Soybean prices are selling at high levels in Brazil due to strong domestic and external demand, rising prices on the Chicago Mercantile Exchange and a weak Brazilian real pair with a strengthening US dollar. Prices rose as Brazil, the world’s largest soybean producer, achieved another record harvest. The 2020/2021 forecast indicates that Brazil will harvest 4.97 billion bushels, 8.5% more soybeans than last season. In addition, Brazil’s soybean exports have increased significantly in recent months, reaching all-time highs, including unusual sales to the United States.
High prices in the Brazilian market
The average monthly cash price farmers receive for soybeans from Paraná, the second-largest soybean-producing state in Brazil, increased 66.8% from June 2020 to May 2021, according to data from the Center for Advanced Studies in Applied Economics of “Luiz de Queiroz Agricultural College” of the University of São Paulo (see Figure 1).
A 60 kilogram bag of soybeans (2.2 bushels) was sold for 177.48 BRL (33.51 USD) on May 12, a nominal record since September 2012. In the port of Paranaguá (Paraná), a bag of 60 kilograms was sold for BRL. 183.02 ($ 33.49) on April 27, also a nominal record for the past 9 years. These historic prices came as the Brazilian soybean harvest came to an end, which reached a new record of average yields: 3.517 kilograms per hectare. Before that, the best result was the 2017/2018 harvest, with 3.507 kilograms per hectare.
Historically high soybean prices in Brazil this year correlate with high soybean prices on the Chicago Mercantile Exchange (CME). Chicago-traded soybean futures were the most expensive since June 2013, exceeding $ 15 a bushel in US dollars. Factors behind the increase include low soybean stocks in the United States, rains in Argentina which hampered the harvest and the surprise of soybean acreage for the USDA. Prospective plantation reports (see farmdoc every day April 7, 2021).
Tight soybean supply in the United States
Soaring soybean prices in Chicago over the past eight years are also boosting the incomes of American farmers, after many years of narrow margins. In 12 months, the average monthly cash price farmers received for soybeans in central Illinois rose 78% from $ 8.40 per bushel in May 2020 to $ 14.94 per bushel in April. 2021 (see figure 2).
In addition, projections for 2021 are high compared to historical prices. The May World Agricultural Demand and Supply Estimates (WASDE) report for May contains a projection of $ 13.85 per bushel for average soybean prices during the September 2021 to August marketing year. 2022 (see farmdoc every day May 18, 2021). Currently USDA is projecting a supply and demand situation that will result in very tight ending stocks at the end of MY 2021.
The tight supply of soybeans in the United States, resulting in part from increased export volumes and lower inventories, has pushed prices up in recent months. In addition, the resumption of African swine fever and the restocking in China have increased global demand for soybeans. For example, ending stocks relative to global consumption in 2020/21 are the lowest percentage since 2013/2014, according to the USDA Foreign Agricultural Service.
The tightening of global crop supplies contrasts with the glut that has leveled trade margins in recent years in Chicago. An example of this unusual period is that Brazil very rarely sells soybeans to the United States. However, in May, Brazil shipped 100,000 tonnes (3.67 million bushels) to the United States, according to Cargonave, an independent shipping group in Brazil.
In addition, forecasts from Cogo Agribusiness Intelligence, a Brazilian private consultancy, estimate the shipment of an additional 300,000 tonnes (11.02 million bushels) in June. The last time the United States bought a large volume of soybeans from Brazil was in 2014, during a historic drought caused by La Niña.
Brazilian exports high in April
After a delay in the soybean harvest in Brazil this season, leading to the lowest February exports in three years, Brazil hit new records in the following months. From January to April, shipments totaled 33.6 million tonnes, breaking the old record of 31.9 million tonnes reached in the first four months of the year in 2020, according to data from the Ministry of the Agriculture, Livestock and Supply.
In addition, in April, the country sold 17.38 million tonnes of soybeans, the highest monthly total on record. Shipments exceeded the 14.8 million tonnes exported in April 2020 by 17%, which was previously a record (see Figure 3). China bought 70% of the total soybean exported during this period.
In the same month, Brazilian agri-food exports hit a new record, reaching $ 13.57 billion for the first time, according to data from the Ministry of Agriculture, Livestock and Supply. . Growth was 39% compared to exports in April 2020. In no month of April in the historic series, which began in 1997, did the value of exports exceed the US $ 10 billion mark.
Current forecast – for 86.0 million tonnes of soybeans to be shipped between October 2020 and September 2021 – calls for exports from February to September to hit a record 81.8 million tonnes, 4.4 million tonnes before 2020 ( USDA, 2021). Reaching that figure, given the current global scenario, is not unlikely given what has happened in the first five months of this year.
The cash price Brazilian farmers received for soybeans in April and May this year broke all records, since 2012. Strong internal and external demand, a surge to eight-year highs on the Chicago Stock Exchange and a weak Brazilian real created a favorable outlook. for farmers this season. Prices increased as Brazil achieved another record harvest, with historic yields. In addition, Brazilian soybean exports have reached new highs, including significant shipments to the United States. With global demand remaining high in the coming months, along with tight stocks in the United States, the soybean market is expected to continue to appreciate in Brazil.
References and data sources
Cepea / USP. Center for Advanced Studies in Applied Economics of the “Luiz de Queiroz” College of Agriculture of the University of São Paulo. Agricultural prices survey. 2021 https://www.cepea.esalq.usp.br/br/consultas-ao-banco-de-dados-do-site.aspx
Irwin, S. “How Prospective plantings Report for corn and soybeans ?. ” farmdoc every day (11): 55, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, April 7, 2021.
Ministry of Agriculture, Livestock and Supply (MAPA). Brazilian agro-industry foreign trade statistics. Export and Import, 2021. http://indicadores.agricultura.gov.br/index.html
Schnitkey, G., K. Swanson, N. Paulson, and C. Zulauf. “High yield outlook for corn and soybeans for 2021.” farmdoc every day (11): 80, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, May 18, 2021.
United States Department of Agriculture, National Agriculture Statistics Services. April 2021. Soybeans – Prices received. https://quickstats.nass.usda.gov/results/7064D70C-CB89-318E-B6DF-0192FACCEE4D
United States Department of Agriculture, Foreign Agricultural Service. April 2021. Oilseeds: world markets and trade. Brazil’s soybean exports hit a record high in March. https://apps.fas.usda.gov/psdonline/circulars/oilseeds.pdf