Firm demand and low inventories underpin prices in Brazil; soy oil quotes hit a new record

Cepea, July 16, 2020 – With the firm international demand for the Brazilian soybean, the volumes exported in the first semester of 2020 hit records, reducing supply in the domestic market and pushing up quotes. For the next seven months, at least, Brazilian processors may have difficulties to purchase the national product. In southern Brazil, processors have been importing soybean from other countries in Mercosur.

 

In this scenario, agents from the market expect ending stocks to be low by the end of 2020. On July 1st, Abiove (Brazilian Association of Vegetable Oil Industries) revised down estimates for the current season (2019/20), predicting ending stocks to total 669 thousand tons in December, the lowest in all times. This scenario is linked to the high volume allocated to Brazilian industries, which, according to Abiove, should crush 44.5 million tons of soybean, a record. Exports were estimated at 79.5 million tons, only lower than that registered in 2018 (83.25 million tons).

 

Although the volume exported in June was 11.4% lower than that shipped in May, it was still higher than that from June/19, totaling 13.75 million tons, according to data from Secex. In the first semester of 2020, Brazil exported 62.87 million tons, a record.

 

Imports were firm in June too. Brazil purchased 89.76 thousand tons of soybean from Paraguay, more than two-fold that imported in May and the highest volume imported since June/16 (Secex).


In Brazil, between July 2 and 9., the ESALQ/BM&FBovespa Index in Paranaguá (PR) remained stable (-0.2%), to 115.09 BRL/60-kilo (21.38 USD/bag) bag on July 15. On the other hand, the CEPEA/ESALQ Index in Paraná dropped by a slight 0.57% closing at 108.73 BRL/bag (20.20 USD/bag).

 

Low liquidity and the dollar depreciation constrained price rises in Brazil in the first fortnight of July. On July 15, the dollar closed at 5.382 BRL, 1% down compared to that on June 30.

 

BY-PRODUCTS – In June, Brazil exported 277.27 thousand tons of soy oil, more than two-fold the amount shipped in May and the highest volume exported since May/12. In the first semester of 2020, soy oil exports totaled 682.67 thousand tons, 10.8% more than that shipped in the same period last year (Secex).

 

With the low soybean supply in Brazil and the growing international demand for soy oil, prices for this by-product as well as the exports premiums continued on the rise in the first fortnight of July, hitting new records. The demand from biodiesel processors is high too – some Brazilian processors have been interested in exporting soy oil rather than selling it in the domestic market.

 

(Cepea-Brazil)

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