Record Soybean Crop Supports Brazil Real as FOB and Futures Diverge - Bloomberg
Brazil’s 12-month trade balance set a record in May, and exports from a booming soybean crop have played a major role in the gains. The strong trade balance has in turn boosted Brazil’s real, and that carries a trickle-down effect on prices because soybean exports are quoted in dollars.
Brazil, Argentina and the U.S. together produce about 90 percent of the world’s soybeans. Export prices from all three have tended to move together. And even with the surging crop and record inventories globally, forecasters say the supply isn’t expected to meet the world’s demand.
“Demand is just silly good,” Dale Durchholz, senior market analyst at AgriVisor, said in May. “The world economy is improving, and as incomes rise, consumers demand more meat, dairy and eggs. Traders have underestimated demand while focusing on the big supply.”
The Issue
Global soybean prices fell on May 17 after news of a new political scandal in Brazil. Soybean prices have continued to move together since then, including free-on-board prices at the primary export ports for the Big 3 producers. However, a tools analysis shows futures prices on the Chicago Mercantile Exchange have fallen even faster, suggesting a more bearish view of the soybean market and also of the outlook for the real.
Note : Any blog OR content suggestion you have , please mail me on prabhakara.dalvi@gmail.com