Brazil Soybean Premiums Rise as U.S.-China Trade War Escalates

(Reuters) – Brazil soybean premiums for June rose to $0.92 per bushel on Monday, in reaction to a U.S.-China trade war that is expected to spur demand, according to the Center for Studies in Advanced Applied Economics (Cepea).

Amid a fall in the Chicago soybean contract and the weakening of the Brazilian currency against the U.S. dollar, port premiums at Paranaguá rose by almost 10 cents from Friday, reaching the highest level since Dec. 7, Cepea data showed.

That more than offset a daily fall of nearly 7 cents on the July soybean contract traded in Chicago, used as a benchmark for Brazil’s soybean shipments.

The trade war has put pressure on the market in Chicago, where traders expected a U.S.-China deal that did not materialize. Instead, the two largest economies in the world have announced further tariffs in recent days.

With the U.S. imposing tariffs and China retaliating, the expectation is that China’s demand for Brazilian soybeans will increase, Cepea said in a statement.

Last year, China hiked imports of soybeans from Brazil to avoid tariffs applied on those from the United States, and Brazil exported a record 84 million tonnes.

By November, local premiums reached more than $2 per bushel, with Brazil having almost no more soy left to export.

Currently, Brazilian producers still have large volumes to ship, since the harvest has recently ended.

Despite the high premium, local farmers are still reluctant to trade more soybeans, according to Cepea, with a government imposition of minimum prices for truck freight hampering business.