May 10, 2006

 

Brazilian soy market volume falls on farmers' protest, weak dollar

 

 

Protesting farmers in the centre-west soy belt and an unfavourable foreign exchange rate has Brazilian soy buyers relying on stocks at Paranagua and Santos ports for product as farmer selling interest plummets, traders said Tuesday (May 9).

Farmers in the centre-west are faced with local market prices below the cost of production, mostly due to a weak US dollar and high diesel fuel expenses that raise freight costs.

 

"I cannot do a thing here today. We bought nothing in Mato Grosso, nothing in Goias and very little out of Parana," said a header trader at Coinbra, a soy exporter owned by Louis Dreyfus.

 

Even as international soybean prices remain at comfortable levels--at US$6.04 1/2 a bushel for the July futures contract on the CBOT Tuesday's close--the US dollar fell 0.34 percent against the Brazilian real to 2.063 Brazilian reals in the meantime.

 

"Everything is moving very slowly. Traders are focusing their energy on the soy stored at the ports, but if this protest keeps up, those stocks are going to dwindle 15 days from now. That's when things can really get worse," said Fernando Muraro, a soy analyst at agribusiness consultancy AgRural.

 

Prices at Santos and Paranagua ports have remained relatively stable at 27.00 real in Santos and 28.00 real per 60-kg bag in Paranagua on Tuesday.

 

Premiums have fallen slightly, however, to 27 US cents over the July CBOT futures contract from previous highs of over 30 cents.

 

Most traders are worried about the expansion of a successful farmer protest in Mato Grosso and Mato Grosso do Sul, which has effectively closed the state to the national and international soy markets. Other states have joined the fray, such as Goias and Bahia, and Parana farmers are expected to protest on May 16. Whether they can shut down the soy market in those states remains to be seen, but it is clearly on the minds of soy buyers and exporters.

 

"It won't be a radical as what is going on in Mato Grosso," said Luiz Martinho, an agronomist at Coamo, Parana's largest soy cooperative.

 

"This is the time of year when volume should be pouring into the ports, but we are not seeing anything expressive and I think it's partly because of the protests now. We are watching it closely," said Guilherme Correia, a soy trader at exporter Coimex. Soy stocks at Paranagua as of May 8 were 234,750 tonnes compared with 188,200 tonnes on May 4, according to Transcar Maritime Shipping Agency.

 

Meanwhile, Brazilian soy and other farmers will meet with Agriculture Minister Roberto Rodrigues on Tuesday (May 9) evening to discuss emergency farm aid, the Agriculture Ministry said.