• Bloomberg reported that some Brazilian soybean farmers are defaulting on forward sales made months ago when prices were low, sparking lawsuits and potentially causing financial losses for trading houses. By last July, about 40% of the 2020/2021F crops were already sold compared with the five-year average of 12%. Forward contracts between traders and farmers usually do not have a wash-out clause but a fine must be paid in case of non-compliance. The penalty ranges from 20% to 50% of the value of the non-delivered cargo.

• S&P Global Platts quoted the USDA as saying that the Regional Comprehensive Economic Partnership (RCEP) that China has joined will not have any major impact on US soybean and corn exports to China. A Beijing-based agricultural consultancy said that none of the RCEP member nations have the capacity to replace US agricultural exports to China for the next 25 years. Over 60% of the USA’s annual agricultural exports to China comprise bulk commodities such as soybean and corns with a total value of more than US$9.1bil. For products that receive preferential treatment under the RCEP such as soybeans, none of the Asia Pacific countries compete with the USA.

• According to S&P Global Platts also, the US soybean crushing volumes for January hit analltime high for the month, this year. This was also the second highest monthly level. The high crushing volumes were due to robust domestic demand and tight supplies from South America. The National Oilseed Processors Association reported that the January crush stood at 184.654mil bushels, up 4% YoY. The demand for soybean meal has been boosted by the US meat processing industry, which uses it as animal feed.

• Reuters cited agribusiness consultancy Datagro as saying that Brazil’s soybean harvesting has progressed in the period through 12 February, but still lagged last year’s pace and the historical five-year average. Brazil has harvested 9.1% of the soy area since this year’s harvest began in January compared with 21.4% at the same time in 2020 and the historical average of 19.7%. While the drought caused planting delays in 2020, constant rains over vast swathes of the soybean production area disrupted harvest in the first weeks of 2021F. The situation may force farmers to plant their second corn crop, which is sown after the soybean harvest, outside the usual window this season.

• Reuters also reported that the EU envisages providing around €1bil over six years to aid Ivory Coast’s cocoa sector as it adapts to EU supply chain laws, which will be introduced later this year. The European Parliament has been pushing for the introduction of laws to prevent the import of commodities and products linked to deforestation and human rights abuses. If the laws are adopted, buyers would be required to trace their inputs through every step of their supply chains, including starting at the level of small farms. Companies like Danone and Nestle might have to comply with these requirements as early as 2024F.

• World Fertiliser reported that Intrepid has increased its pricing for potash by US$50/tonne at all locations and on all new orders. Potash price is now posted at US$140/tonne. Orders taken at previous prices are expected to be delivered by the end of April 2021.

Source: AmInvest Research - 1 Mar 2021