Brazilian sellers chase buyers as Argentina harvest, peso hammers prices

10 Apr 2019 | Thomas Hughes

Prices for soybean cargoes loading out of Argentina have fallen sharply in the past few days as the harvest gathers pace and the currency fell to a record low on Monday, forcing Brazilian sellers to seek bids.

Offers for May shipments FOB Up River have fallen to 42 c/bu under July futures by close of business Tuesday versus offers of 28 c/bu on Monday.

The offers make Argentinian beans more competitive than Brazilian beans, according to Agricensus calculations, a dynamic that is pressuring prices in Brazil.

“Looks like cargoes… are lower than paper, and cannot find demand,” said Aldo Lobo, an analyst at brokerage Granopar.

Paper premiums at the port of Paranagua are typically at a discount to full cargoes loading out of Santos.

A reversal of that relationship tends to indicate full stocks and outstanding commitments to shift soybeans.

Soybean prices in Argentina are being impacted by macroeconomic issues, with the currency in freefall over fears that the cash-strapped economy may not be able to meet the conditions of its IMF bailout set last year.

The peso hit a record low of 43.92 versus the dollar on Monday, collapsing replacement costs for beans to 55 c/bu under July futures for May shipment.

The last deal heard was at a 42-c/bu discount under futures.

And the weaker currency comes as the harvest picks up pace, with the Buenos Aires Grain Exchange claiming that as of last week 6.4% of the beans were in the bins.

With the early stages of the harvest showing promising yields, an upward revision of the estimated 53 million mt projected crop could occur, BAGE said.

One market source told Agricensus on Tuesday that there are fears in Brazil that that crop could be as high as 59-60 million mt.

The figures compare with the USDA estimate of 55 million mt released Tuesday.

Argentinian soybeans are now valued at 58 c/bu under Brazilian beans for May shipment, making them competitive against Brazilian beans for loading in May but gradually less competitive in June and July, according to Agricensus calculations.

The difference between Brazilian and Argentinian premiums need to be at least 50 c/bu taking into account quality discounts and higher freight costs associated with loading out of Argentina instead of Brazil.

However, any downward pressure may prove to be temporary as Argentina exports about 10-12% of the volume that Brazil does.