May 14, 2004

 

 

Brazil Soy Market Dead On Futures Slide

 

Brazil's soy market fell off following a sharp drop in international futures prices on Wednesday, traders said.

 

The weakening of the Brazilian real against the dollar, which lost 4.2% over the last week, was not enough to offset losses.

 

"Farmers aren't remotely interested in 53 Brazilian reals ($1 = BRL3.13) per bag at port when they were being offered BRL57 a couple of days before," said Steve Cachia, analyst at the Cerealpar brokerage in Parana state.

 

Before Wednesday's drop, business had been fairly brisk in the south of the country, traders said.

 

With the dollar and futures expected to remain volatile in the next days or weeks, both buyers and sellers are unsure of committing to deals at present.

 

The size of discounts against soybean exports also acted as a disincentive to deals.

 

Soybean discounts for June shipment were quoted at 150 to 160 cents per bushel under the equivalent Chicago Board of Trade futures contract, wider than 140 to 150 cents under last week.

 

Meanwhile, the meal and oil markets remained quiet with buyers securing just what they need to complete nearby shipments amid market volatility.

 

Rumors that Brazil was set to send soymeal and soyoil to the U.S. to cover the inter-harvest shortfall aroused interest among traders.

 

However, traders said it was unlikely that anyone would send soybeans for fear of subsequent accusations of exporting Asian rust fungus to the world's leading soy country.

 

At the principal export port of Paranagua, soybeans were trading at around BRL53.50 to BRL55.00 per bag on Thursday, down from BRL55.50 and BRL56.50 last week, while in Ponta Grossa, northern Parana, soybeans stood  at BRL50.00 and BRL53.00, again down from the week before.

 

In the center-west of the country, farmers have already committed a large portion of their crop, some 90% in Mato Grosso, according to the local AgRural agricultural consultants, and farmers will hold on to remaining stocks awaiting further price peaks.

 

However, major multinational firms are not yet closing forward sales for the next season in the center-west as is usually the case, said Seneri Paludo, an AgRural analyst.

 

He said that they remain nervous about the uncertain direction of prices and export discounts, which they cannot hedge against.

 

Another concern would be the threat by various farmers to break contracts this year.

 

The news of Chinese authorities' decision to ban imports of Brazilian soybeans from four trading houses - Noble Grain Pte Limited, Cargill Agricola S/A, Irmaos Trevisan S/A-Ind Com E Agricultura and Bianchini S/A Industria Comercio E Agricultura - had rattled the local market, one trader said.

 

Everyone is nervous about this, he said, adding that most imagine it's a ploy to renegotiate shipments, but this remains unclear.

 

Agriculture Ministry officials were to meet Friday with representatives of the companies involved to discuss the situation.