With a new record crop, demand needs to be high in 2020

Cepea, January 15, 2020 – The Brazilian soybean output should hit a new record in the 2019/20 crop. Sowing stepped up in October/19, after the delay at the beginning of the activities. After that, it started to rain heavily, which favored crops development and increased expectations for a higher productivity – except in the areas firstly sown.

 

With the record crop, demand will have to be higher, in both the Brazilian and the international markets. In this context, the trade war between the United States and China should have a great influence on the demand for the Brazilian soybean. So far, agents do not expect great changes.

 

The trading pace for the current crop is faster than that in the previous season, due to the higher price levels in the last quarter of 2019 and the higher attractiveness of term contracts for 2020. Agents believe that it may be difficult to accomplish the contracts due in January and February, because of the sowing delay. It is worth to mention that many processors ended 2019 with low or no inventories, which interrupted crushing earlier. This may underpin prices in the short-term.

 

Of the total output from the 2019/20 crop from Mato Grosso, the number one soybean-producing state in Brazil, more than 40% were traded earlier in 2019, according to the agents consulted by Cepea. Imea (Mato Grosso Institute of Agricultural Economics) surveys, in turn, indicate that 51.12% of the crop had been marketed along 2019, more than the 41.33% registered in the same period last year.

 

For 2020, the exports parity at the Brazilian port of Paranaguá (PR) point to prices at 89.60 BRL/60-kilo bag in February; 88.42/bag in March/20; 88.92 BRL/bag in April/20; and 89.12 BRL/bag in May/20 – considering the average future dollar at B3 in December. Last season, parity pointed to prices up to 10 Reais per bag lower than that in 2019.

 

SUPPLY – Brazil should continue as the number one soybean exporting country in the world, with 76 million tons estimated to be shipped, 1.4% more than in 2018/19. From the United States, exports are forecast at 48.3 million tons (+1.56%), and from Argentina, at 8.2 million tons, according to data from the USDA.

 

(Cepea-Brazil)

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