Despite futures surging, Brazil farmers delay sales to focus on harvest

Farmers in Brazil, returning from a four-day national holiday, are stalling on selling soybeans forward, waiting instead for futures prices to go even higher while concentrating on the harvest, sources said Wednesday.

According to three sources, farmers are refusing to ramp up sales, despite front month futures on the Chicago Board of Trade hitting a near 10-week high and the Brazilian real remaining relatively weak against the dollar at 3.26.

“People are coming back to the market, slowly. Farmers seem to be waiting for even better prices, paying attention to the weather in Argentina,” said Camilo Motter, a broker at Granoeste.

Soymeal futures trading on the Chicago Board of Trade have risen 11% in just over a week on fears that Argentina's soybean crop – the third largest in the world and feedstock for half of global soymeal exports – may be less than expected due to poor growing conditions caused by dry weather. 

That dynamic has pushed soybean futures above $10/bu and, combined with the weak Brazilian real, has seen bids in the paper market in Paranagua surge to 52 cents over March futures for March loading.

That's equivalent to $392/mt FOB and around $10/mt higher than a week ago.

That was meant to bring out farmer selling, but that has yet to happen, despite the fact that farmer forward sales out of the biggest producing state – Mato Grosso - are lagging at 48% of the crop sold compared to 66% last year.

“Sellers are afraid to give offers as they think CBOT is going even higher,” said Eduardo Felau, a broker with Zairam Commodities.

A third source said it was likely that farmers were concentrating on the harvest instead of sales.

Figures published last week by consultants AgRural show the harvest is 10% complete, compared to 19% at this point last year.