February 5, 2022
Soybean buyers turn to the US as Brazil's crop affected by adverse weather
Soybean buyers have turned to the US for supply after Brazil expects harvest delays and lower yields due to adverse weather, resulting in rising prices and the threat of worsening food inflation, Bloomberg reported.
Chicago Mercantile Exchange futures have risen 30% since early November to its highest in eight months, with July contracts over November increasing eight times higher. Demand for immediate delivery has pushed cash prices at elevators in the US Midwest to unusually high premiums for futures, while sales for export rose to nearly 2 million tonnes last week, far higher than analysts have estimated.
Etore Baroni, an analyst at StoneX in Brazil, said south America's soybean losses have pushed additional responsibility to the US. The US will need to increase plantings and yields to avoid soaring prices.
Soybean purchases, many from China, usually buy soybeans from south America in the first quarter of the year. A few months ago, soybeans from south America were projected to hit record numbers, with 145 million tonness in Brazil, 50 million from Argentina and 10 million in Paraguay.
But the La Nina phenomenon has damaged soybean crops, with dry periods expected to continue according to weather forecaster Maxar.
Analysts said Brazil, Argentina, and Paraguay will export 20 million tonnes less soybeans compared to earlier estimations. Baroni said strong processing margins will maintain soybean's high demand in Brazil, as local industries compete with foreign buyers.
Brazilian farmers are being offered record high prices, while vessels have lined up at main export terminals as traders look to secure as many soybeans as possible to fill up ships to China and other markets.
Premium buyers are paying 35% higher in Santos, while in New Orleans its US$1.34 a bushel. It was only 84.5 cents in 2021.
The National Association of Cereal Exporters expects Brazil's soybean exports to hit 9.9 million tonnes in February. Even though this is a record for the month and double the total of February 2021, the monthly export capacity is 16 million tonnes. This shows that supplies are facing delays.
Arlan Suderman, chief commodities economist at StoneX, said Brazil's crops are 20 cents higher per bushel compared to the US Gulf in June and July, adding this is a dramatic game changer because this means the market is running out of supplies and US demand is set to increase.