April 20, 2005

Farmers hold back crops in Brazil, soybean futures may rise

Soybean futures may rise in Chicago for the second week in a row on speculation that farmers in Brazil will withhold newly harvested crops to boost prices amid a weak US dollar.

An 11 percent rise in the value of the Brazilian real against the dollar in the past year has reduced the incentive for exports from Brazil, where about two-thirds of this year's crop has been harvested. Since Feb 1, export sales as of March 31 was down 45 percent from the same period a year earlier, said the Brazilian Association of Oilseed Industries.

China however, the world's biggest buyer of soybeans, may import a record 24 million tonnes of Brazil's soybeans in the year ending Sept 30. This exceeds its earlier forecast because of lower domestic production and rising demand.

Roy Huckabay, executive vice president for the Linn Group in Chicago says this increased demand presents opportunities as well for shipments off the US Pacific Northwest because of the equally competitive soybean prices there.

Soybean futures for July delivery rose by US 2.5 cents to US$6.22 a bushel on the Chicago Board of Trade last week. Prices are up by 25 percent from a 31-month low on Feb 4, partly because of a prolonged drought in Brazil.

Last week's gain surprised the majority of analysts, who predicted a decline in a survey on April 8.