April 17, 2007

Brazilian soy crushers still face poor margins -Abiove

Brazil's soybean crushing industry is still functioning from weak to negative margins despite the country's upturn in the grain sector as compared to last season, Brazil's Vegetable Oils Industry Association (Abiove) said.

The crushing sector, dominated by the four big multinationals Archer Daniels Midland, Bunge Ltd., Cargill Inc. and Louis Dreyfus, is reeling from profit margins due to high price of beans and the weak dollar against the Brazilian real.

Although bean price remain firm, the price of soy meal and oil--the products of crushing--have fallen in recent months.

Abiove president Carlo Lovatelli told said the situation is still "relatively complicated" as the exchange rate effect has been "disastrous" for exports. 

He added that "the (profit) margins truly continue to be hurt...they are extremely low or even negative, depending on the situation."

According to calculations of the Centre for Advanced and Applied Economic Studies (Cepea), sales of meal and oil generated 23 percent more profit over the cost of the beans in early April. This crushing margin was 27 percent a year ago.

It was 32 percent in early December 2006.

According to Renato Sayeg of Tetras Brokers, soybean prices have not dropped to its expected price in recent months and crushing margins have been on the negative.

Sayeg said another reason for the high bean prices was the competition between the crushing industry and export sector for beans during the peak of harvest.