April 18, 2007

 

Brazil's soy market quiet; some buyers pay above market rate

 

 

Brazil soy traders appear willing to pay above market rate for soybeans in Mato Grosso and other centre-west states, major traders and brokers said Tuesday (Apr 17).

 

"There are a lot of traders spending above market rate for soy, and that is making it harder for smaller and mid-sized buyers to even get into this market," said Thiago Simon, a trader at Sperafico Agroindustrial, a mid-sized soy crusher in Mato Grosso state, Brazil's leading soy-producing state.

 

"The business that is being done today in soybeans is mostly for conventional soy being bought by Cargill and Coinbra and they are willing to spend more for it for some reason," said Diogo Santos, a broker at Cerealpar in Mato Grosso. Coinbra and Cargill traders were unavailable for comment.

 

A trader at a US multinational in Sao Paulo said that soy in the interior of Brazil is more expensive than usual.

 

"We are used to that being the case, with prices a bit higher than FOB prices," he said about free-on-board port prices.

 

"But they are higher than usual this week and that is hurting our crush margins," he said.

 

When viewed from a distance, however, soy prices have actually been falling over the last seven days and the dollar has fallen right along with it, a double-whammy for Brazilian soy farmers.

 

The dollar is currently trading at 2.03 Brazilian reals and local soy prices in the spot market have fallen 4.6 percent on the week to 32 reals (US$15.76) per 60-kilogramme bag at the Paranagua Port in Parana, according to agribusiness consulting firm Celeres and brokerage firm Alianca. Prices have fallen 8.7 percent on the month, according to Celeres, but are still 24.8 percent greater than where they were at this time last year.

 

Soybean prices fell on the Chicago Board of Trade Tuesday to US$7.24 per bushel for the May contract. With the dollar continuing its sideways move, and Chicago on the decline, the soy trade is expected to be slow for the rest of the week.

 

"There was business on Monday, but today farmers are selling corn for cash. There is nothing special to attract attention," said Steve Cachia, a soy market analyst at Cerealpar.

 

Moreover, soy buyers like Sperafico are well stocked, Simon said, and what's left of the soy crop in the vital center-west region is all in the hands of large commercial farmers willing to speculate on Chicago soy futures going higher.

 

"Here in Mato Grosso we have 85 percent of the crop sold already and the rest is in the hands of big farm operations that will wait for prices to get better before they re-enter the market," Santos said.

 

Celeres said on Monday that 55 percent of the 2006/07 soy crop has been sold as of April 13. Brazil is expected to harvest nearly 58 million tonnes of soy, according to official government estimates.

 

By Celeres's estimates, 68 percent of the centre-west soy crop has been committed, with another 41 percent sold in the south. The centre-west and southern states are Brazil's top soy producing regions.