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As the world panics about coronavirus, Brazil sells soybeans

The coronavirus hysteria was, at least for a while, just a distant freak show that we were watching on TV and, for those who work with financial and commodity markets, on price charts too.

Since last week, however, COVID-19 is already part of our daily life here in Brazil. First with a few Brazilians who had been to Europe and tested positive after coming home; a couple of days later with people who have never been abroad getting ill; and now with almost everybody in line at supermarkets and drugstores, buying tons of toilet paper, food and, last but not least, alcohol to disinfect the hands and lift the spirits.

And let’s not forget that our President, Jair Bolsonaro, might be ill too, amid all the confusion around the results of his test. Positive? Negative? Who’s lying? Who’s telling the truth? Why was he wearing a mask? Has President Trump been infected too, since he met Bolsonaro in Florida just a few days ago?

Working from home
Some friends are already working from home because their employers told them so. Others are walking on the streets with masks on. Only a few people are still shaking hands or kissing when they meet someone – and, heavens, we are Brazilians, most of us normally touch, hug and kiss family, friends and even acquaintances. In big cities such as Rio de Janeiro and São Paulo, schools have been shut down until further notice.

The first case in my hometown, Curitiba, was confirmed last week in a hospital that sits less than one mile from my apartment building. I’m still going to the office every day, but my husband, who works for a newspaper with about one hundred people breathing and living all in the same big room, has already been told by his boss that home office is an imminent possibility.

Weak Brazilian real
And what does all that have to do with Brazilian agriculture? Well, as the world panics about coronavirus, Brazil is selling a lot of soybeans, thanks to its weakening currency, which last week reached 5 reais per US dollar, a new record buoyed by the risk aversion that has swept the markets around the world and also by some domestic issues.

Since the beginning of the year, the real has already lost 20% of its value. That makes Brazilian soybeans more attractive to importers and, at the same time, spurs prices in reais to historical levels. Last week, the 60-kg bag for prompt delivery at the port of Paranaguá touched 93 reais, one of the highest levels ever, if we don’t consider the inflation (and farmers here never do).

Chinese buying
Nevertheless, that translates into $332 per metric ton for importers, compared to something around $337 at the Gulf and $345 at the PNW. Right now, only Argentina’s prices are more competitive than Brazilian prices, but their soybeans will enter the market only from April onwards. And guess who China is buying from, not only for delivery in 2020, but also in 2021, and despite the “phase one” deal signed only two months ago with the United States? Yes, the Chinese are buying cargoes and more cargoes from Brazil to avoid a soymeal shortage.

Selling fast
Not by chance, Brazilian farmers have already sold about 60% of their 2019/20 soybean production, which was 59% harvested as of Mar 12, according to AgRural data. That is one of the highest farmer selling rates ever seen at this time of the year. In Mato Grosso, Brazil’s top soybean producer, about a quarter of the 2020/21 crop – which will be planted only in October and November 2020 – is already sold.

Jam at the ports
But a big problem might be ahead of us. If the coronavirus situation gets worse and force too many people to stay home, disrupting transportation and inspection, it might be difficult for Brazil to export, over the next few weeks, all the 2019/20 soybeans already sold and just awaiting shipment.

Right now, there is a jam at Brazilian ports (caused by strong demand, harvest delays and excessive rainfall in February) that may get even more complicated if the workforce is disrupted by the coronavirus – no matter if the disease itself, the measures involving its management or the hysteria around a virus that, at least so far, kills less than the common flu.

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