May 20, 2009

Brazil soy trade was choppy on unfavourable foreign exchange rates despite surging international prices, industry participants said Tuesday (May 19).

 

The Chicago Board of Trade's July soy futures contract settled 15 1/2 cents higher at US$11.62 and November soy finished 9 cents higher at US$9.96 on Tuesday.

 

Industry participants said, however, that despite the higher international soy prices, the unfavourable forex dampened trade. Brazilian soy producers were reluctant to sell as they received less cash for their beans in the local currency.

 

One dollar dove to 2.03 Brazilian reals from around BRL2.08 on Monday.

 

"The CBOT price is beautiful, but the dollar has been terrible and trade has stopped," said a chief trader at a US soy exporter.

 

Brazilian producers have sold 63 percent of their soy as of May 15 compared with 61 percent the week before and a five-year average of 67 percent, according to local consultancy Celeres.

 

Overall, Brazil's trade for soy has slowed this month after brisk sales last month largely due to Chinese buying, said industry participants.

 

These Chinese buyers have now stepped out of the market due to the high prices, the trader said.

 

On the other hand, Brazil has been shipping good volumes of soymeal this month, said industry participants. This is as a result of Argentina - the largest exporter of meal - having a smaller soy crop and being largely out of the market, they said.

 

Soymeal trade, however, was brisk as the US tends to focus on its own domestic soymeal needs and is also in its inter-harvest period. Because of this, meal buyers have turned to Brazil, the trader said.

 

Steve Cachia, an analyst at local consultancy Cerealpar, agreed that the forex took the shine off the CBOT rally Tuesday.

 

Prices didn't move much on the local spot market, with soybean prices at Paranagua, the main grains port, trading at around BRL53 per 60-kilogram bag. This compared to around BRL54 per bag last week.

 

Cachia said that with over 60 percent of the soy sold, many farmers already have the resources to pay for the next harvest and will start to speculate. They will hold out for better prices, he said.

 

Cerealpar said buyers Tuesday were looking for around 40 cents over the July contract on CBOT, while sellers wanted 43 cents over the same contract.

 

David Brew, a broker at Brasoja in the south of Brazil, said the soy trade has been brisk in Rio Grande do Sul, the No. 3 soy-producing state. Final beans are being harvested there.

 

Logistics problems have also occurred in Rio Grande do Sul, he said, because of a large amount of wheat and corn occupying silo capacity as the new beans arrived.

 

If the drought hadn't reduced the soy harvest in Rio Grande do Sul by 2 million tonnes, there would not have been enough silo capacity for a larger harvest, Brew said.

 

Brazil is the world's No. 2 soy producer after the US.