March 4, 2009

Brazilian soy trade has been boosted by favourable forex conditions this week, industry specialists said Tuesday (March 3).

 

The May soy futures contract on the Chicago Board of Trade settled four cents higher at US$8.48 a bushel on Tuesday. This compared to US$8.44 at the end of trading on Monday.

 

"On Tuesday three factors have aligned in the right direction - good currency, good premiums, and the CBOT also is helping," said a chief trader at a major US soy exporter.

 

One US dollar was 2.41 Brazilian reals on Tuesday, which is far above lows of BRL1.55 last August and levels of around BRL2.30 in late February.

 

A said that this week the favourable forex conditions have meant that Brazilian farmers get more local currency for their beans, and this has helped to offset prices generally decreasing on CBOT.

 

"All of the major players such as Bunge (BG), Cargill, ADM (ADM) have been buying soy this week, and I expect between 300,000 tonnes and 350,000 tonnes to be bought on Tuesday," the trader said.

 

A broker at a Sao Paulo-based brokerage said soy buyers were asking Tuesday for 42 cents over the May contract on CBOT, with sellers wanting between 42 cents and 43.5 cents over the same contract.

 

The broker said Brazilian farmers have already sold around 34 percent of their new 2008-09 beans compared to a yearly average of more than 45 percent.

 

"The global economic crisis and tight credit is still outweighing soy fundamentals," he said.

 

Brazilian consultancy Celeres said farmers in Mato Grosso, the No. 1 soy producer, had sold 52 percent of their soy as of Friday compared to 50 percent on February 20. Farmers in Parana, the No. 2 soy producer, had sold 17 percent of their beans by Friday, steady with the week before.

 

Steve Cachia, an analyst at local Brazil-based agricultural consultancy Cerealpar, said that, overall, February's physical soy trade was slower than in January, which had seen higher prices in the Brazilian market and better forex conditions. Since the January bright spot trade has slowed and farmers have been reluctant to sell.

 

"If they (farmers) need cash, they tend to sell their corn," he said.

 

Farmers don't see corn prices as likely to rise due to high stocks, while they still hope that some news such as unfavourable weather will help to push up soy prices, he said.

 

Cachia said on Tuesday that soy prices were at BRL47.70 per 60-kilogramme bag, which was above last week's range of range of BRL46 to BRL47.50 per bag.

 

Cachia said around 22 percent of Brazil's 2008-09 soy have already been harvested. Cachia puts the new crop at 57 million tonnes.

 

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