January 17, 2007

 

Brazil's soy market quiet

 

 

Two of Brazil's largest multinational soy trading companies said the soy market was quiet at the start of the week even as soy prices fell on the Chicago Board of Trade.

 

Soy futures are lower because of profit taking on Tuesday, with March soybeans down over 5 cents to US$7.11 per bushel in early afternoon trading.

 

"Farmers will only sell now if prices really start to tank and they start to get nervous," said a trader at Coinbra, a soy exporter.

 

Brokers at Alianca Corretora said that farmers were fixing some futures prices Tuesday with soy crushers on soy already bartered in exchange for fertiliser or loans.

 

"There's been business on the price-fixing side, but new crop sales aren't happening," the Alianca broker said.

 

Farmers are holding out not because of fear that their record 2006/07 crop, officially estimated at 54.9 million tonnes, will produce less than expected, but because a large part of the crop has been sold already.

 

"Farmers have become hungry lions now. They see prices rising and can afford to wait," said Anderson Galvao Gomes, a soy market consultant at Celeres.

 

Soy prices rose substantially on Friday following a US Department of Agriculture report that showed a much smaller soy and corn crop. Brazilian farmers know that that US corn and soy volume isn't going to return any time soon, so prices should remain high, Gomes said.

 

As of Friday, some 35 percent of the crop has been sold on a national level.

 

The centre-west alone, however, is 60 percent sold, according to consulting firm AgRural.

 

The southern states are only 20 percent sold at this time, but brokers said business was slow on Tuesday.

 

"We have more buyers than sellers right now. If you see Chicago prices start to fall substantially this week, then we'll see more business," said David Brew, a broker at Brasoja in Rio Grande do Sul, Brazil's no. 3 soy producer. The state has a tendency to sell at harvest time and not into the futures market.

 

Market analysts expected a busier start to the week once prices rose Friday, but have been surprised so far.

 

"My guess at this point is that farmers spent a lot of time at the beginning of the year fixing prices to cover production costs," said Steve Cachia, a market analyst for brokerage firm Cerealpar.

 

"They know they have their costs covered at this point so there is room for them to speculate on prices going up more," he said.

 

Local prices at the Paranagua port on Monday were 33.80 Brazilian reals (US$15.79) per 60-kilogramme bags. Premiums for soybeans were 30 cents over the March CBOT soy contract, according to Alianca.