March 5, 2008
Brazil soy trade slows as CBOT prices fall
Brazil's soy business slowed Tuesday (March 5, 2008)as prices fell more than 30 cents to around US$15 a bushel on the Chicago Board of Trade, traders and analysts said.
"Business was good on Monday, but has now stopped because of the fall on CBOT and in the commodities markets overall," said Steve Cachia, a soy market analyst at Cerealpar.
Soy prices on the CBOT ended at US$14.94 a bushel for the March contract on Tuesday.
According to Cachia, this appears to be a technical adjustment, with funds taking their profits, while soy market fundamentals remain unchanged.
"Those who sold (Monday) want to wait for better prices," he said, repeating a story often heard in Brazil.
A trader at a US multinational confirmed that business has slowed in the soy market Tuesday, with only a few buyers and sellers doing business.
"The buyers are there, but the sellers are unwilling to sell their soy after the drop in prices," he said.
Moreover, a lot of selling took place in recent weeks due to high soy prices, and around 60 percent of the 2007-08 soy crop is already sold, the trader said.
Analyst Carolina Magnabosco of Scot Consultoria agrees that this week's slow business is primarily due to a large part of the soy crop already being sold.
"Many producers already sold their soybeans and are facing high costs for products such as fertilizers, and therefore want to sell at even better prices," she said.
David Brew, a broker at Brasoja in Rio Grande do Sul, said soy trade is slow this week in Rio Grande do Sul, Brazil's third-largest soy-producing state.
The fall in CBOT has buyers and sellers continuing to take a wait-and-see approach, he said.
Anderson Gomes, an analyst at crop consultancy Celeres, said that the market correction was quiet normal.
"Companies took profits after the recent high commodity prices," he said.
Gomes does not expect any significant change to the soy market. "Soy fundamentals remain the same," he said.
Brazilian traders and analysts remain divided over whether the National Supply Corp.'s 2007-08 estimate of a 58.5-million-tonne soy harvest will be increased later this week.
A new Conab estimate will be made available on Thursday at 1230 GMT.
According to Cachia, Conab is likely to raise its forecast by between 500,000 and 1 million tonnes.
Brazil's 2007-08 soy crop should be over 61 million metric tonnes, he said.
Mato Grosso, the largest soy-producing state, has harvested around 40 percent of the soy crop, which is below last year but constant with a five-year average, Cachia said.
Agronomist Gabriel Pesciallo of agricultural Consultancy AgRural agreed that Conab's number is too low.
AgRural estimated that the 2007-08 soy crop should be 62 million tonnes.
"The Mato Grosso crop is very good and should reach 16.8 million tonnes, with the rain delaying the harvest but not reducing the overall crop," Pesciallo said.
Goias should also be a bit higher than Conab's original estimate, at 6.9 million tonnes, he said.
A trader at a U.S. multinational also agreed that the number should be higher.
"Although we are working with 61.7 million tonnes at present, this number should be increased because the yields are excellent this year," he said.
"We have seen between 33 and 34 bushels per acre in Mato Grosso," he said.
Gomes said he estimates a 58.9-million-metric-ton soy crop, roughly on par with what Conab has estimated.
If Conab changes its estimate, it will be a small change, Gomes said.
"Mato Grosso's rains have returned to normal, while Rio Grande do Sul state now has rain and should harvest around 10 million tonnes of soy," Gomes said, though there is some debate about whether or not Rio Grande do Sul will lose productivity because of dry spots in the northwest.
In Rio Grande do Sul, Brew said that after a lack of rain, the rains have returned over the last few days.
"This brings a lot of relief to farmers and people are in a better frame of mind now," Brew said.
Brazil is the world's No. 2 soy producer behind the U.S.
