April 21, 2023
Brazil soy premiums fall to historic lows, lower Chinese demand
Analysts and traders say Brazilian soybean port premiums have fallen to historical lows in recent days due to lower Chinese demand, while the country harvests a record crop.
Premiums for May shipments fell as low as -200 basis points per bushel this week in ports like Paranagua, as analysts and traders were surprised with the magnitude of the drop.
Eduardo Vanin, an Agrinvest analyst, said he predicted that the soybean premium would reach -50, -60 basis points due to the size of the crop, but as the season progressed and premiums continued to fall, he said it was due to fewer Chinese purchases.
Vanin forecasted premiums of -200 for May shipments and -160 for June shipments in the midst of Brazil's super crop, which at more than 153 million tonnes is 22% higher than last year's drought-affected harvest.
HedgePoint Global analyst Sol Arcidiacono noted that China's demand had dwindled as soy crushing margins fell, affecting immediate purchases from Brazil.
According to Anec, a trade group representing global grain exporters in Brazil, Chinese imports from the South American country fell 9.8% year-on-year to 13.297 million tonnes in the first quarter.
Apart from the massive crop and weak Chinese demand, Anec director Sergio Mendes said that logistical bottlenecks had an impact on premiums.
Soy premiums reflect supply and demand dynamics in relation to Chicago benchmark contracts, resulting in the "free on board" price for a given month's shipment out of a country.
Two analysts said China is unlikely to import the 96 million tonnes of soy predicted by the USDA. One estimate was reduced to around 90 million tonnes.
Abiove, a Brazilian oilseeds crusher group, forecasted 93.7 million tonnes of Brazilian soybean exports in 2023, 1.4 million tonnes more than its March forecast.