Brazil's soy trade lacklustre on unattractive CBOT prices

Brazil's soy trade remains lacklustre this week as soy futures on Chicago Board of Trade remain unattractive, traders and analysts said Tuesday (Mar 2).

 

CBOT May soy rose 1.4 cents to US$9.62 a bushel on Tuesday.

 

"Farmers aren't willing to sell at current prices on Chicago or at the current exchange rate," said a chief trader at a major US exporter, who asked not to be named.

 

One dollar was trading at 1.78 Brazilian real on Tuesday compared to BRL1.79 on Monday (Mar 1), and this makes US dominated prices for soy less attractive in the local currency.

 

The trader said that although farmers can break-even at an average of US$9.50 per bushel in Mato Grosso, Brazil's No. 1 soy producing state, and 7 cents per bushel in Parana, Brazil's No. 2 soy producer, they are unwilling to sell.

 

The trader said farmers are not selling as they hope bean prices will increase. "They want a miracle such as bad weather," he added. But the trader expects soy prices on CBOT to slump further due to bumper crops in South America. He estimates a crop of 66 million tonnes in Brazil and 52 million-53 million tonnes in Argentina.

 

He adds that already farmers in the north of Mato Grosso such as Sorriso and Primavera--with high logistics costs - need above 10 cents per bushel to make a profit. Mato Grosso has higher costs than Parana due to hefty logistics costs as a result of long distances from the nearest port.

 

Steve Cachia, an analyst at brokerage Cerealpar, said that soy have been trading Tuesday at BRL38.50 (US$21.3) per 60-kilogram bag at the port of Paranagua, the country's main grain port. This compares to around BRL39 (US$21.6) per bag last week, he said.

 

Cachia said Brazil's soy trade is unlikely to take off this week, with little new data to spark sales. But trade may get a lift next week from the USDA's supply and demand figures, he added. The USDA is scheduled to release its latest supply and demand report on March 11.

 

Cachia said that soy buyers were asking for premiums of 3 cents over May soy contract on CBOT. Sellers want 5 cents over the same contract.

 

Brazilian agricultural consultancy Celeres on Monday said that 26% of Brazil's 2009-10 soy were sold compared to 24% the week before and 33% a year ago.

 

Brazil is the world's No. 2 soy producer after the US.