March 13, 2007

 

Brazil soy premiums to hit negative territory soon

 

 

After roughly two years of soybean premiums making Brazilian soybeans more costly than Chicago Board of Trade soy futures, local premiums will be negative in the months ahead, a soy market analyst for the consulting firm Celeres said Monday (Mar 12).

 

"Brazil had two years of crop losses and that kept premiums positive all this time, but with a record soy crop coming in, farmers should expect our prices to be below Chicago from herein," analyst Anderson Galvao Gomes said.

 

Celeres expects Brazil to harvest 58 million tonnes of soybeans in the 2006/07 crop. The number is roughly 1.5 million tonnes greater than the official government estimate.

 

On Friday, Brazil's soybean premiums were two cents below the May and July soybean contracts on the CBOT for April, May and June deliveries. July deliveries, however, were still four cents over the June CBOT soybean contract, according to brokerage firm Alianca.

 

Gomes said in a report released Monday that premiums will dip into negative territory throughout the entire first half of 2007.

 

Last year at this time, soy premiums were 25 cents over the April soybean contract in Chicago.

 

Declining premiums means importers will be paying less for Brazilian soybeans in the months ahead, and local farmers will be receiving less for soy than the current price quotes on the CBOT.

 

CBOT soybean futures were trading up around US$7.65 per bushel for May early Monday.

 

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