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Brazilians Sell Soybeans, Search for Corn Storage

Grain transportation costs run up in Brazil.

SAO PAULO, Brazil -- Brazilian producers take the opportunity to sell newly harvested soybeans, following the recent $1.20-per-bushel rally in the CME Group’s futures market.

“From June 23 to July 11, we had an expressive movement for soybeans prices. Producers know that this is a good time to sell soybeans, and they are taking advantage of this opportunity,” says Daniele Siqueira, market analyst at AgRural.
 
The Brazilian soybean market registered an increase between 8% and 12% on soybean prices in reais per bag of 60 kilos, for immediate delivery, Siqueira says. “Producers have been holding on to soybeans for a long time, but marketing improved in May and June. With a rise on prices in Chicago, marketing will accelerate,” says Siqueira.
 
According to an AgRural survey, 70% of the 2016/2017 soybean crop was sold until June. According to Siqueira, from January to June, 45.5 million metric tons of soybean were exported. “The pace of soybean exports is firm. It is possible exports reach 63 million tons of soybean,” says the analyst. If this forecast is confirmed, it is a record higher than in 2015, when Brazil exported 54.2 million tons.
 
But even with a more comfortable situation to sell soybeans, prices are not considered good by producers. In June 2017, the average price for soybean sales was R$ 53.30 ($ 16.39) per bag of 60 kilos in the city of Sorriso (in Mato Grosso state). In June 2016, the price was about R$ 82.70 ($ 25.43) for a 60-kilogram bag.
 
* Conversions at the exchange rate of R $ 3.25 per U.S. dollar.

CORN

Brazilians are harvesting a big corn crop. Total corn production in the 2016/2017 season is expected to reach 96 million tonnes, up 44.3% compared with the 2015/2016 harvest. According to the National Supply Company’s (Conab) estimate (released on July 11), the first crop corn, which is still harvested in some regions of the South and Northeast of Brazil, is expected to close with 30.4 million tons.
 
The second corn crop, with production concentrated in the Central West region, mainly in the state of Mato Grosso, is estimated at 65.6 million tons. The harvest of the second corn crop reached 23% complete on July 6, according to the AgRural consultation survey. Although 30% was harvested in July of last year, the harvest in this season is close to the average of 24% in the last four years.

LOW PRICES

With a greater supply of corn, producers face low prices that discourage sales. “In Chicago, corn prices have risen, but prices are very low in Brazil,” says Daniele Siqueira, market analyst at AgRural.
 
In the city of Sorriso, in Mato Grosso, a 60-kilo bag of corn from the second crop to be delivered in August was sold for R$ 13 ($ 3.99). In the same period of last year, the same 60-kilo bag of corn was worth R$ 27 ($ 8.30) in that city. “The price is below the minimum price of corn for Mato Grosso, which is R$ 16.50 ($ 5.07),” says Siqueira.
 
Up to June, marketing of the second corn crop reached 45%. Last year, 66% of the crop was sold in the same period, but the crop was much lower. “The most capitalized producers tend to invest in silo bags and store the corn crop. The trend is to hold production,” says Siqueira.

 
STORAGE AND TRANSPORTATION

In addition, storage shortfall will be a problem for the producers. Conab estimates that Brazil has the capacity to store 158.1 million metric tons of grains. With an estimated total production of 237.2 million tons of grain (soybean, corn, wheat, among others), the deficit is over 79 million metric tons.
 
As a result, the producer who doesn’t have enough space to store corn is forced to face the low prices and to push the cereal to the ports. This raises another problem because increased demand for trucks at peak harvest raises freight costs.
 
According to a survey by the research group Esalq/Log, from the University of São Paulo, the prices of corn freight costs jumped between 7% and 16%. In some regions, freight was up to 20% more expensive in June in comparison with the month of May.
 
* Conversions at the exchange rate of R$ 3.25 per U.S. dollar.

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