Farmers have halted sales of Brazil’s soybeans as port premiums swooned, the real currency strengthened and a pause in a trade war prompted top importer China to purchase soy from the United States, growers and trading companies said.
Poor market conditions are also affecting planting decisions for Brazil’s 2019/2020 crop that will be sown starting from September. Farmers generally buy inputs like seeds and fertilizers through barter arrangements with traders, used as a form of credit until the crop is harvested, and such deals are way behind schedule, farmers and companies said.
“The market is stalled,” said a soy buyer representing a large trading firm in Mato Grosso, Brazil’s top soy-producing state, who asked for anonymity to speak freely.
Unlike other years, grain handlers did not launch barter campaigns in December attempting to lock in farmer’s 2019/20 harvests, as prices for imported fertilizers rose and locally priced soybeans fell on a stronger real, the buyer said.
Mato Grosso, which will collect an estimated 32 million tonnes of soybeans this season, still has not sold about half of its 2018/2019 output.
“Spot sales slowed as farmers await better prices,” soy grower Cayron Giacomelli said by telephone. At the same time forward sales are hampered by trade war uncertainties, he added.
Growers have sold about at 46.6 percent of Mato Grosso’s estimated output for this season, according to farmer-backed state research institute Imea, below a 49.9 percent five-year average.
The situation bodes ill for the entire supply chain as farmers displeased with margins tend to hold out and pressure transport, trading and fertilizer firms to cut their own margins.
Soybean exports are also below expectations in early 2019 given how advanced the harvesting is, said Frederico Humberg, founder of AgriBrasil, a fast-growing grain origination firm in São Paulo.
Humberg said China’s return to the U.S. soy market after a truce in the trade war slashed Brazil’s port premiums and hindered a potential rise in local soy prices. Farmer hoarding is also keeping a lid on freight prices, he said.
“Price-wise, this is a pessimistic scenario for farmers,” Humberg said, arguing high U.S. soy inventories tend to continue to constrain Chicago.
Grain grower association Aprosoja said the trade war is bad for local farmers because their benchmark is Chicago and the spat left U.S. soy silos filled to the brim.
As harvesting progresses over the next 20 days, Brazilian farmers who lack storage space may be forced to sell, according to Daniel Latorraca, Imea superintendent.
“Whatever is left in storage will only be sold after the peak of the season around June,” he said.