Firm demand for by-products in Brazil keeps domestic prices on the rise

Cepea, August 3, 2020 – The domestic demand for soy oil and soybean meal was high in Brazil in July. In the market of soy oil, demand is primarily for biodiesel production, which hampered purchases from food processors. The industry was purchasing more soybean, since only a few processors has soybean stocked to process until the end of the year. In this scenario, prices for soybean and its by-products continued at record levels last month, in nominal terms, in many Brazilian regions.

 

In the last week of July, the exports premium for soy oil for shipment in August/2020, from Paranaguá port (PR) hit 1.00 USD per pound, the highest level in the Cepea series, which started in June 2004. In early July, the premium for this contract was around 2.2 cents of dollar per pound.

 

For the soy oil traded in São Paulo city (with 12% ICMS), the average price rose by 12.7% from June to July, to 4,282.95 BRL per ton last month, the highest nominal level in all Cepea series, which started in July 1998. In real terms (deflated by the IGP-DI from June/2020), the average soy oil price is 45.8% higher than that in the same period last year and the highest since January 2013 (when it was at 4,323.89 BRL per ton). It is worth to mention that the deals closed in the Brazilian market were closed at higher price levels than the exports parity, which points to prices at 4,191.21 BRL per ton at Paranaguá port for August.

 

As regards soybean meal, premiums increased sharply at Paranaguá port too. The September/20 contract increased from 2 dollars per short ton early in the month to 15 dollars per ton on July 30.

 

Soybean meal prices hit nominal records in Campinas (SP), Campo Grande (MS), Chapecó (SC), Ijuí (RS), Itumbiara (GO), Maracajú (MS), Mogiana (SP), Rio Grande do Sul (RS), northern Paraná, western Santa Catarina, western Paraná, Passo Fundo (RS), Rio Verde (GO) and Santa Rosa (RS). In real terms, quotes in the Mogiana are the highest since November/12, and in Campinas, Ijuí and northern Paraná, since July/16.

 

SOYBEAN – With the firm demand for soybean by-products and the surplus from the 2019/20 crop, Brazilian soybean growers were not willing to sell soybean in July.

 

Thus, soybean prices hit new records in the Brazilian market too. The ESALQ/BM&FBovespa Index in Paranaguá (PR) rose by a staggering 3.3% between June 30 and July 31, to 119.12 BRL/60-kilo bag (22.85 USD/bag) on July 31, a nominal record. The CEPEA/ESALQ Index in Paraná increased by 1.95% in the same comparison, to 111.48 BRL/bag (21.39 USD/bag) on July 31, a nominal record too.

 

The upward trend of prices in the Brazilian market was constrained by the dollar depreciation most of July.

 

(Cepea-Brazil)

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