The Brazilian soybean market is currently buoyed by premiums and the dollar. Despite a modest rise in soybean prices on the Chicago Board of Trade (CBOT) this week - with August futures increasing from $10.78 to $10.97 per bushel and November futures from $10.40 to $10.42 from Monday (15th) to Thursday (18th) - the strong demand for Brazilian soybeans has significantly strengthened premiums, providing critical support for producers.
For example, August premiums tested 50 cents per bushel positive at Brazilian ports, while September premiums reached 123 cents over CBOT prices, marking a record high for this marketing year. This notable movement reflects the still-concentrated demand in the domestic market. At one point, premiums for current-season soybeans had fallen to more than $1.00 per bushel below CBOT prices.
"We have seen a rally of 223 points for September premiums in Brazil, which alone provides a support base of about R$25.00 per sack in the spot market. Premiums are stabilizing and balancing the domestic Brazilian market," explains Matheus Pereira, director of Pátria Agronegócios. This price movement aligns with the currently tighter supply in Brazil, with soybean volumes committed to export growing and pointing to a 1.8% increase compared to the same period last year, with over 79 million tons committed. Compared to the average of the last five years, the increase is more than 20%.
"Brazilian soybean imports might slow down not due to a lack of demand, but because of limited supply," Pereira states. "If we export close to 100 million tons of soybeans in 2024, there won't be enough left for domestic vegetable oil production. We don't have enough soybeans to match last year's demand, which will likely drive premium prices higher."
In this context, it will be essential to monitor the influence of Chicago prices on the rising premiums for determining soybean prices for Brazilian producers. "We'll need to watch and understand how much Chicago prices might drop to impact physical price recovery through export premiums. That's the key issue for the second half of the year," Pereira explains.
In addition to strong exports, the market is also focused on domestic soybean demand. However, Pereira notes the seasonal competition among Brazilian processors, which tends to increase in the second half of the year. "We are starting to see regional premiums now, where local industries begin paying more for the product, particularly in more industrialized regions," he says.
With premiums testing the best levels of the 2023/24 marketing year for September and the dollar rising sharply against the real - testing levels close to R$5.60 once again - soybean prices also saw a better Thursday in the domestic market. At ports, soybeans from the current harvest surpassed R$135.00 per sack, reaching R$139.50 in October at the Paranaguá port.
Chicago Board of Trade
On Thursday, soybean prices tested both sides of the table on the Chicago Board of Trade but managed to stay positive, with small gains of 1.25 to 2.50 points among the most traded positions. The market remains focused on its fundamentals while also keeping an eye on the political scene in the U.S.
"The more positive scenario for U.S. soybean demand, combined with the rise in soybean oil prices, provides support for the asset. However, gains were limited by the decline in corn prices and the devaluation of the real, making Brazilian soybeans more competitive."
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