February 28, 2007

 

Brazil soy market stalls on CBOT sell-off even as US dollar rises

 

 

Brazil's soy market stalled Tuesday (Feb 27) as soybean prices on the Chicago Board of Trade declined while funds sold out of futures contracts, local brokers said.

 

"Overall, the fundamentals here in Brazil are the same for both the crop and the business climate. Farmers sold a lot of their soy already and can afford to wait when prices decline in Chicago," said Helio Sirimarco, a broker at Fator Corretora in Rio de Janeiro.

 

CBOT March soybeans started the day down around US$7.62 per bushel and May soybeans were down to around US$7.78 per bushel.

 

The dollar rose against the Brazilian real in trading on Tuesday, hitting BRL2.10 thanks to capital flight out of emerging market investments like Brazil.

 

No one in Brazil is complaining about international soy prices, however, but all eyes now appear to be on the US Department of Agriculture's planting intentions report, due out in early March.

 

"Today was just a small correction in these futures prices. Sellers, and better prices, will be back later in the week," said Paulo Gilioli, a broker at Cerealpar in Mato Grosso.

 

In the early afternoon hours, very little trade was being done in Paranagua Port and Mato Grosso, with most active trade occurring in Mato Grosso do Sul state. Between 1,500 and 2,000 tonnes were negotiated before the market opened, Sirimarco said of Mato Grosso do Sul.

 

Premiums have come down to Earth over the week as Brazilian soybeans start to hit the market. Soybeans for March 15 to April 15 deliveries were selling Monday for 4 cents below the March CBOT soybean contract, declining 4 cents from Friday. April, May, June and July deliveries were all quoted at 4 cents below the May and July CBOT contracts as of Monday, according to brokerage firm Alianca Corretora.

 

Soymeal sales premiums dropped 7 cents to 10 cents below the March CBOT soymeal contract.

 

Soyoil sales premiums also declined at the start of the week to 300 cents below the March CBOT soyoil contract, Alianca said.

 

Port prices at Paranagua are currently 36 Brazilian reals (US$17.14) per 60-kilogramme bag.

 

"Nothing has been traded yet this morning as far as I can tell out of Rio Grande do Sul," said David Brew, a broker at Brasoja in Porto Alegre, that state's capital.

 

"If prices trend downward today, though, you might have some farmers willing to fix prices again out of fear they'll drop even further," he said.

 

Brazil should harvest around 57.8 million tonnes of soybeans in the 2006/07 crop, according to agribusiness consulting firm Safras & Mercado.

 

On Monday, agribusiness consultancy Celeres said Brazil harvested 14 percent of the crop as of Feb 23. Celeres soy market analyst, Anderson Galvao Gomes, said this week that wet weather in Mato Grosso would reduce soybean quality in parts of the state, but not reduce quantity. The general consensus here regarding Brazil's soy crop is that any losses caused by excessive rains in north Mato Grosso will be compensated by high yields elsewhere. The 2006/07 crop promises to be a record breaker.

 

Brazil is the world's no. 2 soy producer behind the US.