February 25, 2005

 

 

Brazil soy market reacts to higher global prices

 

The Brazilian soy market is beginning to react to higher prices on the international soy market, where concerns regarding the drought in southern Brazil have impacted prices.

 

Earlier this week, Rio Grande do Sul crop agency Emater told Dow Jones Newswires that continued dry weather in the southern state of Rio Grande do Sul could prompt losses of over 25% to the region's soy crop, but some analysts believe losses could surpass 35%.

 

Given current conditions, analysts expect the harvest to reach a maximum of 58 million metric tons.

 

While prices are starting to increase due to lowered harvest projections, sales levels are still limited on the Brazilian market.

 

"The increase in prices in Chicago hasn't impacted sales in Brazil because producers are waiting to see the full impact of the weather," said Antonio Sartori, the president of Rio Grande do Sul-based Brasoja.

 

Nonetheless, as larger amounts of new-crop soy hits the market, sales levels are likely to increase.

 

However, sales levels continue to be significantly below historic levels.

 

According to Celeres, producers have sold 34% of their 2004-05 crop as of Friday, well below the five-year average of 46%.

 

Harvest levels are in line with historical averages and the market estimates that Brazilian producers will have harvested roughly 15% of the total crop through the end of this week, up from 7% as of last Friday.

 

Despite concerns about the Brazilian crop, traders added that the worldwide crop is still expected to be the largest ever, which has given buyers a greater deal of flexibility.

 

A 60-kilogram bag of soybeans at the Paranagua port stood at 33.00 to 34.00 Brazilian reals ($1=BRL2.59) Friday compared with BRL31.20 to BRL32.00 last week.

 

In Ponta Grosso, northern Parana, soybeans were quoted at BRL30.00 to BRL31.00, similar to last week's levels.

 

At Paranagua port, soybean premiums stood at 20 to 25 cents per bushel above Chicago Board of Trade futures for February/March delivery. Soybeans are quoted at 6-10 cents above the CBOT for April delivery.

 

Soy pellets were quoted at US$10-US$12 per short ton below CBOT quotes for April delivery.

 

A cold front will reach southern Brazil late Thursday and should bring scattered showers to the region through Saturday. These rains are not expected to revert the drought-like conditions in the region.

 

Brazil is the world's No. 2 producer and exporter of soybeans.