Harvesting and US dollar appreciation increase liquidity in BR

Cepea, February 18, 2020 – The weather favored soybean harvesting in Brazil in the first fortnight of February, primarily in the central-western region of the country and in Paraná, increasing supply in the domestic market. This scenario added to the strong US dollar – the American currency hit a nominal record in the first fortnight of February – increased growers’ interest in trading batches from the 2019/20 and the 2020/21 crops. Besides, many of them were more willing to close deals, due to the uncertainties about the Chinese demand in the coming days.

 

As regards demand in Brazil, agents from some processors have reported to be receiving the product previously purchased through contracts, scenario that should last until March. However, the competition with international purchasers (for the Brazilian product) may increase.

 

SUPPLY AND DEMAND – The USDA has revised up the world soybean production to 339.4 million tons. This increase is linked to expectations for a record crop in Brazil, forecast at 125 million tons, 6.8% higher than that produced in the previous crop and 1.63% up compared to that estimated in January. In Argentina, however, the output is estimated at 53 million tons, 4.16% down compared to that in the previous crop.

 

Demand, in turn, is growing. According to the USDA, China should import 6.6% more soybean this season, totaling 88 million tons, 3.5% up compared to that estimated last month. The European Union should import 15.2 million tons of soybean this season, 1.3% more, in the same comparison.

 

Thus, global trades should total 151.5 million tons, 2.18% higher than that in the previous season and 1.58% up compared to that estimated last month. Of this total, 50.82% should come from Brazil, 32.78%, from the United States, and 5.41%, from Argentina.

 

In this scenario, Brazilian soybean exports should be 3.2% higher this season, totaling 77 million tons, 1.32% up compared to that in the previous month and a record if confirmed.

 

PRICES – Between January 31 and February 14, the ESALQ/BM&FBovespa Index in Paranaguá and the CEPEA/ESALQ Index in Paraná increased 3.8% and 1.6%, respectively, closing at 88.57 BRL (20.60 USD) and at 81.64 BRL (18.99 USD) per 60-kilo bag on February 14. On February 12, the US dollar closed at 4.347, the highest nominal level since the beginning of Plano Real, in 1994.

 

EXPORTS – As supply is low in Brazil, the soybean exports in January were the lowest in 36 months, totaling 1.48 million tons – of this total, 1.09 million were sent to China. Last month, shipments were 56.7% lower than in December/19 and 29.1% below that in Jan/19, according to data from Secex.

 

(Cepea-Brazil)

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