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June 2, 2016

Soybean Prices at Brazilian Ports could hit R$ 100 Per Sack

Soybean prices in Brazil continue to climb to new record highs due to increasing international prices and a weaker Brazilian currency. Some current prices at Brazilian ports include: Sao Francisco do Sul in Santa Catarina R$ 94.50 per sack ($12.27 per bushel), Rio Grande in Rio Grande do Sul R$ 94.50 per sack ($ 12.27 per bushel), and Paranagua in Parana R$ 93.00 per sack ($12.07 per bushel). At the ports of Paranagua and Rio Grande they are offering R$ 90.00 per sack for delivery in May of 2017 or $11.68 per bushel.

According to Vlamir Brandalizze of Brandalizze Consulting, he feels it is possible that soybean prices at Brazilian ports could reach the benchmark of R$ 100 per sack ($12.98 per bushel) during the month of June. The current record high prices are the result of price increases on the Chicago Board of Trade and a weakening of the Brazilian currency. The Brazilian currency is currently trading at 3.60 to the dollar and it is expected to continue weakening due to poor economic news in Brazil. As the currency weakens, the domestic price of soybeans in Brazil increases.

For the past five months, the Brazilian currency had actually been strengthening due to the possibility of the impeachment of President Rousseff and a stronger currency makes it harder to service bank debts that are dollar-denominated. The President has been impeached and temporarily removed from office while she is tried in the Brazilian Senate. The currency is expected to weaken going forward as the temporary administration of President Temer struggles to pull Brazil out of its worst recession in decades.

Yesterday, Bloomberg reported that the large Brazilian farming group Bom Jesus filed for bankruptcy protection because 90% of its debts are dollar-denominated. According to the law firm hired by the company, Bom Jesus's debt is about 3 billion reals and they failed to reach an agreement with banks and suppliers. The company plants soybeans, corn, and cotton on 250,000 hectares (617,500 acres) in the Center-West region of Brazil.