Brazilian soybean prices pursue bull run on Argentinian drought

A rise in both premiums and futures have caused a double whammy on Brazilian soybean prices, as analysts further reduce the damaged crop of neighbouring Argentina, while Brazilian traders are caught short.

“We see CBOT going up and Brazilian basis going up - it's kind of scary to be honest,” said Eduardo Felau, a broker with Zairam Commodities in Brazil.

Persistent drought in Argentina over the last four months has led the Buenos Aires Grain Exchange (BAGE) to cut its initial estimate for the 2017/18 marketing year by a total of 10 million to a current estimate of 44 million mt.

Projected crop size is down 14 million mt compared to last year’s production.

The bad news coming out of Argentina has made Brazilian farmers even more reluctant to sell their crop, which contrary to Argentina, has benefitted from La Nina as rains have propelled the latest AgRural forecast to a record 117.9 million mt.

Brazilian traders, anticipating this record Brazilian crop, kept short and are now caught out, needing to bid up for the few available barges in the market.

Prices in the Brazilian Paper Paranagua market traded Monday near an 80-cent premium for May delivery, up over 30 cents from the beginning of the month.

Cargo offers were few and far between, with indicative offers heard 12 cents above the Paper Paranagua market, but with little liquidity.

“Who, in their right mind, will sell something now before being able to originate it?” the broker asked.

The May CBOT futures contract was trading at $10.77/bu, up more than 20 cents since the start of the month.