Brazilian farmers picked up the pace of 2023-24 soybean and winter corn sales last month, amid the US dollar's appreciation against the Brazilian real, and increasing pricesand demand for both products.
Approximately 51pc of the current oilseed crop was sold by the end of April, according to market participants. Sales advanced by at least 15mn metric tonnes (t) — or 11 percentage points — since the end of March. The national supply company Conab forecasts 2023-24 output at 146.5mn t.
Sales usually accelerate around April, as farmers need to finance inputs for the next crop and pay off farm loans, among other debts. Another factor in play is the depreciation of the Brazilian real to the US dollar, amid an outlook for borrowing costs in the US to remain elevated for longer as inflation pressures persist, along with the ongoing conflict in the Middle East.
The US dollar reached its highest end-day level in over a year at R5.27/$1 on 16 April and remained above the R5 mark throughout the month. The strengthening dollar boosted domestic, real-denominated soybean prices, while also making dollar-denominated soy more attractive to international buyers and curbing the impacts of successive losses on the Chicago Board of Trade (CBOT) in mid-April, as the rapid progress of the US' 2024-25 planting pressured futures.
The average price of a 60kg bag of soybean in Rondonopolis and Sorriso cities, in central-western Mato Grosso state, ended last month at R111.45/bag ($21.81/bag at the time), from R107.75/bag at the end of March.
Prices in Brazilian ports — such as Santos, Paranagua and Rio Grande — rose last month. The port differentials for shipments scheduled for loading between May and July remained steadily at premiums to the CBOT for the first time since March 2023, also propelled by more heated international demand and the confirmation that output will fall short of the 162mn t initially expected for 2023-24.
Despite the economically favorable moment allowing stronger crop sales, progress remains behind ideal levels. Producers have usually sold over 90mn t by the beginning of May instead of the almost 75mn t marketed through the end of April this year — participants estimate. Progress should be around 62pc for the 2023-24 soybean crop, but the prior unfavorable prices and concerns surrounding yields previously delayed progress.
Last month's rising prices also fueled forward sales for 2024-25, amid favorable barter rates. Barter transactions are common in Brazil and consist of the exchange of 1t of inputs — such as seeds, fertilizer or pesticides — for a portion of production.
Market participants estimate that farmers negotiated over 15mn t for the 2024-25 soybean crop through the end of April. That would account for around 10pc of what Brazil may harvest in the next cycle, with forward sales advancing by 5 percentage points throughout the month. The average for this time of the year is 15pc.
The beginning of May has also been marked by rapid progress in sales for both crops, favored by the still-high levels of the US dollar and an upward trend for contracts in the CBOT pushed by forecasts of lower global soybean supply this year.
In Brazil, heavy rainfall flooded the Rio Grande do Sul state — the second largest soybean producer in the country —, where 2023-24 harvesting is still underway. The official outlook for Brazilian production may fall by around 1-5mn t, market participants project.
Winter corn sales advance, but still delayed
Farmers seized more opportunities to advance forward sales for the 2023-24 second corn crop last month.
Market participants estimate that 25pc of an expected production of 87.3mn t have been sold, compared with 17pc by the end of March.
But the pace continues much behind a historical average of over 45pc sold for this time of year, while market participants also consider that ideal progress for entering May should be at least 35pc.
Lower international grain prices failed to attract a steady pace of negotiations since early 2023, when farmersdecided to postpone 2022-23 winter corn forward sales and wait for new price surges — which never came. The oversupplied global corn market caused prices to progressively fall throughout the first half of last year, with the front-month CBOT contract remaining below 500¢/bu since July 2023.
US dollar appreciation in April encouraged more producers to return more strongly to winter corn negotiations, although their focus was on the higher-priced oilseed. Demand comes mainly from the animal feed sector in southern Santa Catarina and Parana states, followed by Mato Grosso's corn ethanol industry. Favorable barter rates also boosted trading.
Market participants expect sales for the current winter corn crop to pick up when the harvest starts. Parana is the only state that has begun harvesting, with activities yet to reach 1pc of sowed areas. International demand for the Brazilian grain — which is slow — is also set to strengthen in coming months.
