Price Discounting Propels Brazil’s March Soybean Exports to Record

Brazil’s soybean exports in March approached a record 12 million tons, eclipsed only by port loadings that came in at 13.4 million tons. Roughly three-quarters of March exports were destined for China. Discounting in Paranagua relative to the U.S. gulf along with flush supplies from the recent harvest are helping to drive sales.

Sales and exports are also being driven by record Brazilian prices in reals as producers hope to take advantage of the near free-fall in the Brazilian real relative to the dollar. Since January 1, the real has depreciated by one-third with more than half of the fall occuring in March. Much of this decline is due to the current global COVID-19 pandemic and resultant flight to U.S. dollars. Consequently, U.S. Gulf soybean prices have sagged nearly 5 percent from the first of the year, while Brazil’s local prices have risen 40 percent and stand near 1,870 reals/mt at the end of March.

With Brazil’s sales to China surging, U.S. sales to China remain sparse. Private buyers in China have only been able to access U.S. soybeans and avoid the tariffs since early March. While Brazilian sellers continue to price agressively given the record local prices, few purchases of U.S. soybeans by China are anticipated in the coming weeks. With the global COVID-19 pandemic expected to continue for some time, the factors driving the U.S. dollar higher are unlikely to abate in the near term. Only when supplies in Brazil dwindle later in 2020 will there be opportunity of increased U.S. sales to China.

PROJECTION FOR 2019/20

Global 2019/20 oilseed production is forecast at 577 million tons, down 3 million tons from March primarily driven by lower soybean crops forecast for Brazil and Argentina. Oilseed trade volumes are largely unchanged overall. Global ending stocks are down slightly on lower production. Protein meal production is down slightly to 339 million tons on lower Argentina soybean meal production. Protein meal ending stocks are down again in March to 14 million tons. Vegetable oil production is forecast slightly lower, with ending stocks growing to 18 million tons on weakening demand. The projected U.S. season-average farm price for soybeans is lowered by $0.05 to $8.65 per bushel.

EXPORT PRICES

Export prices for soybeans and products were volatile across all major exporters in March in response to COVID-19. U.S. Gulf FOB soybean export bids in March averaged $345/ton, down $5 from February. Brazil Paranagua FOB averaged $340/ton, down $6 from February. Argentina Up River FOB averaged $324/ton, down $23. Meal export prices rose in March driven by a sharp price surge in the middle of the month. Concerns about availability in Argentina added to the rise. U.S. soybean meal export bids in March averaged $361/ton, up $27 from February. Brazil Paranagua FOB averaged $337/ton, up $20 from February, and Argentina Up River FOB averaged $348/ton, up $18. Soybean oil prices continued to fall with monthly average declines of $115/ton, $104/ton, and $71/ton in Argentina, Brazil, and the United States respectively due to the impact of COVID-19 and low petroleum prices on food and fuel markets. Malaysian palm oil prices continued to move largely in tandem with soy oil prices, averaging $586/ton, while Indonesian palm oil prices stagnated during the latter half of the month. Both soybeans and meal prices experienced a downturn at the beginning of April in response to rapidly changing market forces during the COVID-19 global pandemic.

EXPORT SALES 

 As of the week ending April 2, 2020, U.S. soybean accumulated exports (shipments) to China totaled 12.1 million tons and 20.0 million to the rest of the world. Outstanding sales remain low at 473,000 tons to China; 2.9 million to the rest of the world. Last year at this time, accumulated exports to China were 5.3 million tons and 25.5 million to the rest of the world, and outstanding sales to China were 7.6 million tons and 3.5 million to the rest of the world. U.S. soybean export commitments (outstanding sales plus accumulated exports) to China have fallen slightly behind last year’s levels on weak sales, totaling 12.6 million tons compared to 12.9 million a year ago. A weakened real has allowed Brazilian soybeans to be more price-competitive. Total commitments to the world were also lower than last year, totaling 37.4 million tons compared to 43.8 million tons the year before.