April 5, 2007

Soy falls below government price floor in north Brazil

A weak US dollar and a volatile soybean futures market in Chicago has soybean prices falling below the Brazilian government guaranteed price minimum this week in north Mato Grosso, grain brokerage firm Cerealpar said Wednesday (Apr 4).

The government set a price minimum for soybeans at 22.50 reals (US$11.08) per 60-kilogramme bag last May.

Spot market prices in Lucas do Rio Verde, Sinop and Sorriso are all below the price floor. All are located in north Mato Grosso. Prices are low because of the relative high cost of getting the soy out of the region for port shipments.

Prices in Lucas do Rio Verde were BRL22.30, Sinop was BRL21.80 and Sorriso was BRL22.10 per bag.

The government has set up soybean subsidy auctions to protect farmers from falling prices. If prices remain at these levels, more government auctions will take place in the weeks ahead, according to the National Commodities Supply Corp (Conab).

Elsewhere, Brazil soy prices remain favourable even if the dollar is taking away some of the gains. Port prices in Paranagua were BRL32.50 on Tuesday, the highest price quote in Brazil. Parana soybeans are hovering around BRL30.00 per bag and central and southern Mato Grosso are around BRL25.00 per bag, according to Cerealpar.

The dollar is currently trading around BRL2.032, down from Tuesday's close of BRL2.037, the lowest trading level in six years. Higher soybean prices have compensated for the dollar weakness. North Mato Grosso farmers were getting roughly US$8 per bag for soybeans last year at this time, 25 percent less than the US$10.73 per bag they are currently getting in the worst case scenario.

CBOT soybean futures are trading slightly higher on Wednesday to US$7.66 per bushel for the May contract.