March 12, 2008

 

Market awaits soy prices discounts as high prices reign in Brazil

 

 

Discounts for Brazilian soy widened again on Tuesday (March 11, 2008) to 105 cents to as high as 110 cents below the May and July soy contracts on the Chicago Board of Trade.

 

"Sellers are asking for 85 to 90 under so we are far away on price agreements," said a soy export broker at Cerealpar.

 

May soy closed Monday at US$14.06 per bushel on the CBOT with July soy closing at US$14.20 per bushel.

 

At least three soy export brokers said that China is currently on the sidelines and canceled two ships last week as soy prices pushed near US$15 per bushel.

 

According to All Grain, much of the EU soy buying market has been quiet.

 

Another variable this week is Argentina's decision late Monday to close the door on new soy and corn export orders.

 

Argentine press reports are speculating that the closure was in anticipation of another increase in the export tax on grains, and Brazilian soy exporters are closely watching their southern neighbor.

 

"If they stick to a prolonged suspension and increase on export tariffs for soy, all of a sudden you have the world looking more to Brazil again, even with the strong currency we have here," said another soy export broker in Sao Paulo.

 

Brazil's real is holding steady at BRL1.69 against the dollar this week.

 

Meanwhile, some 60 percent of Brazil's 2007-08 soy crop has been sold as of March 7, agribusiness consultancy Celeres said Monday.

 

With so much of it gone already, those holding onto soy can hold out before conducting any new business, brokers said.

 

In Mato Grosso, the leading soy producer state, around 78percent of the crop has already been sold, according to Celeres.

 

With soy prices rising so quickly since the October planting season, when farmers thought that US$9 and US$10 a bushel was fantastic compared to last season's prices of around US$6 on average, some farmers are defaulting on delivery contracts with the major soy crushers, market participants are saying. However, this has not been happening on "on any grand scale", said Paulo Gilioli, a soy broker for Cerealpar in Mato Grosso.

 

Mato Grosso will end its harvest in mid-April and have most of its soy sold by July, Gilioli predicts.

 

"Right now, traders are having a hard time getting deliveries on soy in Mato Grosso because there are no trucks to go around and the roads are a complete mess," Gilioli said.

 

Normally, Brazil soy growers keep around 10 percent to 15 percent of the crop once the harvest is complete in order to speculate on weather.

 

If bad weather impacts the soy crop, soy futures on the CBOT tend to rise.

 

"We haven't had any problems this year with defaults. Business is going normal now and we are busy bartering with farmers in exchange for soy," said a trader at a multinational in Sao Paulo.

 

"The crop is going marvelously well. Better than last year," he said.

 

On Monday, farm consultants at Agroconsult in Sao Paulo said Brazil should harvest over 62 million tonnes of soy in the 2007-08 crop.