China's intentions to impose 25% punitive tariffs on US imports, such as soybeans or corn, have enabled high premiums on Brazilian soybeans. Yesterday, the premiums there rose to historic highs. But traders and analysts point out that Latin America can not completely replace US exports.
The already high premiums over CBoT quotes now rose to 37%. This is the highest increase since January 2017. Yesterday's bloodbath in Chicago was more than compensated for traders in Brazil.
Latin America, however, can not export as many soybeans as the US has supplied to China, forcing negotiators in China and the US to compromise.
Brazil has already delivered 75% of its soybean exports to China; At the same time, national consumption continues to increase and hardly any quantities are available for export. Even if Brazil would deliver its entire export volume to China, there are still 30 million tons missing, traders predict.
Argentina, South America 's second largest soybean exporter, also sold 90% of its soybean exports to China last year, while Paraguay sold no.3 does not currently have diplomatic relations with China.
China can now try, instead of soybeans, to introduce more soybean oil and soybean meal. This would benefit Argentina in the first place. However, forecasts for soybean prices in Argentina are already high as the country suffered from a drought over the past five months and the next crop is smaller. Meanwhile, China's demand for soybeans continues to rise.
If China has to buy more soybeans from Brazil, the premiums are likely to be well above the CBoT rates for the time being.
Text: HANSA Derivatives Trading GmbH /
