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January 29, 2020

Brazilian Analysts Optimistic Concerning Brazil's Soybean Exports

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

There has been a lot of speculation lately concerning Brazil's future soybean exports given the signing of the Phase 1 trade agreement between the U.S. and China.

Last week, Noticias Agricolas reported that the consulting firm SIMConsult is estimating that in 2020 Brazil will export 77 million tons of soybeans with 62 million going to China and 15 million to the rest of the world. They feel the big advantage for Brazil is that Brazilian soybeans are cheaper, they are cleaner, and they have 46-48% protein compared to 42% for soybeans from the U.S. Vlamir Brandalizze from Brandalizze Consulting estimates that in 2020 Brazil will export 75-80 million tons of soybeans.

According to Brandalizze, soybean production in Brazil generates a profit margin of 5% to 25% depending on the region. In the center-west region, soybeans have a profit margin of 5% or a little more, whereas in southern Brazil, profits are in the range of 25% due to lower transportation costs. A weaker Brazilian currency compared to the dollar makes Brazilian soybeans even more competitive.

As a result, they feel the Chinese government buyers will purchase more soybeans from the U.S. even though they are more expensive while private companies will purchase the cheaper soybeans from Brazil.

Another source of optimism in Brazil is the strong domestic demand for soybeans from the booming livestock sector and from biodiesel manufactures who will need to process about 4 million tons of soybeans in 2020 to obtain the needed 600,000 tons of soybean oil for biodiesel production.

Brazilian farmers have already sold more than 40% of their anticipated 2019/20 soybean production for very good prices, so they are in no hurry to sell additional soybeans. They will only sell if they have bills to pay over the next 60 days. Additionally, they have also started to sell some of their 2020/21 production which they will plant later this year.