Global Oilseed Market: Damaged Brazil Soy Crop Fuels Rumors of Chinese Purchases of US Beans

In the week ending May 24, 2024, global oilseed prices have risen due to concerns over potentially greater losses in Brazil's southern regions from recent flooding, unfavorable wet weather in Argentina hampering soybean harvests and quality, rumors of Chinese purchases of US soybeans, and rainy US weather potentially slowing soybean planting. However, weak US soybean export demand, a strengthening US dollar, and falling global crude oil futures have capped the upward momentum in oilseed markets.

On Friday, the July soybean futures contract on the Chicago Board of Trade (CBOT) settled at $12.48 per bushel, up 1.6% from a week earlier. The average price for US Gulf soybean cargoes loading in June rose 1.6% to $12.915 per bushel. July soybean meal futures climbed 4.8% to $386.5 per short ton, while July soybean oil fell 0.7% to 44.95 cents per pound. On the Euronext exchange, August rapeseed futures rose 2.5% to €490.50 per ton, and on the ICE Futures Canada, July canola futures increased 0.9% to C$666.7 per ton. Argentine Up River soybean spot prices rose 2.6% to $469 per ton, including a 33% export tax.

Consultancies have revised their estimates of soybean production losses in Brazil's Rio Grande do Sul state, with most now indicating the damage may be worse than initially expected. Brazil's national food supply agency CONAB lowered its forecast for Rio Grande do Sul's soybean output on May 14 to 21.43 million tons, down 460,000 tons from April. In contrast, Hamburg-based Oil World estimates the state's soybean losses could reach 3-4 million tons, while Hedgepoint Global Markets believes the crop may only reach 18.2 million tons due to the severe weather impact.

Rio Grande do Sul's crop agency Emater has reported a sharp decline in soybean quality compared to pre-rainfall harvests. Around 15% of the unharvested crop may be abandoned, as yields are insufficient to cover operating and transportation costs. The adverse weather has also disrupted soybean drying and logistics, with some deliveries arriving at silos with moisture levels near 30%, well above the 14% ideal for safe storage.

Despite the production challenges, Brazil's soybean export premiums have remained firm, fueling market rumors that Chinese importers have booked US soybean cargoes for July delivery. European traders noted that with Brazil's export peak season largely passed, the country's elevated export premiums have made US soybeans more attractive, opening a window of opportunity. However, China is still reported to be purchasing Brazilian soybeans, and the US Department of Agriculture has not yet confirmed the alleged Chinese purchases of US beans.