Brazil-US soybean spread widens to $60/mt

12.07.2018

The spread between Brazil and US beans out of major ports on an FOB basis has widened to above $60/mt for September loading, $10/mt up in two weeks as Chinese buyers snap up cargoes.

On an FOB basis for September delivery, Brazil beans loading out of Santos were valued at 240 cents over August CME soybean futures on Tuesday evening versus US Gulf material at 65 cents over September futures.

With September futures valued at 10 cents more than August, Brazil beans are 135 cents per bushel higher, equivalent to $60.50/mt.

Last week, China put a 25% tax on US soybeans, fears of which has seen futures prices since June fall $1.60/bu.

Brazil premiums have spiked $1.35/bu over the same period to offset the loss, although have so far been kept in check by a marginally weaker domestic currency.

That dynamic has left FOB prices on a real basis stable at around BRL1,535/mt, meaning that Brazil’s farmers have yet to cash in on booming Chinese demand while leaving bargains to be had out of US ports for non-Chinese buyers.

On Thursday the USDA is expected to leave this year’s soybean carryout unchanged at around 500 million bushels in its latest WASDE report.

That's because demand from North Africa, Southeast Asia, Mexico and Europe is expected to offset slack Chinese demand, leaving US farmers on track to export 56.2 million mt this marketing year.

The US exported 49.5 million mt by the end of June with outstanding sales of 7.7 million mt, around 10% of which is destined for China and seen likely to be cancelled.

 

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