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Brazil 2019-20 soybean sales hit 95% on weak real, high domestic and China demand: sources

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Brazil 2019-20 soybean sales hit 95% on weak real, high domestic and China demand: sources

Highlights

Brazilian real loses 29% of value against US dollar in last 12 months

Farmers take advantage of attractive prices, enter into substantial forward sales

Average domestic bean prices hit multi-month high

New Delhi — Brazilian soybean sales for marketing year 2019-20 (February 2020-January 2021) reached 95% of total estimated output of 124.5 million mt as of Aug. 28, up 15 percentage points year on year, due to a rapidly depreciating Brazilian real, high domestic crush demand, and robust China demand, market sources said Sept. 1.

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The Brazilian currency has lost 29% of its value against the US dollar in the last 12 months, making Brazilian soybeans extremely competitive in international markets.

With the depreciating real and dry weather in the US Midwest, average soy prices in Bazil have touched multi-month high levels of $10.60/bu, market sources said.

As a result, port prices have also shot up.

Platts assessed SOYBEX FOB Santos at $414.30/mt for October loading on Aug. 31, up 5.6% month on month.

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 45% of next year's crop, as of Aug. 28, up 20 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 54% year on year to average 337,824 mt/d so far in August -- 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 seven of this calendar year, Brazil exported 70 million mt of soybeans, up 36% on the year, with 73% of these shipments purchased by China.

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

Brazil is expected to export over 82 million mt of soybeans in the 2019-20 local marketing year, which runs from February 2020 to January 2021, up 8% on the year, according to market estimates.

However, 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 95% 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.

With limited Brazilian soybean stocks until January 2021, the market expects US soybeans to be price-competitive and sell at an average discount of over 40 cents/bu to their South American counterpart until the Brazilian soybean harvest begins in February 2021.