April 25, 2007

 

Weak US dollar making soy a hard sell in Brazil's Mato Grosso

 

 

A weak dollar in comparison to the Brazilian real has some soy traders wondering when soy becomes a thing of the past in Mato Grosso, currently Brazil's top soy producing state.

 

"With current prices the way they are, and the dollar where it is today, the day is coming when Mato Grosso is going to be wiped off the soy map," said Jair Alencar Freire, trade manager for Archer Daniels Midland in Sao Paulo.

 

Freire blamed a dollar currently worth around 2.03 Brazilian reals and logistics problems for the festering anti-soy scenario in northern Mato Grosso state. As it is, soybean prices are hovering close to the government price floor of 22.50 reals (US$11.08) per 60-kilogramme bag, according to brokerage firm Cerealpar. The government has promised to provide subsidies to farmers whenever prices fall below 22.50 reals.

 

Many farmers in the north of the Mato Grosso cannot make ends meet in the soy trade without the government auction programme, which awards winning bidders with a higher market price for soy.

 

"When you look at the actual scenario today, even with good prices in Chicago, I doubt that Mato Grosso expands soy fields next year," said Fernando Muraro, a soy market analyst at AgRural.

 

Chicago Board of Trade soybean prices are all trading well over US$7 per bushel, but Muraro said that as the dollar continues to slide from 2.16 reals during the planting season, Chicago might have to hit US$8 before soy farming is really attractive in some regions of the centre-west.

 

"We are returning to a time now where lots of land is in the hands of few people, and this strong local currency has a lot to do with that. You'll see the census bureau figures show that later this year," Muraro said.

 

Brazil's census bureau, IBGE, returns to the fields after a 10-year absence to do a rural farm census.

 

"You won't see much in new soy areas in Brazil next year," Freire predicted at an agribusiness event Tuesday run by the Brazilian Commodities & Futures Exchange.