Porto Alegre, April 5, 2021 – In this external environment, the Brazilian domestic market brings two important impacts on the formation of prices. At first, it makes imports more expensive, even with the arrival of the Argentine crop in April. Then, it strengthens port prices for the 2021 second crop, now at the levels of BRL 80. Domestic prices, albeit high, do not yet make imports feasible, which would be important to neutralize the price support movement in the first half of the year.
Domestic market prices continue supported by the supply picture in this first semester. Unfortunately, many consumers adopted strategies that took into account variables that did not exist for this first semester and are now resuming purchases at high prices and fueling new price highs. Until the arrival of the second crop, in reasonable volume, in August, the Brazilian domestic supply will be at the mercy of these high prices and import decisions. While importing today costs over BRL 100 CIF industry, the domestic market operated at the levels of BRL 90/95 in the South region, BRL 92/95 in São Paulo, and BRL 82/85 in Minas Gerais.
This new upward movement in the international market brought the prices of the second crop to BRL 79/80 at ports, against BRL 75/77 before the USDA’s report. Therefore, with the arrival of the second crop in August, domestic market prices will try to adjust to port levels. If this does not happen, the export targets for this year will be compromised, and more stocks will be left for 2022 in Brazil.
The planting of the second crop is almost finished, with nearly 70% of the area complete in March. The initial risk is the decrease in the volume of precipitation in the fall. April suggests is likely to be a drier month, with rain only returning in May. Afterward, most plantations will have 50/60% of moisture in June. This establishes a risk of frost in June in PR, MS, SP, and Paraguay. Until this definition, growers may avoid more intense sales of both old and new crops.
Agência SAFRAS Latam
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