USDA boosts prices, but June ends with lower soybean prices in Brazil

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     Porto Alegre, July 5, 2021 – The US quarterly reports on soybean acreage and stocks, released on Wednesday (30) by the United States Department of Agriculture (USDA), boosted futures contracts in Chicago in the last session of June, a move that was naturally followed by domestic prices. The internal movement also gained pace.

     The week’s earnings reduced the losses accumulated over the month of June in the Brazilian market. With strong volatility in Chicago and the retreat of the dollar, the month was marked by a slow trading pace.

     A 60-kilogram bag at the Port of Paranaguá rose from BRL 151.00 to 165.00 between June 25 and July 2. But at the beginning of the month, the price was BRL 173.00. In Rio Grande, the behavior was similar, with a bag starting June at BRL 173. Last week, the price partially recovered, surging from BRL 148.00 to 164.50.

     On the Chicago Board of Trade (CBOT), the contract with delivery in November, the most active, rose 10.18% over the week, closing Friday at USD  13.99. For the month, the position rose 1.91%, while in the first semester there was a 25.83% growth.

     Chicago’s good performance in June was defined by this last week’s performance, mainly with the strong appreciation that occurred after the release of USDA numbers, which indicated lower-than-expected acreage and stocks. The month had a behavior of ups and downs, typical of the weather market period. Besides climate projections, the flow of money from funds, doubts about the use of biofuel, and concerns about the Chinese strategy to combat the rise in commodities deserved attention and strongly affected prices.

     USDA indicated that the area planted with soybeans in the United States in 2021 must total 87.6 mln acres. If confirmed, the acreage will be 5% above the total cultivated last year.

     The number surprised and was well below the market’s expectation of 89.15 mln acres. The number repeats the estimate of the planting intentions report, released in March by USDA, which is extremely unusual. In comparison with last year, the acreage must be equal to or greater in 28 of the 29 growing states of the country. The market understood that the good rhythm registered in planting, combined with the recovery of higher levels in Chicago in 2021, would encourage growers to further increase soybean areas in the new crop. However, according to USDA, this expectation must not be confirmed.

     Quarterly US soybean stocks, on June 1, totaled 767 mln bushels (20.87 mln tons). The stored volume decreased 44% from the same period in 2020. The number was also below market expectations of 795 mln bushels (21.63 mln tons). The decline in quarterly stocks opens the possibility that USDA will reduce its estimate for the US ending stocks for the 2020/21 season already in its next supply and demand report, to be released on July 12.

     After the release of these latest reports, Chicago gained strength, closing Wednesday (30) with highs above 7% in most positions, a fact also quite unusual.

     The exchange rate also stood out in the composition of domestic prices in June, when the US currency fell from BRL 5.223 to 4.972, accumulating losses of 4.8%. It is important to highlight that the US currency had not closed below the level of BRL 5.00 since June 2020. In the semester, the US currency lost 9.2%. This behavior also weighed on soybean prices and slowed down the pace of business in Brazil. Last week, the dollar rose 2.4%, contributing to the partial recovery of domestic prices.

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