Farmer Soy Hoarding in Brazil Hits Local Crushers, Squeezes Storage

(Agrimoney) –  The Brazilian soybean crop is nearly completed, and widely expected to come in at record levels of over 110m tonnes.

But despite the massive size of the crop, farmers seem to have little interest in selling at the moment, given rock-bottom prices.

The result is glutted storage capacity, a shortage of soybeans for local processing, and a surprising lease of life for US exporters at a time when they are usually facing stiff competition from Brazil.

ADM reports narrow crush-margins

The giant US agriculture company Archer Daniels Midland this week reported tight crush margins in Brazil, due to the farmer hoarding.

“In Brazil, margins have been compressed as farmer selling hasn’t kept pace with export demand due to weak commodity prices and the strong Brazilian real,” said ADM’s chief executive and chairman Juan Ricardo Luciano.

“Brazil will have a very large crop. We expect soybeans to be up in production maybe 20% versus last year,” Mr Luciano said.

But he added that “the dynamics in Brazil have been about farmer selling, farmers not liking the prices, not liking the currency at this point in time.”

“So crush margins have been maybe breakeven at best as everybody fights for soybean origination,” Mr Luciano said, adding that grinds have been particularly pressured in Mato Grosso, give export demand for unprocessed beans in northern ports.

Farmer soybean hoarding could leave corn in the cold

The slow pace of soybean selling is also raising concerns that there will be no storage available for safrinha corn crop.

“The safrinha corn crop in Mato Grosso, which is Brazil’s largest safrinha corn producer, generally looks good and that is bad news for corn prices in the state,” said analyst Dr Michael Cordonnier.

Dr Cordonnier said farmers are worried that prices could fall as low as R$10 a sack, or around $1.50 a bushel.

“If prices do fall that low, it would only be temporary because farmers would prefer to store their grain rather than sell at such low prices and that could cause another problem – a lack of storage space,” Dr Cordonnier said.

“With many silos still full with the recently harvested soybeans, the storage deficit in the state is going to be painfully obvious over the next few months,” Dr Cordonnier said.

“As a result, there are going to be mountains of corn piled outside all across the state.”

Still, Dr Cordonnier said that the corn would be stored outside “during the dry season when there is little chances of rainfall,” reducing the potential for damage.

Boon for US exporters

With farmers holding onto their soybeans in Brazil, the usual rotation of Chinese business away from the US has been slowed.

US usually books most of its soybean sales in the first half of the marketing year, before the Brazilian crop arrives.

But this year demand for US supplies has held up, even after the harvest.

Last Thursday the US Department of Agriculture announced weekly soybean export sales at 808,000 tonnes, a very high level for this point in the year.