Brazil's soybean sales picks up on rising prices and farms obligations

Brazil's domestic soybean sales picked up during the week ending Friday as prices soared on all fronts and farmer’s financial obligations came due, according to market sources.

Brazil’s FAS Paranaguá soybean prices rose to BRL 122/sc ($408.30/mt) on March 7 from BRL 117/sc ($391.56/mt) on February 23, with a significant increase in the sold volumes when prices hit BRL 120/sc ($401.60/mt).

Export prices followed the same path, with April loading FOB Santos assessment going to 18 c/bu under the May futures contract from a 59 c/bu discount on the same specifications.

This was also coupled with futures rising contracts, pushing Brazil’s FOB Santos outright prices to soar to $417/mt from $395/mt during the same period.

Higher export prices prompted traders to increase bids, which also found no barriers as domestic logistics remains considerably idle when compared to the same time last year.

“Origination [to buy soybean from farmers to export] bids strengthened while inland freight rates on a fall also help traders to improve their bids”, said Victor Martins, Amius’s Latam risk manager.

“We are seeing a calm season so far, with no logistic pressure and a slow [Chinese] demand, allowing for reduced [inland] freights, which also favors farmers to sell”, Alaíde Ziemmer, AgRural’s market analyst told Agricensus.

In addition, the available time to fill previously sold cargoes is running out as some players were expecting farmers to sell at lower prices as harvest gets momentum.

According to a report published on Monday by Brazil’s Food Agency (Conab), the national harvest reached a 47.3% completion rate, 3.4% above the same time last year.

Soybean volumes were being sold, during most of February, on contracts with prices to be set later, a way to avoid logistic bottleneck as the harvest advances.

“Ships are “whistling”. There are some players buying soybeans with a short shipping time at ports and they must pay more for that”, said Granopar’s broker Leonardo Marangoni.

“Many traders had sold forward cargoes with basis to be set, and now that China margin is better and CFR levels are boosting, they have to cover this in the FOB market, leading them to push up bids to bring farmers to sell actively”, Martins added.

Soybean CFR China prices from Brazil on April shipment reached 108 c/bu, on March 7, considerably higher than the 41 c/bu assessed on February 23, both over the May futures contract.

Furthermore, domestic crushers were also reported to be actively bidding on the market to take advantage of low soybean prices before the Argentine harvest gathers steam next month.

“Crushers are filling up their stocks, taking advantage of good crush margins before Argentine harvest starts”, Ziemmer told Agricensus.

Parallel to it, farm costs are also pressuring sales as March is one of the favorite months by farmers to set financial obligation deadlines.

“Farmers also have obligations to honor as important expenses are usually set to expire from 30 March to 30 April, when farmers usually have more soybeans to sell”, Ziemmer added.

However, Alaíde Ziemmer flags that It is important to notice that overall Brazil’s farm sales remain slow, but these past two weeks were way better when compared with all of January and the first half of February.