China drops soybean flat price (Chicago + premium) in main origins…

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The latest news on Chinese demand for soybeans caught our attention this week. Traders confirmed the negotiation of at least 13 boats of North American product by China, which seeks to guarantee coverage of at least a portion of what it still needs for the coming months. And as market analyst Eduardo Vanin, from Agrinvest Commodities explains, despite the purchases, soy premiums – not only from the US, but also from Brazil – have dropped significantly.

“China is buying in the USA and in Brazil as well. It is buying Brazil for August and these premiums are dropping a lot. ) and this Wednesday (21) deals were reported at 265 cents. The premium is falling along with Chicago, that is, the flat price – the sum of the two things – is falling”, he details. “In early June this shipment (August) had a 420-cent premium offer with August at $16.20 in Chicago.

However, this is not a move for this time of year. After all, although the 13 ships have attracted some market attention, in ‘normal’ years of demand from the Asian giant, somewhere between 35 and 40 boats would be being purchased. More than that, seasonally, the country is approaching the peak of bran consumption – as the history shows – which could not be confirmed now in 2022 in view of all the difficulties that the country has been facing in the soy complex, especially with the negative margins in grain processing.

“The fall in the flat price has been happening because the demand is low, it is small, because the margins are bad and because we still have supply. It is falling (the flat price) in Brazil, Argentina and also in the United States. Soybeans today have to go after logistics, that is, they have to be placed there at the destination. And as demand is small, there is more supply than demand and that’s because margins are still very negative, despite the big drop”, he adds. the analyst.

From June until now, soybean prices, post China, are already showing approximately US$ 100.00 lower per ton, which did not help, however, in an improvement in the margin. Still according to Eduardo Vanin, this maintenance of the bad moment of the margins occurs with a drop in the prices of oilseed derivatives, having happened faster and more intensely than the price of imported soybeans.

From the peak tested in June until now, soybean oil has already lost almost 30%, while soybean meal has lost between 12% and 15% in the same period. Inventories of both products remain quite high in the country, despite good bran sales in June, recording the highest volume since August last year. In July, sales returned to retreat aggressively.

“The crushing rate above 60% and the low demand for bran have put pressure on the internal basis of bran, which is already negative in southern China”, says Vanin.

On the other hand, stocks of soybeans continue to fall. In the first half of 2021, Chinese imports of the commodity were 5.5% lower than in the same period last year. And, as Agrinvest’s calculations show, the country still needs to buy 10 to 11 million tons of soybeans to guarantee its coverage. By the end of February, this volume reached something from 30 to 32 million tons. “This volume can vary greatly depending on the crushing pace. With today’s negative margins it seems that it may be smaller”, says the analyst.

FOR THE BRAZILIAN PRODUCER

For the Brazilian producer, the questions are about how prices will be formed and what volume Brazil will have available to meet this demand. It is already known that the country will not be an exporter of soybeans in January as it was this year.

“Of the ticket stock we had from 2021 to 2022, China bought a lot for January shipments to Brazil. We were competitive and, remembering, that the US delayed shipments due to Hurricane Ida. Probably, this year it won’t be like that because we have less soybeans . And naturally our soy will be more expensive than the American one”, explains Eduardo Vanin.

Last Monday, Brazil traded more than one million tons of soybeans and then the market began to adopt a less intense pace, as explained by market consultant Vlamir Brandalizze, from Brandalizze Consulting.

“Sellers continue to hold large volumes of soybeans, which at the moment may be in the range of 39 million tons. We have a lot to serve the domestic market, which this remaining year will consume 15 to 17 million tons”, he says. And it will be this domestic demand that will compete with the export of the remaining soybeans from the 2021/22 crop in Brazil.

And in this dispute will also count the influence of the dollar in the formation of prices. This Thursday, the American currency rose again and reached the level of R$ 5.50, a factor that favors the indicators for the Brazilian product, helps in its competitiveness, however, with the sharp losses in Chicago, the impact ends up being limited.

In the last 30 days, from June 21 to July 21, while the dollar rose 7%, from R$5.14 to R$5.50, the August and November soybean contracts traded in Chicago plummeted more than 10% . August yielded 11.26%, falling from $15.98 to $14.18, while November was down from $15.10 to $13.01 a bushel. Thus, it is in the prize – in Brazil or in the destination – that the next opportunities of the Brazilian producer can be given.

About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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