June 2, 2004

 

 

Brazil Soy Market Recovers Slightly; China Worries Remain

 

Brazil's soy market recovered on Tuesday in response to rising international prices, traders said.

 

"We saw a little interest today, principally at the port of Paranagua, but the market generally remains quiet," said Steve Cachia, analyst at the Curitiba-based Cerealpar brokerage.

 

Prices have been propped up by a weakening of the Brazilian real, which closed at 3.15 to the dollar Tuesday compared with 3.09 on Friday.

 

However, the impasse over exports to China continued to cast a shadow over the market, traders said.

 

This year, Brazilian exporters may fail to deliver up to two million metric tons of soybeans to China, its principal market, because of barriers raised by Chinese authorities, according to Sergio Mendes, president of the National Cereal Exporters Council, or ANEC.

 

Brazilian soybean exports have been hampered since May after Chinese authorities found fungicide-tainted seeds in shipments. Subsequently, authorities banned shipments from Libero Trading, Cargill, ADM, Louis Dreyfus Asia, Nobel Group, Irmaos Trevisan and Bianchini.

 

Currently, nearly all loading of soybeans to China have been halted as Chinese authorities have warned that further bans would be meted out and shipments rejected if Brazilian shipments tested positive for any level of contamination, said Mendes.

 

"It looks like they will try to extend the impediments to our beans until the U.S. crop arrives," said one Sao Paulo-based trader.

 

Chinese soy crushers are reported to be trying to delay soybean shipments and renegotiate deals following a sharp fall in international quotes over the last month.

 

The China imbroglio meant discounts remained at record levels despite declining futures on Chicago.

 

Soybean discounts for June shipment were quoted at $1.50 to $1.70 per bushel under the equivalent Chicago Board of Trade futures contract, some 10 cents higher than last week

 

"These problems have just stacked up on the operational issues hindering exporters at Paranagua," the Sao Paulo trader said.

 

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

 

At the principal export port of Paranagua, soybeans were trading at around BRL45.00 to BRL47.00 per bag on Monday, up from BRL46.00 and BRL48.00 last week, while in Ponta Grossa, northern Parana, soybeans stood at BRL45.00 and BRL47.00, again up from the week before.

 

These price levels will still act as a stimulant for farmers to increase planted area next season.

 

Brazil's May soybean exports totaled 2.67 million metric tons, down 18.6% from 3.28 million tons in the same month last year, according to preliminary figures issued by the government's Foreign Trade Secretariat, or Secex, on Tuesday.

 

May shipments were higher than April exports of 2.01 million tons as the new soybean crop arrives at port.

 

Brazil is the world's leading exporter of soybeans and their by-products.