May 9, 2006

Brazil, Argentina want soy market link with China's Dalian

The Rosario Cereals Exchange in Argentina and the Brazil Futures and Commodities Exchange (BM&F) will likely have a system in place permitting Chinese brokers direct access to a unified South American soy futures market by the second half of 2006, a BM&F spokesman said Monday (May 8).

BM&F will guarantee supply and shipment out of the Paranagua port in Parana state, Brazil, the no. 2 soy shipping port. The China-based broker, working with the Dalian Commodity Exchange, would deposit payments in US Treasuries in the BM&F's Citibank account in New York and notify the BM&F about the name of the shipping agency and carrier contracted to ship the soy to China from Paranagua, according to a slide presentation made by BM&F officials at an agribusiness conference last week.

All deposits are to be done in US dollars.

China is South America's no. 1 soy importer.

"We want to invite Dalian to be a partner in a South American soy contract with BM&F and Rosario," Manoel Felix Cintra Neto, president of BM&F, said in a speech last month in China.

Neto said that China soy buyers and the government were most concerned about food supply and needed long-term supply guarantees from trading partners like Brazil and Argentina. Combined, the two nations produce over 90 million tonnes of soybeans annually.

The three exchanges have been discussing a unified soy futures market for nearly a year. Some argue that a unified South American-Chinese soy market would become an alternative way to fix soy complex prices based on conditions specific to Brazil and Argentina, instead of traders here relying on the Chicago Board of Trade, which is more focused on conditions in the US soy market.