Aug 16 / Ignacio Espinola

How much soybean is available in Brazil?

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How much soybean is available in Brazil?

* Brazilian crushers have covered for the next 2 months of crushing.

* They will have to increase their purchase pace up to almost double versus previous years in order to cover their stock needs until the end of the year.

* Local Soybean prices should get more pressure, make it more attractive to sell Soybean for local crushers rather than for the export market.
In order to maintain the projected crushing pace, crushers will have to be more aggressive on their purchases or run the risk of having less emergency stock levels.

* The overall scenario for second half of the year: strong local basis.




Current situation

Analyzing the numbers published by the Abiove (National Brazilian Association for the Oilseeds Industry), we can get to some conclusions relating to the pace of crushing of soybeans, the level of stocks and the activity that could help us explain what is going to happen with the Soybeans local prices in the coming months.

Before we start, let’s take into consideration that for this study we will be using the average of the last 3 years as a proxy for the numbers that we need to project what is likely going to happen in the near future.

The Brazilian soybeans market has been exporting a lot over the past months. China has been very active, buying a lot of beans from Brazil due to a building stock policy. China has been very active in the market, continuing its stock building policy.

How that affects Brazil local market? Should local prices go up? Until when the crushers have stocks to use? Let’s try to figure it out.


Beans availability, crushing numbers and more

According to Abiove, until the end of June, Brazil has crushed 26.9 M mt of soybeans. In order to determine the crushing number for July, we will consider the average of the last 3 years, which is equal to 4.8 M mt. That leaves us to a total of 31.7 M mt soybeans crushed by the end of July, second biggest number since 2017.

Regarding the export numbers, Brazil has already exported a total of 75.4 M mt until July. We are going to assume that Brazil will export a total of 92.4 M mt which is the same number than CONAB printed on its last report. Brazil should export 17 M mt of Soybeans in the rest of the 2024 in order to match with the CONAB’s number.

Considering all the previously mentioned numbers, we get to the conclusion that as per the 1st of August there were 44.4 M mt of Soybeans available in Brazil.



Brazilian Soybean Supply & Demand Balance - CONAB

Source: CONAB


How much Soybeans the crushers have available?

If we consider that according to Abiove the crushers have bought until end of June a total of 39.6 Mmt and we consider purchases for July for a total of 0.6 M mt (taking the average of the last 3y), that means that the crushers have bought until end of July a total of 40.2 M mt.

Following to that reasoning, we have concluded that the total crushing by the end of July would be 31.7 M mt (26.9 M mt until June plus 4.8 M mt for July) which means that the crushers still have around 8.5 M mt of beans available for crush (40.2 M mt purchases – 31.7 M mt crushed).

If we project from August to December, we should have 20.9 M mt crushed, or what is equivalent, a total of 4.19 M mt crushed per month. Considering the 8.5 M mt of stock, this means that crushers are covered for the next 2 months. This also means that in order to get until the last day of December and cover it’s crushing needs, the industry will need some extra 12.4 M mt to cover their crushing needs and they probably are now buying for Oct-Nov-Dec, and if we add a 2 months security stock, the number goes back to 20.9 M mt.


SyD Balance

Source: ABIOVE – CONAB - Hedgepoint


What is going to happen in the near future with Brazilian beans basis?

It is clear that each crusher has its own strategy. Some will be buying with 2-3 months anticipation; others could be looking at a wider or a ticker window. Regardless of the strategy, the industry as a whole in Brazil is covered for almost 2 months forward.

Considering the buying pace of the previous 3y, in which during the second half of the year the industry was buying at an average pace of 1.8 M mt per month, that would give us a total of 8.9 M mt, which is not enough to cover for the 12.4 M mt that the industry will need to match their crushing expected numbers and it’s not enough to cover the crushing plus the security stock. On top of that, we need to consider some carry stock for the next year. If we assume CONAB’s numbers, the carry should be around 3.1 M mt.

Finally, if we consider than the crushers use a stock policy of 2 months of stocks for their crushing plants, and we take the average of the last 3y for the crushing activity in Jan-Feb, that gives us a total of 3.25 Mmt each month. Therefore, crushers should be buying a total of 20.9 Mmt from now until the end of the year, that is almost 2.5 times the average of the last 3y. It’s also important to remark that 2024 has the lowest purchase pace since 2020 until June, therefore the crushers must catch up in the second half of the year in order to have the physical beans to crush.


Stocks Needs/Availability

In summary

This situation may bring some pressure into the local market prices for soybeans, which may potentially lift the prices and make it more appealing for the framers to sell soybeans for crushing than export. Considering the fact that now Brazil enters into a full corn export program pace, the raise on prices for beans to be used in crushing activities shouldn't be a surprise at all. Also, there’s Chins effect, while the Asians were buying a lot of Brazilian soybeans, it does seem like they are switching into ’ US origin beans as it normally happens by this time of the year.

All that being said, crushers will either have to be more aggressive on their purchases, or adopt a strategy of low security stocks, which are already low considering only 2 months of stock. We may potentially see some pressure on local prices due to more competition for the remaining Soybeans. Finally, there’s always the possibility than if the market gets way overpriced, crushers decide to do their annual maintenance during the second half of the year in order to adjust the plant and also to avoid crushing expensive soybeans.

Here’s an example of the basis looking forward in Mato Grosso. Let’s wait and see..


Soybeans Basis  Rondonopolis, Mato Grosso *USD/Bu(

Fonte: hEDGEpoint Global Markets, CME, ESALQ


Weekly Report — Grains and Oilseeds

Written by Ignacio Espinola
ignacio.espinola@hedgepointglobal.com
Reviewed by Thais Italiani
thais.italiani@hedgepointglobal.com
www.hedgepointglobal.com

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