In June, the average price of Brazilian soyabean reached the lowest level in thirteen years and declined by 5% y-o-y. Consequently, Brazilian soyabean export prices declined by 5% over the first half of 2020, to USD 326.1/MT at the end of June, due to high domestic supply, weak global demand, and a sharp depreciation in the Brazilian real (BRL).
With the harvest completed in mid-June, the USDA estimates Brazil’s 2019/20 soyabean production at a record 123m tonnes, rising 3% y-o-y. The USDA also anticipates output to increase further by 6% y-o-y to 130m tonnes in the 2020/21 season. These record supply expectations provide strong downside potential for prices, particularly with demand subdued due to the COVID-19 pandemic .
Additionally, the USDA estimates Brazilian soyabean ending stocks for the 20 19/20 marketing year at 3.6 million tonnes (+16%, y-o-y), with low local storage capacity forcing local producers to sell below their price expectations, according to Brazil’s Ministry of Economy’s Foreign Trade Secretariat (SECEX).
The COVID-19 pandemic has led to a severe economic recession and correspondingly sharp depreciation of the Brazilian currency, with the BRL depreciating by 24% against the US dollar (USD) from January to mid-July. A weakened domestic currency improves export competitiveness, which may lead to increased import demand for Brazilian soyabeans. However, the bearish outlook for the USD due to re-escalating trade tensions with China could reverse this advantage.
With COVID-19 continuing to spread in Brazil and the anticipation of higher supply, international export prices for Brazilian soybeans will likely remain under pressure.