February 27, 2008

 

After the rush to sell soy, Brazil's farmers content to wait for higher prices

 

 

High soy prices, which previously lured farmers into the market throughout Brazil's center-west is now prompting them to adopt a wait-and-see attitude in anticipation of higher prices.

 

Recent prices have presented an opportunity for farmers to increase profit margins on a soy crop that promises to take them out of the red.

 

More than half the new crop has already been sold, with only 11 percent harvested so far.

 

Analyst Anderson Galvao Gomes from farm consultancy Celeres recommended his clients to sell soy immediately to capitalize on high soy prices, currently more than US$14 per bushel on the Chicago Board of Trade

 

Celeres estimates that 58 percent of the new crop has been sold at this time, up just one percentage point from last week, but well ahead of the five-year average of around 47 percent.

 

The center-west soy states have sold a total of 72 percent of its new crop as of Feb. 22, Celeres said.

 

Mato Grosso, the top soy producing state, has already sold 75 percent of its 2007-08 soy crop, compared with just 56 percent at this time last year. Parana, the second largest, sold 39 percent of the crop compared with 29 percent a year earlier while Rio Grande do Sul, the No. 3 producer, has sold 32 percent compared with 29 percent a year earlier.

 

Brazil, the No. 2 soy producer behind the US, is expecting to harvest around 60 million tonnes of soy this year, judging by private estimates.

 

Brazil's 2007-08 soy crop is 11 percent harvested, according to Celeres.

 

That is two percentage points above where the harvest was last week, but below the 14 percent harvested at this time in the 2006-07 season.

 

Rains have slowed the harvest.

 

In Mato Grosso, 25 percent has been harvested as of Feb 22. below 30 percent at the same period of last year, but close to a five-year average.

 

Number two producer Parana has 6 percent harvested and No. 3 Rio Grande do Sul state has yet to start harvesting its soy at this time. Located in the deep south, Rio Grande do Sul is traditionally the last state to harvest.

 

The harvest generally ends in early May.

 

Meanwhile, after a dry spell lasting a week or more in the main soy regions of Rio Grande do Sul, in south Brazil, rains are back in the forecast for this week.

 

"Soy farms in the state need rains this week or else they would face productivity losses," said Flavio Franca, a soy market analyst at consulting firm Safras & Mercado.

 

According to Safras & Mercado, the state should harvest 9.3 million tonnes in the 2007-08 crop.

 

Southern Marine Weather Service, Somar, has heavy rainfall forecast throughout all of the major north, central and northwest soy regions of Rio Grande do Sul.

 

Steve Cachia, a soy market analyst at Cerealpar said soy farmers are seeing very good yields in Mato Grosso.

 

"Farmers are seeing almost 4,000 kilograms of soy per hectare compared to an average of around 3,000 kilograms per hectare," said Cachia.

 

Mato Grosso traditionally has the best yields in Brazil, said Cachia.

 

Agronomist Gabriel Pesciallo of agricultural Consultancy AgRural, agrees that despite the weather, the 2007-08 soy crop should reach 62 million tonnes.

 

"In Mato Grosso, the soy crop this week has developed well and the outlook is very good," Pesciallo said.

 

Mato Grosso should produce 16.8 million tonnes of soy this harvest, while Parana should produce 12.7 million tonnes, said Pesciallo.

 

However, Rio Grande do Sul's soy crop should be close to 9 million tonnes, rather than the 10 million tonnes that was previously expected, due to crop loses in the state's northwestern region.

 

David Brew, a broker at Brasoja in Rio Grande do Sul, said with the bad weather this week in Rio Grande do Sul, trade has almost stopped. "Buyers and sellers are worried about the soy harvest, and many are waiting for even higher prices," Brew said.

 

Analyst Carolina Magnabosco at Scot Consultoria agreed that soy trade is slow this week. "Buyers see a large availability of soy on the market and are waiting for the high prices to decrease. She added that the rainy weather shouldn't lead to a decrease in expectations for the overall soy crop

 

Soy prices on the Chicago Board of Trade were trading at around US$14.60 a bushel for the March contract.

Brazil is the No. 2 soy producer behind the US.

 

 

	Mato Grosso	Parana	Rio Grande do Sul	Overall
Percent Harvested as of Feb 22	25	6	0	11
Percent Sold as of Feb 22	75	39	32	58