12 February 2023, Chicago: Bids are indicating a 5¢/bu discount to the March maturity in the Paranagua paper market, as Port differentials acted to correct the rise in soybean prices recorded on the CBOT today.
The harvest of Brazil’s soybean crop is advancing and expectations of a record production— at more than 152mn metric tonnes (t) — appear to be coming to fruition. Market participants say that the return of rains in Rio Grande do Sul, the only state facing a drought and low productivity, is ruling out the chance of further cuts in estimates and putting downward pressure on premiums.
Movement in the paper market has been strong, as the equivalent of 150,000t of soybeans were traded on Friday. One of the 15 deals heard — not all confirmed — was closed for March with a discount of 1¢/bu to the CBOT. Negative values were not seen since early June 2021.
The reason for the change from a premium to a discount for the March maturity was the advance of sales by farmers and lower-than-expected Chinese demand this week, said Flavio Almeida, grain broker ACI’s partner and director in Brazil. Farmers sold more than 5mn t in the week, according to Almeida, and demand did not follow. Therefore, the only thing left for the paper market is to act as a hedging tool for trading companies.
Brazilian soybeans continue to hold a premium to Chicago for the other maturities, from April to July, but the levels also dropped significantly.
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