“Brazilian farmers will likely make the biggest profit in history in the 2020/2021 soybean harvest, as soybean prices have reached nominal records in recent months. The high prices are a result of low domestic supply and the depreciation of the Real in relation to the Dollar”. The projection is by researcher Joana Colussi and professor Gary Schnitkey in the article “Profit from Brazilian Soybeans will reach an all-time high in 2020/21”, published on the website of the Department of Agricultural and Consumer Economics at the University of Illinois (USA).
According to the authors, soybean prices “will likely remain high in Brazil, and soybean exports may grow for the 2020/21 marketing year. Production growth in Brazil will likely continue over the next ten years.”
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They highlight that the monthly price at the port of Paranaguá (Pr. Paraná) increased by 66.5% from January 1st to September 25th this year, according to data from the Center for Advanced Studies in Applied Economics (Cepea) at the Faculty of Agriculture Luiz de Queiroz from the University of São Paulo: “The increase in soybean prices in Brazil is directly related to the depreciation of the Real in relation to the Dollar. From January to September, the US currency rose 29%. During the pandemic, the Brazilian currency depreciated further as its economy slowed.”
In addition to exchange rate changes, the authors explain, there are high premiums in relation to Chicago Mercantile Exchange (CME) prices in Brazilian ports. In September and October this year, port premiums were between US$ 1.90 and US$ 2.00 per bushel above CME prices. “These premium increases occurred in a year in which Brazil harvested a record soybean harvest, exceeding 124 million tons in the 2019/2020 harvest”, they point out.
“Factors suggest that soybean prices in Brazil will continue to rise, as record exports have generated a reduction in domestic supply compared to previous years. Domestic demand remains firm due to large purchases of soybean meal and oil. Low soybean stocks are leading national industries to pay more compared to ports”, conclude Colussi and Schnitkey.
Source: agrolink
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