Soybeans delivered into China are trading at a theoretical discount to the origin price as traders hit CFR bids in an attempt to lock in profits amid falling futures prices over the past week.
Several CFR deals were heard Thursday overnight at prices that netback to a level of about $1-1.50/mt below origin prices at the port of Paranagua, as traders who had contracted soybeans earlier in the year at much lower levels sought to book profits.
Cargoes sold on CFR basis to China for March and July 2021 on Thursday were valued at 148 c/bu over March futures, and 176 c/bu over July futures, respectively.
When using freight to calculate netbacks to the port of Santos, these levels equated to 70 c/bu for March and 94 c/bu for July, meaning the netback levels were 3-4 c/bu under bids for beans on a FOB paper Paranagua basis.
“Paper is trading at origination levels, but China is way below that. Brazil have longs that are super in the money and they will sell where they find demand,” said one source.
“Bids on a CFR basis are being hit, but FOB sellers want more than the netback value,” said a second source.
Typically, soybeans traded on a FOB basis at the port of Santos are 5-10 c/bu over the paper market in Paranagua, but one deal overnight suggested Santos was at a 3-5 c/bu premium.
The unusual pattern of trade has arisen because many trading houses have contracted soybeans back in September and October this year – when price levels were much lower.
And for those that have fixed the price with farmers, fears that the fall-off in futures this week could trigger the end of the bull-run has seen many actively seek buyers to take what profits they can.
Futures fell for three consecutive sessions for the first time in more than six weeks this week as end-of-year profit-taking and better weather in South America allayed fears of a reduction in output.