Despite the recent import duty suspension by the Brazilian government, soybean crushers are not keen on importing beans and are ready to wait till new Brazilian harvest hits the market in February, market sources told S&P Global Platts on Oct. 21.
Brazilian beans imports in the last quarter of 2020 is seen sluggish on weak currency and low crush margins, an agricultural analyst said. Brazilian crushers do not see much business sense in buying imported soybeans in Q4 of 2020, he added.
Brazilian real is trading at 5.60 per US dollar, as of Oct 21, down 40% year on year.
A weak Brazilian real versus the US dollar ensures high import costs of raw beans for the local crushers and the price spread between domestic and imported oilseed may not be much, analysts said.
In fact, in the interior regions, located far away from Brazilian ports, soybean prices of imported beans could be 7%-8% higher than the domestic stocks, sources said.
According to the state governments' price reports, domestic soybeans prices have soared 5 reals - 10 reals/60 kg since the announcements in some regions to Brazilian real 170- 175/60 kg, close to $13/bu, while in other regions, the prices are expected to rise in coming days.
Brazilian domestic soybeans prices are more or less benchmarked on futures index of the Chicago Board of Trade and the CBOT November soybeans prices are trading in the vicinity of $10.70/bu on Oct 21, up 20 cents/bu since the Brazilian tariff cuts were announced on Oct. 16.
CBOT soybeans futures got supported by the Brazilian government's tariff suspension decision, coupled with strong China export demand and delayed Brazilian plantings, a commodities trader said.
Brazil -- world's largest soybeans producer and exporter -- sold over 98% of its 2019-20 oilseed stocks in the first three quarters of 2020 due to weak Brazilian real and robust demand from world's largest beans importer, China.
As a result, Brazilian domestic soybeans prices soared to unprecedented highs amid tight supplies.
Record high prices for Brazilian soybeans have fueled inflation, which in September hit 0.64% - the highest value for the month of September since 2003, according to the government data.
To counter inflation, Brazil announced on Oct. 16 that it would suspend the import tariffs on corn, soybeans, soy meal, and soy oil from non-Mercosur countries.
Mercosur is a trade block comprising Brazil, Argentina, Paraguay and Uruguay.
Before the announcement, the tariff on soy and corn imports from non-Mercosur was 8%, 6% for soybean meal, and 10% for soybean oil. The import tariff waiver will apply to soybean and soy products until Jan. 15, 2021, while for corn imports, until March 31, 2021.
According to different analysts estimates, post the duty suspension, Brazil could import roughly 0.3 million mt - 0.5 million mt of soybeans in the last quarter of 2020, primarily from the US.
However, that may not be enough for the Brazilian crushers, who have experienced high demand for soy based animal feed from the Brazilian meat industry, one of the world's biggest producers and suppliers.
The Brazilian crushing industry needs around 1.5 million mt - 2 million mt of raw beans in the last quarter of 2020, a Brazilian crusher said.
But the tight supply and record prices of soybeans are expected to slow down Brazilian oilseed crushing in Q4 on negative crush margins, he added.
