January 26, 2004

 

 

Brazil's Soy Market Slow As Players Await Harvest

 

Brazil's soybean market remained calm over the past week as farmers waited for harvest results.

 

"Farmers in the center-west region have already sold a large portion of their crop and want to see how much soy they have before committing more," said Sergio de Abreu of the Rio Graos trading firm in Rio Verde, Goias state.

 

The soybean harvest generally looks in good shape in the center-west, according to traders and analysts. However, rain continues to interfere with early harvesting, and farmers are nervous they may struggle to meet February deliveries should the precipitation continue.

 

Meanwhile, local prices remain stable, offering little incentive to bring farmers to market.

 

Local prices have failed to fully reflect the recent jump in international prices as exporters have pulled out of the market.

 

Local farmer interest fell off further Thursday as soy futures on the Chicago Board of Trade slipped back between 3 and 8 points.

 

At the principal export port of Paranagua, soybeans were trading at around BRL48.00 to BRL48.50 per bag on Thursday, slightly higher than the BRL47.00 to BRL47.50 per bag last week, reflecting a slight weakening in the Brazilian real.

 

On Thursday, the local currency was quoted at BRL2.84 to the dollar compared with BRL2.81 last week.

 

In Ponta Grossa, northern Parana, soybeans stood at BRL47.50 and BRL48.00, slightly higher than the week before.

 

On Thursday, soybeans were quoted at BRL48.00 at Rio Grande Port, up from BRL47.00 last week.

 

The recent rises in international prices have been cancelled out by widening discounts as exporters see no problem with short-term soybean supply next year and record maritime freight costs are incorporated into prices.

 

Paranagua soybean discounts for March shipment were quoted at level to 32 to 40 cents per bushel under the equivalent CBOT futures contract, compared with level to 20-30 cents under last week.

 

Exporters have also pulled back from the market over concerns about the ban on genetically modified soy at Paranagua, the main export route, this year.

 

For the first time, Brazilian farmers were allowed to plant GMOs this season and analysts say anything up to 30% of the soybean crop is of this type.

 

"Everybody had imagined this (the Paranagua GMO ban) would be overturned, as the Parana state law was, but the export season is nearing and it hasn't happened yet," said Steve Cachia, analyst at the Parana-based Cerealpar grain brokerage.

 

In December, Brazil's Supreme Court suspended a Parana state law banning all GMO planting and dealing.

 

Wide-spreading testing at the port could cause major delays at the port from February when Brazil's record crop begins to be shipped.

 

"All you need is one contaminated truck load and a whole shipment could be cancelled," said one Parana-based trader.

 

Business was also weaker on the soymeal differential market Thursday as discounts continued to widen.

 

Soymeal export discounts for nearby delivery stood at $35-$38 per short ton under the CBOT for February-March delivery, compared with $28-$31 last week.

 

Soyoil export differentials stood at 150 to 180 points under the CBOT Mar contract for February-March delivery, tightening from 290 to 320 points last week.

 

Brazil's soybean crop is developing well, according to analysts.

 

Rain is set to continue over the next couple of days in the center-west soy belt, according to the local Somar Meteorologia weather service.

 

This rain needs to clear for farmers to meet delivery commitments, said Jacqueline Alves of the Multisafra brokerage in Mato Grosso.

 

The southern region will also receive more rain through the weekend, although it will be more isolated than in the center-west.