Brazil: Physical soybean market operates without major changes, focused on planting and slow trading

The physical soybean market ended the week with little aggressive movements. At ports, the market showed a decrease in sales—something consistent with the current context of high lineups, indicating well-stored buyers, possibly until December. Thus, even with the recent highs on the CBOT, domestic prices did not show firmness, reflecting the fall in premiums at ports.

On the other hand, November is approaching—a crucial month for the unfolding of the trade war between the United States and China. If there is no agreement, the scenario tends to worsen for the US export sector. Projections indicate that US exports could fall between 10 and 12 mln tons, raising stocks to more than 15 mln, even if there is a significant increase in domestic crushing or a negative revision of US yield. Today, the CBOT is trading around USD 10.70 for March and USD 10.85 for May, levels again close to previous resistance levels, which represents an opportunity for hedging, especially for those who have not yet locked in prices.

It is worth remembering that soybean premiums are still positive but are beginning to lose strength for the new crop, reflecting the pressure from the CBOT. In the medium term, with the effective entry of the harvest, this correlation tends to weaken: premiums should price much more the large, expected supply in Brazil and increasing logistical costs. Freight rates will likely become more expensive, which is equivalent, in practice, to discounts or negative premiums, even if the CBOT operates downward.

Regarding the exchange rate, if the crop is abundant, with only small regional losses, the movement of the dollar tends to have a negative correlation with premiums. In other words, if the dollar surges and tests levels close to BRL 6.00 again, the premium tends to plummet at ports, which directly impacts the producer’s margins.

In regions such as Mato Grosso, Goiás, and others, prices could fall to around BRL 100.00/bag under supply pressure. With an average production cost of BRL 6,500 per hectare, a minimum yield of 65 bags/ha would be needed just to break even, that is, zero margin.

Currently, the new crop curve still offers prices around BRL 110.00 to 112.00/bag (March position), considering port prices in the range of USD 131.00 to 132.00 FOB. However, depending on premium and exchange rate movements, this level could fall to BRL 118.00 to 120.00.

Therefore, to face the period of weaker seasonal prices without being heavily impacted by the physical market, the ideal is to advance sales, ensuring predictability and cash flow, and then conduct subsequent negotiations adjusting the average selling price.

Tags: stocks, Market, China, exports, prices, United States, soybeans