Porto Alegre, July 25, 2023 – The Brazilian soybean market has maintained an overall average increase of 7.4% in prices in the country’s main regions and ports since the beginning of July. The recurrent hikes in internal prices have steadily accelerated the business flow, with large volumes of soybeans sold due to the rising selling interest of producers.
Some factors have contributed to improving offers, with the positive movement in CBOT futures contracts being the main reason for the substantial rise in prices. The domestic market has felt the elasticity of the CBOT much more than other price makers such as the dollar, which has moved sideways since last week. We could also point to the slight improvement in premiums as a variable that has contributed positively when compared to the scenario of the first semester. Premiums have shown a reversal since the beginning of July, which is natural in a period of the second semester, when part of the crop is already sold.
Even so, we could have a better move for premiums if there were not the current logistical problems, as ports are crowded, with very little space for soybeans. All of this is still a reflection of the record Brazilian crop of 156 mln tons.
Exchange rate movements have not shown significant weight on the internal price formation, as we have seen sideway oscillations for the US currency. The short-term bias for the dollar remains negative, as there is a large discrepancy between the “risk-free” Brazilian and US interest rates. If we look at the interest parity calculations, in order to balance the domestic and foreign markets, the spot dollar should be pegged close to BRL 4.42. Of course, we depend on the agents’ future expectations regarding the economic scenario. Even so, even if there are reductions in the Selic rate by the Central Bank, the cuts would not be firm enough to reverse the exchange rate situation in the short term.
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