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Brazilian soybean exports forecast at all-time high in 2020-21: USDA

Highlights

Record soybean production forecast of 130 million mt in 2020-21

Brazilian real expected to remain weak till 2021

China seen as top Brazilian soy purchaser

New Delhi — Brazil is forecast to export an all-time high volume of soybeans in the 2020-21 marketing year (February 2021 - January 2022) due to ample supplies and an extremely favorable exchange rate, according to the US Department of Agriculture's report.

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The country's soybean exports in the 2020-21 are forecast at 84 million mt, topping the previous record set in 2017-18 when the country exported 83.7 million mt, the USDA said July 13.

Brazilian 2020-21 soybeans production is also expected to hit the highest ever volume, which should support the soy trading activities.

The South American nation's soybean output in 2020-21 is forecast at 130 million mt, up 6% on the year, due to 4% year on year increase in the planted area to 38.5 million hectares, the USDA said.

Despite the poor Brazilian economic outlook amid rising debt and the coronavirus pandemic, the country's soybean production and trade is expected to grow.

Market consensus is that Brazil's gross domestic product is set to contract by at least 7% in 2020 on the account of the hard-hitting novel coronavirus pandemic, the USDA said. Meanwhile, agricultural GDP is estimated to grow between 2% - 3% in 2020, in large part driven by soybeans, it added.

CHINA DEMAND

Over the past few year, China – world's largest soybean importer – has purchased over 75% of Brazilian beans and this trend is expected to continue in 2020-21, particularly since the Asian nation has started to recover from the African swine fever, which has in turn boosted its demand for soy based animal feed.

China lost over 50% of its swine population to the African swine fever epidemic, which started in August 2018. With quarantine measures and preventive culling of over 200 million pigs, the country's pig population has been on the path to recovery since late 2019.

The continuing recovery in China's swine sector and poultry production growth are expected to push up soybean demand in 2019-20 and 2020-21, the USDA said in June.

China's soybeans import in 2019-20 and 2020-21 is forecast to touch 96 million mt, up 17% on 2018-19, the US Department of Agriculture said in its latest supply and demand report.

In early June, China's agricultural ministry's data indicated the eight consecutive months of sow inventory expansion and four months of growth in the hog herd, with a net growth of 38 million hog heads between the end of 2019 and May 2020.

WEAK REAL

A weak Brazilian real, which has lost over 40% of its worth on the year, against the US dollar as of July 14, currently valued at 5.40 real/dollar, has also attracted Chinese soybean buying interest, a Chinese trader said. This trend is expected to continue in 2020-21 as well, he added.

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

The market participants expect continued weakness of Brazilian real amid the sluggish economic outlook in 2020 and 2021.

The market expectation is that real will continue to trade at above R$ 5/dollar in 2020 and in 2021 which will boost Brazilian soybeans exports, the USDA said.

China is expected to remain the top importer of Brazilian soybeans, notwithstanding the Phase 1 trade deal between Washington and Beijing that was announced in mid-December 2019, the USDA added.

Brazilian soybean exports in 2020-21 could be heavily dependent on China's commitment towards the Phase 1 deal, market sources said. If the ongoing US-China political tensions continue, then Brazilian soy exports forecast for 2020-21 could be revised further up.

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