Brazil 2019-20 soybean sales hit 93% on weak real, high domestic crush and China demand: sources

New Delhi — Brazilian soybean sales for marketing year 2019-20 (February 2020-January 2021) reached 93% of total estimated output of 120 million mt as of July 17, up 18 percentage points year on year, due to a rapidly depreciating Brazilian real, high domestic crush demand, and robust China demand, market sources said July 21.

The Brazilian currency has lost 43% of its value against the US dollar in the last 12 months, making Brazilian soybeans extremely competitive in international markets.

The real fell to as low as 5.89 against the dollar on May 12, a slump of 45% from a year ago, before making a brief recovery which lasted until June 8. The currency, however, has lost ground since then and is currently valued at 5.33 to the dollar.

With the depreciating real, average soy prices in the country have touched six-month high levels of $9/bu, market sources said.

Also, Platts assessed SOYBEX FOB Santos at $382.43/mt for August loading on July 20, compared with the July average of $366.69/mt.

Well-capitalized farmers are already taking advantage of these attractive prices to make substantial forward sales for their next crop. Brazilian soybean farmers have forward contracted 42% of next year's crop, as of July 17, up 16 percentage points on the year, sources said.

Domestic demand for the oilseed has also seen a huge jump in Brazil, which has boosted domestic soy prices and subsequent farmers' selling.

Brazil has been exporting high volumes of meat to China and Europe, and needs large quantities of soybean meal based animal feed to sustain its burgeoning cattle industry, a Brazilian analyst said.

According to the US department of agriculture, Brazilian domestic soybean crush in 2020-21 is forecast at 45 million mt, up 750,000 mt on the year.

Robust China demand

According to Brazil's trade report, its soybean exports -- which spiked 47% year on year to average 475,905 mt/d so far in July -- had hit monthly record highs of 16.3 million mt and 15.5 million mt in April and May, respectively, with the majority of overall exports bound for China each month.

In the first half of this year, Brazil exported 61 million mt of soybeans, up 38% on the year, with 72% of these shipments purchased by China.

With August and September demand covered, Chinese buyers are now mostly focused on booking October soybean shipments from both the US and Brazil, a China-based trader said.

Brazil is expected to export over 80 million mt of soybeans in 2019-20, up 7% on the year, according to market estimates.

Market participants are skeptical on Brazilian soybeans ability to continue supplying high volume of beans to China in the second half of 2020, given the fact that they have already sold 93% of their old crop.

Despite the ongoing diplomatic spats between Beijing and Washington, China is expected to turn away from Brazil and purchase a large volumes of US beans from September, when the US soy harvest begins, sources said.

Tight supply of Brazilian soybeans in the second half of 2020 is seen as a boost to US beans exports.