March 18, 2008

 

Brazil soy futures hit the floor as investors bail out

 

 

Brazil soy futures on the Brazilian Futures & Commodities Exchange, or BM&F, hit their lowest daily trading limit and then broke through it in electronic trading on Monday (March 18, 2008), falling another US$0.40 per 60-kilogram bag, brokers said Monday.

 

"We hit the floor today just like Chicago and now we broke through," said a broker at Link Corretora in Sao Paulo.

 

The BM&F followed Chicago Board of Trade soy futures, which fell Monday to their lowest level in weeks as market participants reevaluate their appetite for commodities, until now trading at record highs.

 

The US banking crisis continues to hamper markets worldwide, and soy were no exception, falling to $13.02 for the Chicago May contract, more than US$1 below where they were just a couple of weeks ago.

 

Trading stopped in Chicago and Sao Paulo once the lowest daily limit was reached. A soy trade director at a US multinational in Sao Paulo said he wouldn't be surprised if the sell-off continues into the week.

 

"There were tonnes of sellers in the (local) futures market (Monday) morning with all the big players liquidating. They sold fast and furiously," said a broker at Futura Commodities regarding the main soy traders like Bunge (BG) and Archer Daniels Midland (ADM).

 

Despite fundamentals being good for soy as far as supply and demand are concerned, jittery investment funds are showing early this week just how much sway they have in commodity prices. When they head for the door, it's hard to stop a stampede, futures brokers in Sao Paulo said Monday.

 

"The strange thing is that the futures market is usually always impacted by the financial side during day trading, but the fundamentals tend to reign supreme in after-hours electronic trading. Prices are still falling," said a broker at All Grain in Sao Paulo.

 

China has yet to enter the Brazil soy market, he said, waiting for prices to go even lower.

 

"You can't fix soy prices in Chicago due to the lock down and this stops a lot of business," said David Brew, a broker at Brasoja.

 

"There's a lot of panic in the soy market, as people remain unsure whether the price will bounce or crash further," he said.

 

Brazil is the world's No. 2 soy producer behind the U.S.