The rise in soybean prices in Brazil has generated several disputes between tradings and rural producers involving contracts for future purchase of the commodity.
Producers, on the one hand, are seeking to be released from the obligation to deliver the product based on contracts entered into at the beginning of the 2020/21 plantation season when the soybean prices were substantially lower than the current market quotes, and the trading companies, on the other, demand the delivery of soybeans supported in the underlying signed instruments.
The court decisions issued in cases across the country are indicating that the judiciary is backing the trading companies’ arguments towards the enforcing the contracts provisions and granting seizure measures to guarantee the delivery of soybeans.
Some producers are preferring to pay the default penalties provided to in the contracts, which range from 20% to 50% on the product price, instead of delivering the product.
On top of the discussion of clauses such as “force majeure” and “unforeseeable circumstances” brought about by the pandemic, the moment of substantial increase in agricultural commodities adds to the list of relevant provisions in Brazilian contracts the “affirmative covenants” and “specific performance”, necessary to provide legal certainty to buyers that suppliers will be prompt to deliver what was originally contracted even with marked price fluctuation.