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May 11, 2020

Soy Prices Continue to Increase in Brazil due to Weaker Currency

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

Brazilian farmers are now actively engaged in marketing their 2019/20 crop, forward contracting their 2020/21 crop, and purchasing inputs for their next soybean crop. The Brazilian currency continues to weaken against the U.S. dollar, and as a result, the price of soybeans in reals continues to move higher.

Last week, the Brazilian currency got close to trading at 5.9 reals per dollar and it closed the week at 5.74 reals per dollar, which was up 5.5% for the week. At one point last week, the Brazilian currency had devalued almost 50% since the start of the year.

The weaker currency resulted in higher domestic soybean prices. The spot price for available soybeans last Thursday at the Port of Santos was R$ 116.0 per sack. At the close last Friday, the price was R$ 115.00 per sack. At the Port of Paranagua, the spot price for soybeans at the close of trading last Friday was R$ 110.00 per sack and at the Port of Rio Grande, it was R$ 110.50 per sack. The price for February 2021 delivery was R$ 105.50 per sack at Paranagua and R$ 105.00 per sack at Rio Grande.

Soybean prices were also strongly higher last week in many of the principal soybean producing states in Brazil. In Castro, Parana soybean prices increased 6.8% last week to R$ 110.00 per sack. In Panambi, Rio Grande do Sul, they increased 3.1% to R$ 98.00 per sack. In Sorriso, Mato Grosso they increased 3.8% to R$ 95.00 per sack. In Maracaju in Mato Grosso do Sul, they increased 5.3% to R$ 98.00 per sack.

I usually convert the price of Brazilian reals per sack to dollars per bushel, but that is tricky these days because of the volatile exchange rate. For example, a price of R$ 116 per sack would translate to $10.54 per bushel if you use the exchange rate of 5 reals per dollar. That same price of R$ 116 per sack would translate to $9.58 per bushel if you use the exchange rate of 5.5 reals per dollar. I think it is safer just to say that these are record high prices in reals, which is what Brazilian farmers are concerned about.

According to data from the consulting firm ARC Mercosul, the price of soybeans late last week at the Port of Paranagua for June delivery was US$ 332.70 per ton, while at the U.S. Gulf, it was US$ 335.10 per ton. For July delivery it was US$ 336.70 at Paranagua and US$ 337.70 at the Gulf.