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Still a weather market
This is still a crucial time for Brazilian soybeans and all eyes are on the weather forecasts. It has been quite awhile since southern Brazil (Rio Grande do Sul and Parana) has seen meaningful rainfall and it is hot. This is also true for the country of Paraguay.
With the USDA taking their usual conservative approach to crop sizes, there still may be smaller crops in future reports. Last week’s reports were almost disappointing due to the corn and bean crop sizes the USDA estimated for Brazil and Argentina. The estimates included Argentine beans at 48 mmt (43.5-46.2 mmt is the range of recent estimates) and Brazilian beans at 72 mmt (the Brazilian government agency CONAB’s estimate is 69.2 mmt). For corn, the USDA put out 22 mmt for Argentina and 61 mmt for Brazil.
Both the Brazilian and US cash markets are still very tight for soybeans. In Brazil, there is a substantial line-up of vessels waiting to load soybeans (around 3 million metric tons). There has also been an accident at one port, Santos, causing delays. At the main port of Paranagua, workers have indicated they will slow work (an annual occurrence to protest conditions and demand higher wages).
Brazilian farmers, in the face of smaller crop sizes, have apparently become reluctant sellers. Given the basis levels in Brazil and the port issues, the US is price competitive with Brazilian beans through May. This is unusual, as Brazil should be the dominant player during their harvest season. Still, demand has shifted back to the US and this could continue. This week has featured many large export sales to China and unknown for both this crop year and next.
Just a note on corn--the Brazilian corn crop should also be getting smaller, based on the dryness, right? For right now, the crop has suffered in the southern area, but corn in the north balances it out. Also, the second (winter or safrinha) crop is still to come and it is estimated larger than previously thought. Brazil does export some corn, but for right now, the focus is on soybeans.
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