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November 18, 2020 | FBN Insights | Kevin McNew

Some Producers Missed Brazil Soy Price Surge

Many grain merchants expect operators will try to renegotiate delivery terms

Some Producers Missed Brazil Soy Price Surge

  • Strong exports helped push soybean futures prices up 12.3% between Aug. 1 and mid-September.
  • The price rise was too late for many Brazilian farmers who had already committed to sales at much lower prices.
  • Braziian exporters sold out of beans earlier than usual this year due to large purchases by China.
  • It’s estimated Brazilian producers, who start harvesting in January, pre-sold over half of their crop before August.
  • Farmers pre-sold their beans when the 60-kilogram bag was around 80 real, less than half of the 170 real ($31.26) current price level. 
  • Most contracts have "no guarantee" that the grain will be delivered, as there is no pre-payment by buyers.
  • Many grain merchants expect operators will try to renegotiate delivery terms, and are concerned there is also a risk of non-delivery.

FBN’s Take On What It Means: Usually the best opportunities to sell for fall are March through June but this year was an exception and the third year in the last 20 that paid to sell later. U.S. farmers, who have also received record subsidies from the government this year, can count their blessings after years of oversupply and low prices saw them take on increasing debt and forced many out of the industry. 

French Grain Exports Higher

  • FranceAgriMer increased its forecast of French soft wheat exports outside the EU in 2020/21 for the second month in a row.
  • Projected soft wheat exports are at 6.85 million tonnes, up from 6.7 million last month.
  • If realized, exports would still be 49% below the record 13.5 million tonnes estimated for 2019/20.
  • France has already shipped 1 million tonnes of wheat to China since July and some traders expect exports to reach 2 million tonnes over the full season.
  • The forecast for soft wheat stocks at the end of 2020/21 was decreased to 2.5 million tonnes from 2.6 million last month.
  • For corn, FranceAgriMer raised its outlook for exports within the EU for the second month in a row to 4.3 million tonnes from 4.1 million.
  • Projected corn stocks were left unchanged at 2.2 million tonnes.  

FBN’s Take On What It Means: Reduced exports from last season reflect a sharp drop in France's harvest this year due to adverse weather. China has been a very active buyer in the first half of the season, although it remains to be seen what sales look like in the second half. Currently US prices are not competitive in world trade. 

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