Forwards contracts for the 2017/18 soybean reached to 5.6 Mt to the
first week of November. The figure is the highest in the last 6 years,
considering that 2011/12 MY forwards accounted for 7.8 Mt. The
sluggishness in the old crop year domestic sales comes from the unusual
gap between the old crop and the new crop prices.
The traded volume of the 2017/18 soybean took a strong kick off. The volume
measured in tons reached similar figures since October 2011. As of November
8 of 2007, the exporter and crushing firms have already bought 5.6 Mt of
new crop soybeans. According to our estimates, 10 % of the new crop has
already been traded. This ratio is above the five previous marketing years
figures, but it is similar to the 10-marketing year average. The low volume
of new crop domestic sales in the last marketing year is counteracted by
the high figures of the previous ones. For example, in the 2011/12 and
2010/2011 MY, 20 % and 18 % of the soybean crop had already been sold at
this time of the year, respectively.
The high volume of priced contracts is explained by the behavior of
soybeans prices at harvest. The difference between the spot market prices
and May 2018 prices is positive for the first time in at least a decade.
This positive price gap discourages the sale of the bean in the present MY
while boosts the new crop trades.
For a better understanding of the local scenario, we should also look at
the weekly trading figures published by the Ministry of Agroindustry of
Argentina. As of November 8, there are 19.3 Mt of traded soybeans with
prices to be fixed. From this total, 13.1 Mt remain in hands of country
dealers or farmers. The latter is 50% higher than the average of the last
5-MY. The reluctant farmer selling is also noticeable at the BCR trading
floor. In the last week, the bid prices for the available soybeans ranged
between ARS $ 4,370 / t and ARS $ 4,400 / t. Those values are not
attractive enough to activate a good trading volume. The price expectations
of medium and large sellers are around ARS $ 4,450 / t or ARS $ 4,500 / t,
for a start. This slow pace scenario is pressured by the upwards price
curve where May'18 (MATBA futures prices) reflects annualized earnings of
7.16%, measured in US dollars, while at Sep'18 and Nov'18 this value
reaches 9% and 9.82%, respectively. This curve of bullish prices to harvest
has no record at least in the last decade. As of November 15, the base
(difference between spot price in US dollars minus prices for May delivery)
is US$ -9.5 /t. Once again, this unusual price difference for the domestic
price cycle invites a deferral in the decision to trade the soybean stock
in a future date.