Soybean buyers forced to look north on tardy Brazil crop, firmer real

Chinese buyers are being forced to look to the US Gulf to source soybeans for February loading as the combination of a stronger Brazilian currency and the late harvest mean sellers are scarce.

According to several market sources, buyers for Brazilian beans to import into China are struggling to source offers either on an FOB Brazil or CFR China basis for cargoes loading in the next two months, a move that could see higher prices ex-US Gulf.

According to public and private analysts, Brazil is expected to produce between 110-115 million mt of beans during the 2017/18 harvest – meaning it is likely to get close to, if not eclipse, its record-breaking 2016/17 crop of 114 million mt.

However, due to the later planting of seed there are few willing sellers currently on the market.

“We are at a slow pace because our crop will be late this year... in 2017 we exported 900,000 mt of soybeans in January and 3.5 million mt in February,” said Aldo Lobo, an analyst with Brazil-based brokerage Granopar.

“This year line-ups indicate 2.5 million mt in January, mainly old crop, and maybe 1.5-2 million mt in February,” he said.

According to a report by AgRural last week, Brazil had harvested 3.8% of its expected crop of soybean as of last week, down from 4.3% a year ago and a five-year average at this time of year of 2.9%.

With the exception of Mato Grosso and Rondonia, very few states, including Parana, have reached 1%.

The issue is compounded further by the strength of the real, which has firmed 6% in the last six weeks versus the dollar to hit 3.16, more than offseting the underlying rise in soybeans.

December 8 was the last time front month futures were trading at $9.90/bu, when the real was worth 3.29 to the dollar, meaning beans futures were worth around BRL1,200/mt.

Currently, with the current futures at $9.92 and the exchange rate at 3.16, that falls 4% to BRL1,150/mt.

“[Chinese buyers] can’t find an offer down there on a CIF or FOB basis so I expect them to look to the Gulf,” said one broker, who declined to be named.

That may change, however.

According to Camilo Motter, a broker with Granoeste, deliveries of old crop to the ports are starting to pick up due to fears that transportation costs from the farms are starting to increase as the new crop hits the road.

“They are sending the leftover of old crop to the ports in order to take advantage of still low truck freight. This is my impression,” he said, adding that he expected February exports to get close to the 3.5 million that set sail from Brazil in February 2016.