China have fallen 5% in dollar terms and 8% in reais terms.

Last week, President Trump tweeted that he had had conversations with President Xi of China about bringing an end to a trade war that has sent Brazil soybean premiums soaring and futures crashing. As part of the trade spat, China slapped an additional 25% tax on US soybean imports.

Following the tweet, soybean futures rallied strongly, but Brazilian sellers have been reluctant to lower premiums until now.

A resolution to the trade spat is not expected before a G20 meeting in Buenos Aires on November 30, if it happens at all.

Analysts expect soybean futures to rally strongly in the event of a resolution, as Chinese crushers are anticipated once again to buy US soybeans.

“There is maybe pressure to lock [in] this current basis... maybe foreseeing an upcoming trade agreement,” said a Brazil-based broker.