June 3, 2009

Brazil's soy farmers remained on the sidelines of the market Tuesday due to a double whammy of unfavourable foreign exchange and sliding international prices, industry participants said.

 

Chicago Board of Trade July soy futures dropped 9.50 cents to US$12.09 a bushel, while the US dollar slid 1.4 percent to 1.92 Brazilian reals.

 

"All of the sellers vanished from the market due to the Brazilian real getting stronger against the dollar and the lower prices on CBOT," said the chief trader for a major US soy exporter.

 

This week's trading activity is likely to remain slow, like the week before, as Brazilian producers have already sold a large part of their beans, the trader said. The big soy producers in Mato Grosso have been especially quiet because they already sold a large chunk of their beans, he said. Mato Grosso traditionally harvests and sells its beans earlier than other states.

 

Brazilian agricultural consultancy Celeres said that Brazilian producers had sold 67 percent of their soy by Friday, compared with 65 percent the week before and a five-year average of 69 percent.

 

Celeres said farmers in Mato Grosso, the No. 1 soy-producing state, had sold 86 percent of their beans, and that those in Parana, the No. 2 producer, had sold 47 percent of their beans by Friday.

 

The trader sold one vessel of beans to Chinese buyers last week, but so far China hasn't reappeared in the market this week. The Chinese buyers aren't under pressure to buy as they don't need any more beans until late July and August, he said.

 

Steve Cachia, an analyst at local consultancy Cerealpar, said that trade was brisk Monday when CBOT soy prices rose sharply, but that business slowed Tuesday due to both CBOT and the exchange rate moving downward.

 

Cachia said premiums have stabilized, with buyers asking for 35 cents over the CBOT July soy contract on Tuesday. Sellers were looking for 40 cents over against the same contract, he said.

 

Glauco Monte, an analyst at consultancy FC Stone, said the exchange rate has been trimming the recent price gains on CBOT in the local Brazilian soy market.

 

Brazilian soy prices at Ponta Grossa in Parana have remained in a band of BRL50 to BRL51 per bag this week and last week, despite recent price increases in international soy prices, he said.

 

Brazil's soy exports rose to a record 4.6 million tonnes in May from the 4.4 million tonnes exported in April, the Foreign Trade Ministry said recently. Brazil's soy exports were 4.4 million tonnes in May last year.

 

In the futures market, Monte said that a small number of soy farmers are starting to fix soy contracts for 2010.

 

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