March 21, 2007

 

Brazil's soy market slows as premiums fall; awaits USDA report

 

 

Brazil's soy market has slowed over the last week as price premiums continue to dip into negative territory, as expected.

 

"The physical market was very liquid all the way until soy prices hit around US$8.06 per bushel in Chicago (May). Once those prices started falling, the market went with it," a trader at a US multinational said Tuesday (Mar 20).

 

Soybean futures on the Chicago Board of Trade were trading at US$7.61 a bushel Tuesday, up slightly on the bullish debate over 2007 soy-planting intentions in the US

 

"Soy farmers here are willing to wait to see what happens with the USDA report on soy plantings," said Paulo Gilioli, a broker at Cerealpar in Mato Grosso. The US Department of Agriculture's report is due March 30.

 

"No one is fixing prices here today," Gilioli said about Mato Grosso soy farmers. Mato Grosso is Brazil's no. 1 soy-producing state.

 

"I'd say that since prices started falling since the end of February, we've maybe sold another 1 or 2 percent of this crop," said the trader at the US firm in Sao Paulo. The company estimates that 45 percent of the 2006/07 crop has already been sold. Brazil should harvest around 57 million tonnes of soybeans this season. The harvest is currently underway.

 

Soybean premiums Tuesday have fallen to 11 cents below the May CBOT for April and May deliveries and 6 cents below the June CBOT, said Helio Sirimarco, a broker at Fator Corretora in Rio de Janeiro.

 

"Farmers will enter this market as the prices rise. They're not going to wait for premiums and a weak dollar to take away all the gains in Chicago," Sirimarco said.

 

Paranagua port prices were down to 33.40 Brazilian reals (US$16.13) per 60-kilogramme bag Tuesday afternoon from BRL33.80 Monday, Sirimarco said.

 

Prices are lower in other parts of the country, declining to BRL25.90 per bag in the center and south of Mato Grosso and BRL23.00 for soybeans in northern Mato Grosso, according to Fator Corretora.

 

Soyoil premiums declined 10 cents to 330 cents below the May CBOT soyoil contract earlier this week, with soymeal premiums down slightly to 21 cents below the May CBOT soymeal contract, according to brokerage firm Alianca.

 

Yet, business is getting done despite the fact that nearly half the crop has been sold, price premiums are taking a bite out of CBOT futures, and the dollar is weak at BRL2.07.

 

"The same buyers are in the market. It's liquid. But it's a cold liquid," said Flavio Franca, a soy market analyst for consulting firm Safras & Mercado.

 

"The fact is that even though the premiums are declining, the dollar is declining, and Chicago prices aren't where they were a few weeks ago, there is a lot of soy coming out of the ground and people are buying and selling it this week," he said.

 

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