Liquidity is low in the Brazilian spot market, but agents show interest in term contracts for 22/23

Cepea, August 3, 2021 – Soybean sales were slow in the Brazilian spot market in late July, influenced by the dollar depreciation against the Real, which tends to reduce the interest of importers in the national product, since it makes the American product more attractive in the international market. Besides, soybean farmers were away from the spot market. However, these agents were interested in closing term contracts for the 2022/23 crop.

 

Despite the US dollar depreciation late in the month, the American currency rose by 4.5% in July, closing at 5.197 BRL on July 30.

 

The ESALQ/BM&FBovespa Index Paranaguá increased by 6.3% between June 30 and July 30, to 168.05 BRL (32.34 USD)/bag on July 30. Considering the averages in June and in July, this Index increased by 3.4%. The CEPEA/ESALQ Index Paraná rose by 6.6% in the monthly comparison, to 163.56 BRL (31.47 USD)/60-kilo bag on July 30. The average of this Index in July closed at 162.65 BRL/bag, 3.5% up from that in June.

 

2021/22 SEASON – Although the deals for the 2021/22 crop have begun earlier, the volume traded until the end of July was below that from a year ago. As China had been purchasing record volumes of soybean from Brazil, and the currency exchange rate is still attractive to farmers, many of them believe prices will rise more significantly in the last quarter of 2021, postponing the closure of term contracts. Besides, as prices increased despite the harvesting in the last two seasons, there is no interest in anticipating deals for the 21/22 season.

 

According to the agents consulted by Cepea, the deals for the 2021/22 season in SP have reached 20% of the output, below the 35% from the same period last year. In Mato Grosso, deals have reached 34.58%, 12.41 percentage points below that traded a year ago, according to Imea (Institute of Agricultural Economics from Mato Grosso).

 

2022/23 SEASON – Although soybean farmers are cautious about selling the remaining from the 2020/21 crop and the soybean from the 2021/22 season, they are beginning to offer batches from the 2022/23 season, majorly in Mato Grosso.

 

These agents have reported that the deals for the 2022/23 crop have been influenced by the attractive currency exchange rate for 2023. While the future dollar for August/21 (traded at B3 on July 29) was at 5.070 BRL, and for April/22, at 5.2740, for April/23, the American currency was at 5.66 BRL. Besides the currency exchange rate, there are uncertainties related to the demand from China, which may be lower next season, according to the USDA.

 

(Cepea-Brazil)

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