December 30, 2020


Brazilian soybean sales expected to remain high in 2021



Even on the back of a weak currency forecast, Brazilian soybean farmers are likely to witness another year of high supply and demand in 2021.


According to analysts' average estimates, Brazil is forecast to produce an all-time high volume of 129 million tonnes to 133 million tonnes of soybeans in the 2020-2021 marketing year.


Companhia Nacional de Abastecimento (Conab) reported in December that Brazilian soybean farmers received unprecedented profits for their 2019-2020 crop due to a weak Brazilian currency and robust Chinese demand. The report also mentioned farmers are confident of oilseed crop planting for 2020-2021, with record acreage transferred from other crops.


The soybean acreage in Brazil is forecast to expand 3.3% year on year to 38.17 million hectares in 2020-2021, and exports are projected up 1.7% on the year at 85 million tonnes, according to Conab.


Notwithstanding a record soybeans output, the prices of the Brazilian beans are projected to soar on strong domestic and export demand, coupled with limited stocks during the second half of 2021, analysts said.


As of late November, Brazilian farmers have sold nearly 65% of 2020-2021 projected crops, up by 35% according to the states' average estimates.


A Chicago-based agricultural consultant said, similar to 2020, Brazilian soybean farmers are likely to sell their produce in the range of $12 to $14 per bushel in the second half of 2021 and gain record margins.


As the COVID-19 pandemic spread across the globe, that lead to an economic slowdown, the Brazilian real depreciated almost 30% year on year during the first half of 2020. Consequently, the Brazilian soybeans were selling at an average discount of $0.30cents to $0.40cents a bushel against the US origin in the first half of 2020.


This induced a massive buying frenzy for the South American beans, especially by China. Monthly record shipments of Brazilian oilseed were sent to the Asian nation between February and July.


Analysts said that beginning February 2021 Brazilian soybeans are projected to remain price competitive in the new harvest season as well, as the economists predict another year of weak real due to fiscal concerns.


The Secretariat of Foreign Trade (SECEX) reported that, for the last few years, Brazil has shipped out 75% of its soybean shipments to China.


Despite the US-China Phase 1 trade deal, Brazil remained China's prime supplier of soybeans in 2020.


According to the United States Department of Agriculture's (USDA) export sales report, China purchased 31.8 million tonnes of US beans between January 1 and December 17, compared with 10.5 million tonnes in the same period last year.


Simultaneously, SECEX reported on December 5 that China imported over 60 million tonnes of Brazilian beans between January and November, up 8% on the year.


This trend is likely to continue in 2021 on the back of expectations that China's swine herd is set to fully recover from the African swine fever epidemic early next year.


The USDA and Platts Analytics forecast China's soybean demand in 2020-2021 at an all-time high volume of 100 million tonnes, due to the country's sharper than expected hog and sow herd recovery from ASF.


Additionally, China is keen to enhance its grains and oilseed reserves in 2021 to cover for supply side uncertainties, analysts said.


A Shanghai-based agricultural consultant said: "Irrespective of the trade deal, Chinese crushers generally prefer Brazilian beans over the US origin. There is less complexity in Beijing-Brasilia trade relations."


Analysts said that Brazilian crushers are expected to ramp up soybeans purchases in the first half of 2021. The crushers faced extreme supply tightness of raw beans in the second half of 2020, leading to higher input prices and low capacity utilisation.


According to analysts' average estimates, despite a record output forecast, the ending stocks for Brazilian beans in 2020-2021 is expected to remain low at about 15 million tonnes, down 10% year on year, on low carryover and high crush demand.


Conab reported that Brazilian crushers faced high demand for soybean products in 2019-2020, with crush estimates at 48.9 million tonnes, up by 10% year on year.


The domestic soybean demand in 2020-2021 is expected to remain strong at 49 million tonnes, Conab said.


 - Hellenic Shipping News