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Date: March 30, 2021
Posted by: CPDMA team

Discussion about the possibility of reviewing soybean futures contracts grows

The sharp rise in the price of soybeans has caused a great debate about the fulfillment of contracts formalized in 2020 with an expected maturity in 2021. Rural producers argue that the price variation is very large. Buyers fear not receiving the product on the expected dates.

What is observed is the increase in the movement of producers seeking to review the pacts, administratively or judicially, so that the value of the grain approaches a base closer to that currently practiced in the market.

The central question is whether there is a legal possibility of claiming the review or even the termination of contracts based on the considerable variation in the price of soybeans.

It is important, initially, to better understand this kind of operation. Soybean futures contracts are an important source of agribusiness development. They allow the contractors to fix (the so-called Hedge operation) a price understood as reasonable for the seller and the buyer, avoiding the risk of future market fluctuation at the time of harvest. It so happens that the soybean buyer (mainly cooperatives and trading companies) is not the final recipient of the product. While he manages to lock in quantity and price with the producer, the buyer, in parallel, negotiates this contract, usually on the Commodity Exchange.

The operation, therefore, is more complex than a mere contract established between rural producer and buyer, as it reveals itself as part of a true business chain, typical of agribusiness - which ranges from the supply of inputs to the industrialization of agricultural products. The contracts established in this business environment must therefore prioritize the security and predictability of the chain.

Considering these factors, we must analyze the possibility, from a legal point of view, of contesting future contracts made between rural producers and buyers. For this evaluation, it is essential to consider the well-known theory of unpredictability, widely debated in Brazilian courts. The main argument used in the attempt to revise or terminate these contracts is the unpredictability, on the part of the producer, of anticipating a possible large price variation, attracting the notion of excessive onerosity, fortuitous event and force majeure.

It so happens that futures contracts exist precisely because of the inevitable price variation of the product. If the price was fixed and stable, there would be no reason to fix the price through a Hedge operation in futures contracts. The very nature of the contract, therefore, plays against the unpredictability thesis.

The application of the theory of unpredictability in relation to the price variation of products in futures contracts has already been rejected by the Superior Court of Justice: "The case in the case has peculiarities that prevent the application of the theory of unpredictability, dealt with in art. 478 of CC/2002: (1) the contracts under discussion are not of continuous or deferred execution, but contracts for the purchase and sale of future things, at a fixed price, (2) the rise in the price of soybeans did not make the provision of a excessively costly, but only reduced the profit expected by the rural producer and (3) the exchange rate variation that altered the price of soybeans was not an extraordinary and unpredictable event, because both contracting parties know the market in which they operate, as they are professionals of the branch and know that such fluctuations are possible” (REsp 936.741/GO, Rep. Minister Antonio Carlos Ferreira, Fourth Panel of the STJ, judged on 11/03/2011).

This understanding is strengthened as the professionalization of the management of the participants in the agribusiness chain, mainly rural producers, grows more and more.

Not even the pandemic would attract the application of the theory of unpredictability. There is no way to establish a direct link between the pandemic and the impossibility of delivering the grain, since, a source of pride for Brazil, agribusiness did not stop during this period. The exchange variation suffered interference from the pandemic, but in parallel with several other factors that generated the high of the dollar. And, finally, the “Pandemic Law” itself, 14.010/2020, expressly excludes the exchange variation from the list of unpredictable facts of the pandemic: “Art. 7 - Unpredictable facts are not considered, for the exclusive purposes of arts. 317, 478, 479 and 480 of the Civil Code, the increase in inflation, exchange variation, devaluation or replacement of the monetary standard”. The pandemic, therefore, is unlikely to change the courts' position on the applicability of the unforeseeable theory to soybean futures contracts.

One of the hypotheses raised by the producers would be the possibility of paying the contractual fine to justify the non-delivery of the grain. The current price of soybeans would support this conduct from an economic point of view. Theoretically, the payment of the fine would free the producer from fulfilling the contract. This type of contract, however, usually contains a Washout clause, which establishes that, if the seller does not honor the delivery of the product, he must indemnify the buyer with the difference in the existing price between the value fixed in the contract and the market value of the product. when it is expected to be made available.

The existence of this clause is justified by the fact that the contract forms part of a chain. The company that bought it has commitments in sequence, if the producer does not deliver, it will continue to have to fulfill its part. If the grain is missing, the buyer will have to look for the product in the market to fulfill its obligations. As you will be forced to pay a higher price for the product that was not delivered to you, you are entitled to charge the difference. Thus, it is legally possible to cumulate the contractual fine with the Washout clause, which has an indemnity nature.

It is important to remember that judicialization always creates insecurity, which can compromise funding. A possible retreat by trading companies in financing production would worsen the scenario of credit scarcity.

The best orientation for producers is to seek to fulfill the future contracts assumed, even if, at this moment, it means lower profitability.

Certainly, there may be abusiveness in the contracts, giving rise to the adoption of legitimate legal measures. Deserving, however, the analysis of the specific case, through due legal consultation.

Source: Felipe Meneghello Machado, lawyer for Cesar Peres Dulac Müller.

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