Brazil's May soybean exports jumped 45% on the year to reach 15.5 million tons, the second-highest monthly soy shipment ever, the latest foreign trade department data released on June first showed, with a hefty 74% of this volume bound for China.
Data shows the Chinese crushers chose the more competitively priced Brazilian beans over US-origin supply, despite the US-China Phase 1 trade deal inked in January.
The main reason underpinning China's strong demand for Brazilian soybeans is its weakened currency. The real has lost over 40% of its value since January, boosting the price competitiveness of Brazil's soybeans. Over January-May, Brazil shipped 74% of its 49 million tons soybeans exports -- a 40% jump from a year ago -- to China. Its soybean shipments averaged 0.77 million tons/day in May, a 70% year-on-year spike, the trade report showed.
Backed by a good soybean harvest pace and robust demand from Chinese crushers eager to cover COVID-19 related supply-side uncertainties, the prevailing uptrend in Brazilian soybean exports could continue to accelerate in June, an industry source underlined.
Another factor favoring Brazilian soybean farmers is the timing of exports. Brazilian soybean sales peak between February and May, ahead of when the US soybean harvest is ready for domestic sales and exports in September-December. Brazil completed its soy harvest in mid-May.
Besides the price advantage, sector analysts have forecast Brazilian soybeans output for 2019-2020 to hit a record high average of 122/125 million tons.
Brazil's national crop agency Conab in its December report said that the country is expected to export 72 million tons in the 2019-2020 local marketing year, which runs from February 2020 to January 2021, up 3% from a year ago.
Market participants, on the other hand, see Brazil's 2019-2020 soybean exports rising to as high as 78 million tons due to the pandemic-fueled Chinese buying spree and the weak real.
With July and August demand covered, Chinese buyers are currently focused on booking Brazil's September soybean shipments, a Chinese trader said. Brazil has already sold over 85% of its current year crop, a rise of 20 percentage points from a year ago, and forward contracted almost 40% of next year's crop, a 20 percentage-point increase over the same period, market sources said.
Chinese crushers typically start to inquire about buying US soybeans for the last quarter of a calendar year. However, the ongoing tensions between the US and China has nudged Chinese soy buyers towards Brazilian beans for the last quarter of 2020. The world's two largest economies have disagreed over the origin and mismanagement of the coronavirus pandemic.