February 7, 2007
Brazil's soy market takes break as dollar falls; harvest underway
Brazil's soy market took a holiday Tuesday (Feb 6) as the dollar weakened and wiped out international soybean price gains, market analysts said.
Nearly 40 percent of Brazil's 2006/07 soy crop was aggressively sold early in the season, with local sales rising every time the Chicago Board of Trade found reason to push soybean futures higher. Some of that soy is being delivered this week from the centre-west states, though just 13 percent of Brazil's crop has been harvested up to now, according to consulting group AgRural.
Soybean prices held their own Tuesday, rising for March and May soybean futures on the CBOT. May soybeans rose to US$7.60 in afternoon trading. These are good prices for Brazil, but the dollar dropped to 2.08 Brazilian reals from Monday's close of BRL2.094, taking some sellers out of the market altogether.
Farmers appear to be in a better financial position than the sector previously imagined at the start of the season, thanks to the recovery in soybean and corn futures. That said, farmers who do need cash this week are inclined to sell corn to trading houses instead of soy, said Steve Cachia, a market analyst for brokerage firm, Cerealpar, in Parana.
"If prices start to rise this week as we've seen in the past, then you will have more interest on the part of the seller," Cachia said.
"Producers who need cash are opting to sell corn," he said.
Traders from two large multinationals in Sao Paulo and Bahia states said sellers were largely absent from the market this week.
"We can find a few who like these prices, but others are still speculating, waiting for things to go higher," said a trader.
Soybean premiums are coming down to earth, after months of double digit values. On Monday, premiums were 1 cent below the May CBOT soybean contract, according to brokerage firm Alianca.
Soymeal remains at 22 cents below the May soymeal contract on the CBOT and soyoil premiums were 280 cents below the May CBOT soyoil contract.
