January 9, 2017

Reuters: Premiums for Brazil's soybean export increase due to strong currency



A more robust currency has boosted premiums for Brazil's soybean exports to close to double the amount from a year ago as well as convincing local producers to hold sales of an anticipated record crop, Reuters reports based on data revealed early this month.


Rising to 57 cents a bushel over February futures in Chicago, the premiums moved up 90% from the 30 cents amount offered in early 2016. Soybean prices in reais are 24% below their 2016 peak, at 74.52 reais per 60-kg bag at the Paranagua port, as the local currency gained nearly 30% since early last year. The Brazilian real is currently trading at a near-two-month high, just above 3.2 per dollar.


In meantime, despite strong demand, producers are not enthusiastic about selling yet, Glauco Monte, commodities director at brokerage INTL FCStone, says. Forward sales are below their historical average at about 34% of expected production so far, compared with 40% at this time last year, consultancy AgRural said in December. The prospect of better prices are prompting traders to withhold deals.


The government's crop supply agency Conab forecast that the 2016/17 soy harvest would reach a record 102.45 million tonnes, up 7% from the previous season. There are reports of early harvesting in small areas of top producing states. As work gains pace, large volumes of soybean should reach the market in January.


"Expectations are for a very good crop in Brazil... and for an early harvest. Buyers are showing up and exporters are trying to get more beans out of producers' hands," Pedro Dejneka, president of analysis firm AGR Brasil, comments.


With potential stiff competition at ports when harvest escalates, analysts expect premiums to drop soon.


"Sales will be concentrated during the harvesting period. Premiums will drop, and spot prices will come under pressure in February and March," FCStone's Monte said.


- Reuters

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