May 27, 2010

Brazil's producers withhold soy as currency drops

Soy farmers in Brazil are withholding supplies of the oilseed as they bet the real's drop will boost revenue from dollar-denominated sales abroad, the head of the nation's biggest producer said.

"It looks like the real will devalue a little bit more, so we are holding sales and waiting for the right moment to sell," said Erai Scheffer, president of Grupo Bom Futuro, Brazil's top soy grower. The group has 230,000 hectares (568,000 acres) of soy.

The Brazilian real has lost 5.5% against the dollar this month, the worst performance of the seven most-traded Latin American currencies. Farmers do not expect the real to rebound any time soon amid concern that the debt crisis in Europe may slow the global economic recovery, Scheffer said.

Soy growers had sold 57% of this year's crop as of May 21, compared with 65% in the year-earlier period, agribusiness consulting company Celeres said in a report. Over the past five years, growers had sold on average 66% by this time.

Farmers in Argentina, the world's third-largest soy producer, are also hoarding the oilseed as President Cristina Fernandez de Kirchner seeks to weaken the currency to stimulate exports.

"When faced with uncertain circumstances, farmers hold onto the currency they understand best, the beans," Miguel Calvo, president of the Argentine Soy Association said.

In Brazil, farmers are seeking to take advantage of the exchange-rate fluctuations as a bumper corn crop boosts freight costs, squeezing profit margins, Scheffer said. Freight costs have risen about 30% from a year earlier, he said.