Brazil soybean sales for export stutter as farmers hope for better price

Soybean farmers in Brazil are preferring to hold on to beans in the hope that a weaker currency and a poorer-than-expected harvest in the US will push up prices next year, leaving the US as the main export location for soybeans over the next few months, trade sources say.

Brazil, which had a bumper harvest of 114 million mt this year, still has a surplus of soybeans at storage inland and at port, but very few farmers are willing to sell below 78 reals for a 60kg bag.

An 11-cent contango from January through March coupled with the expectation that the Brazilian real will weaken is deterring sellers from going close to port bids of 74 reals per 60kg bag at Paranagua port.

“There is no shortage of beans, but it is more like what price will the farmer be willing to sell at,” said one broker with a Brazil-based brokerage.

The BRL-USD rate is currently at $0.307, but according to CME futures, that is set to weaken to $0.304 by March providing farmers a bigger incentive to hold on to beans.

“The farmers they are betting on this upside, they prefer to keep the beans at the moment,” said Marcos Pinto Lima Filho, commercial manager of Soy Brasil – a trader in soybeans, adding that currency volatility may be playing a part.

An increase in storage facilities inland is said to have allowed farmers to manage the harvest pressure better – giving them more flexibility to ride any price volatility on the Chicago Board of Trade.

And that dynamic appears to be playing out currently, with the bid and offer spread of 74-78 real per 60kg bag on a free alongside ship basis equating to $378.50-399/mt.

That, however, excludes an $11-12/mt loading charge to get the beans on the vessel. And with freight to China at around $38/mt, the cheapest beans could arrive there is at $416-436/mt.

Chinese demand

With US Gulf bids at ports at around $373/mt in the US Gulf and freight valued at around $43/mt, Brazilian farmers’ intransigence to sell should leave any Chinese demand for the next three months to be picked up by the US.

However, concerns over delays in unloading the vessels in China has seen shipments stall, according to one US-based broker, who estimated that 20 vessels were on the water without the relevant documents certifying the exact origin and nature of the beans and a further five were queuing.

China-based analysts Cofeed said in a report Monday that Chinese bids at ports had firmed slightly over the past week due to uncertainty over when volumes would arrive.

Cofco last week estimated China will import 100 million mt of beans this year.

With imports during the first 10 months of the year at 77.3 million mt, the state-owned agribusiness expects over 350 Panamax sized vessels to arrive and unload in just under nine weeks.