Dollar supports prices and keeps soybean market busy in November

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The Brazilian soybean market had a month of November characterized by reasonable trading, mainly in the second half of the year, and rising prices compared to October. Despite the fall in Chicago futures contracts, the appreciation of the dollar against the real, besides the firmness of export premiums, encouraged producers to negotiate available volumes, mainly from the new season.

A 60-kilogram bag went up from BRL 83.50 to 85.50 in Passo Fundo (RS) in November. In Cascavel (PR), prices advanced from BRL 81.50 to 84.00. At the port of Paranaguá, prices jumped from BRL 88.00 to 89.50. In Rondonópolis (MT), prices increased from BRL 78.50 to 84.00. In Dourados (MS), a bag rose from BRL 79.00 to 84.00. In Rio Verde (GO), prices surged from BRL 78.00 to 83.50.

The exchange rate was a key factor for the slight improvement in the business pace in November, noting that October had a positive first half. The US currency accumulated an appreciation of 5.66% in the period, closing at BRL 4.2410. The dollar reached over the month the highest level in history. The combination of external factors (trade war, falling US interest rates) and domestic factors (current account deficit, falling interest rates in Brazil) set the positive tone for the dollar against the real.

Domestic market behavior could have been even better, but Chicago disappointed. January contracts fell 5.95% by plummeting from USD 9.32 to 8.76 per bushel, the lowest since mid-September.

The delay in closing a trade agreement between China and the United States led to the fall in Chicago in November. The last half of the month was marked by setbacks in trade negotiations between countries, bringing back market pessimism. Besides commercial divergences, geopolitical issues were on the agenda, such as US support for protesters opposing the Chinese government in Hong Kong. Most market players no longer believe that the ‘phase one’ of the trade agreement will be signed in 2019. Faced with these uncertainties, Asian demand for soybeans will continue to be directed towards Brazilian ports, which strengthens Brazil’s export premiums, besides also supporting domestic prices.

Moreover, Chicago also reflects the harvest in the United States. The harvest, practically completed in the US growing belt, had a great recovery in November, without new loss in production potential, besides the one already priced by the market. That fact opens the possibility for the US Department of Agriculture (USDA) to raise its estimate for US production in its December supply and demand report, to be released on the 10th. Low Chinese demand is a negative factor for Chicago, preventing major price gains.

To top it off, estimates are positive for South American production. Both in Brazil and Argentina, the planting has developed well, leading to a full crop in the current season.