Brazil: Tight Profits for Soybeans
Jan 23, 2010
Basically, soybean prices are composed by three factors: CBOT + internal basis + currency exchange.
Currently some local advisors estimates producers have about 23% of their production sold until January 15, against 36% in previous last 5 years. It means producers will need a recovery in CBOT prices to fix contracts in good levels. So we can estimate 9.50/bu is a possible price average for South America crop season.
As a big crop is due to come, we can expect a pressure on internal basis because of producer’s low capability of storage. So this one will probably be negative, or just will not compensate in case of CBOT keeps low.
Brazilian Real keep valuating against U.S. Dollar, and recent economical indicators from U.S economy indicates U$ will keep losing value for BRICs currencies. This factor makes prices in R$ goes down.
Considering above numbers, official survey & research institutes estimates farm prices in major producers states: Paraná *R$30,11, Rio Grande do Sul *R$30,29 and Mato Grosso *R$24,75. Same institutes, calculates regional production operational costs: PR*R$28,24, RS*R$27,92 and MT*R$25,07.
If this scenario confirmed, we will have a low profit for PR and RS, and a little loss for MT, the most important soybean producer in Brazil, currently responsible for 8% of world supply of this grain.
*value in local currency for 60kg bag (2,2046 bu)