January 23, 2008

 

Brazil soy futures market active in volatile day

 

 

An emergency interest rate cut by the US Federal Reserve made for an exciting day on Tuesday in Brazil¡¯s soy market, with traders buying up soy futures.

 

The physical market is dead, but the futures market has tonnes of traders speculating, a broker at Futura Commodities said.

 

Soy futures declined by over 17 cents per bushel on the Chicago Board of Trade for the March contract, recuperating some of its losses earlier in the day. March soy futures are around US$12.47 per bushel, with May at US$12.63.

 

In an attempt to curb what appears to be a stalling US economy, the Federal Reserve cut interest rates by 75 basis points, leaving the benchmark fed funds rate at 3.5 percent.

 

Tuesday's cut was the Fed's largest since 1984, and more cuts are expected next week.

 

Other brokers operating in the Brazilian futures market expect the big financial players, mainly investment funds holding futures contracts as assets, will be back in a buying mood soon.

 

Nevertheless, it has been a shaky start to the week for Brazilian soy traders because of the macroeconomic picture around the world. With stocks tumbling in Europe and Asia on Monday, and US banks continuing to bleed from the mortgage-backed securities crisis, commodity prices have been all over the place.

 

Farmers are uncertain and the physical market is at a standstill, said Steve Cachia, an analyst at grain brokerage firm Cerealpar.

 

With the volatility in the markets, more attention is turning to the speculative side of the business, with big trading companies buying up future positions, brokers said Tuesday.