November 18, 2020
US soybean farmers sell commodity for profit as soy prices rise
United States farmers sold soybeans freshly harvested soybeans for a profit as prices increased to its highest in four years this autumn, but Brazilian farmers lose out, Reuters reported.
Higher soybean exports to China pushed the most-active soybean futures contract at the Chicago Board of Trade S1v 12.3% up between August 1 and mid-September. This was the period that US farmers harvest soybeans in the US Midwest.
However, Brazilian farmers cannot enjoy the surge in prices as they have committed to lower prices. They may seek contract renegotiations with buyers.
Brazil ran out of soybeans faster than normal this year as it ramped up exports in China, resulting in local companies importing soybeans in recent weeks. 30,000 soybeans were imported to Brazil from the US, a small amount by global trading standards but a record high Brazil import from the US since 1997.
During the US-China trade war, China turned to Brazil for its soybean supplies, but now US farmers are benefitting from global market forces.
US farmers that benefitted waited for harvest to begin in September, rather than committing early. Now they obtain sales straight from the fields.
Jed Olbertson, a farmer from Norway Center, South Dakota, said usually March through June is the best time to sell, but the pandemic resulted in a sharp decline for commodity prices in March this year.
Grain group Apsoroja said Brazilian farmers presold about half their crop before August.
Frederico Humberg, trading house AgriBrasil owner and chief executive, said the majority of agreed contracts came with no guarantee that the grains will be shipped, as the purchasers did not prepay.
Humberg said there will be issues if Chicago prices and the dollar maintain current levels. During harvest, farmers could say yields drop or cite weather problems to boost grain sale terms.
Purchasers from two major US companies with Brazilian operations also said non-delivery risks are possible. Brazilian farmers pre-sold soybeans at BRL 80 (~US$15.01; BRL 1 = US$0.19) for 60 kg, less than half than the current BRL 170 (~US$31.90) for that amount.
Brazilian soy prices usually follow Chicago, along with the addition of account local port premiums and freight prices.
Cayron Giacomelli, a farmers in Mato Grosso state, said no one could have predicted prices rising above BRL 120 (~US$22.52) per bag.