Falling prices again slow down the business pace of Brazilian soybean crop

The trading pace of Brazil’s 2022/23 soybean crop once again lost momentum in May and the first days of June compared to the evolution registered in April. The decline in prices in Brazil once again held back growers, who moved forward in negotiations because of issues basically related to the need for liquidity to meet financial and storage obligations with the arrival of the harvest of second-crop corn in the Midwest and Southeast.

In terms of prices, besides export premiums still pressured by the large internal supply, the recent low in futures contracts in Chicago, which reflects the possibility of a super crop in the USA, increased the negative pressure on Brazilian prices, which once again had a negative month. This fact further held back growers, who naturally do not accept prices that are increasingly close to production costs. It is important to point out that, in fact, in several places in the country, the growers’ margin is close to zero, creating a very different environment from what we have seen in recent years.

In any case, many growers need to speed up sales due to short-term financial obligations and the release of physical storage space for the arrival of the corn second crop that, by all indications, will set a new record. Also due to the recent decline in corn prices, we can predict the maintenance of the slow pace in soybean sales in the coming few weeks, as growers may choose to sell the cereal to the detriment of the oilseed due to the difference in margin. Despite this, we remember that there is still a very large supply of soybeans in Brazil, and the “delay” in the disposal of this huge production tends to play against growers in the coming few months, even if we tend to recover premiums in the second half of the year.

According to a survey carried out by SAFRAS & Mercado, with data collected up to June 2, 56.7% of the 2022/23 Brazilian soybean crop were sold, with an increase of 5.7% over the percentage of the previous month (51.0%). The current percentage is equivalent to approximately 88.177 mln tons traded, out of a crop currently estimated at 155.656 mln tons. In the same period of the previous year, the percentage was 65.9%, while the five-year average for the period is 73.0%. For the new Brazilian soybean crop (2023/24), we have data on a theoretical percentage sold of only 8.1% of a still hypothetical production figure (by using the 2022/23 crop as reference). In the same period last year, the percentage was 13.3%. The five-year average for the period is 17.7%. For the current calculation, we used the basis of the 2022/23 crop, as the first estimate by SAFRAS & Mercado for the new crop (2023/ 24) will be released in July, in its traditional planting intention report.

Tags: premiums, harvest, export, Brazil, prices, Oilseed, soybean, crop, cereal