Brazil cash premiums for soy surge on logistics, low farmer selling

Prices in the Paper Paranagua market surged in late trade on Monday, amid fears of spiking logistical costs due to the challenges of getting Brazil’s late, huge soybean harvest to the ports as well as reluctant selling by farmers.

Several trades were heard for April loading at 55 and 57 cents per bushel over May futures, up from 51 cents on Friday and 47 cents two weeks ago, as offers of full cargoes were pulled from the market and traders sought to snap up material to satisfy Chinese demand.

“The harvest is delayed and our main source of transportation is by trucks – which makes things worst. Another problem is the very rainy weather this year, creating more problems to load the ships at Brazilian ports,” said Camilo Motter, a broker with Brazil-based brokerage Granoeste.

Brazil is facing its biggest harvest on record, with estimates as high as 116-117 million mt, compared with last year’s harvest of 114.2 million mt.

But late planting of the beans has delayed the harvest in most of the country, with consultants AgRural estimating just 25% of the harvest is in the bins as of last week.

That compared to 36% last year.

Crazy

But that figure hides the fact that 61% of beans have already been harvested in the state of Mato Grosso, which produces around 30% of all of Brazil’s beans but lies over 1,100 miles away from key ports Santos and Paranagua.

And those beans are now heading south on the so-called soybean superhighway BR-163 at the same time as farmers in the state of Parana, which account for 18% of all beans produced, are accelerating their harvest.

That has created a spike in trucking rates, according to brokers, with one claiming that prices were changing on an hourly basis.

“Domestic truck freight in Brazil is crazy at the moment. It goes up at every call you quote them. Not weekly or even daily,” said Eduardo Felau, a broker with Zairam Commodities in Brazil.

Everyone needs logistics

On Friday, offers for cargoes for loading in March and April were thin in the market, while offers were scant for May on Monday, with sources saying that it reflected uncertainty about where prices should be due to concerns about logistics.

“Everybody needs logistics, there is a lot of old crop corn in stocks, and people need to sell soybeans because they don't have anywhere to put it,” said Aldo Lobo, an analyst at brokerage Granopar.

“There will be a great concentration of soybeans going to the ports in March, April and May,” he added.

However, for now market sources say there is little farmer selling with farmers concentrating on getting the crop in the bins while it is still in good condition.

Last week, the respected agricultural university think tank Esalq, prompted its analysts to recommend that producers hold their harvests as a sales strategy on hopes that futures prices would go higher on what is widely expected to be a poor Argentinian crop.

That was when Paper Paranagua prices in reais stood at 1,262 reais per mt.

Now they are at 1,300 reais per mt, up 3%.