If you are trading Brazilian soybeans or involved in any commercial aspect of its trade lifecycle, be warned of the price distortion associated from focusing only on port prices.
The simple truth is that Brazilian soybean primary market prices are better represented by production areas and NOT port prices.
Prices at the ports are majorly influenced by the large trading companies and as witnessed in 2020, the then observable distortion of supply and demand generated a drastic reduction in stocks.
This 2020 price distortion (circled in yellow) between domestic and export prices manifested in China, the worlds largest global importer, shrewdly paying production centre prices and not port prices.
The fixation on Soybean derivatives priced versus only ports poses an interesting question….
Is there a better pricing tool to hedge Brazilian Soybean production and exports?
Port prices of course play an intrinsic role in Brazilian Soybean price discovery which is why the SAFRAS CTDI Soybean Index is the only index that has a constituent weighing linked to 37 key Brazilian domestic markets, that include both production centers and ports.
Brazilian domestic market prices from 37 domestic markets are collected and scrutinised daily by Safras & Mercado, the worlds leading consultancy for Brazil agribusiness. The validated EOD prices go through a rigorous CTD Indices sanity check and are weighted to an exact SAFRAS & Mercado methodology. The index is is constructed to IOSCO principles and made available daily via a direct data feed or select market data vendor partner channels including CMA.