June 13, 2007

 

Export demand slows for Brazilian soy; domestic market steady

 

 

Export demand for Brazilian soybeans slowed this week, traders said, while soy prices in two states were competing well with the export markets.

 

"Paranagua port is still packed with soybeans because there is just not a lot of international demand for our soy right now," said a trader at a US multinational soy exporter.

 

He said Argentina soybean export prices were more favourable for Brazil's no. 1 customer, China.

 

"The US still has huge soybean stocks so they are still in the (export) market when perhaps in other years they would have (sold) at a slower pace," said Steve Cachia, a soy market analyst for Cerealpar, a grain brokerage.

 

Local activity was a bit heated up in at least two states because of favourable prices.

 

"We were buying today in Minas Gerais and Goias because farmers there were happy with prices as good as export prices," another trader said.

 

Overall, however, Brazil's soy market continues relatively stable, with no changes from the previous weeks.

 

There are currently nine ships waiting to load soybeans at the Paranagua Port, as of Tuesday, according to Grano Logistica, a port operator in Curitiba, the capital of Parana state. All but one ship is heading to Europe. The other is heading to Iran, with a few others listed as charter carriers without a destination listed.

 

Some 68 percent of the 2006/07 crop has been sold as of June 8, according to agribusiness consultancy Celeres. Soybean prices are very favourable for farmers, even though the dollar continues to disappoint. The dollar is currently holding steady around 1.94 Brazilian reals, down from 1.97 reals last Friday. Soybean prices are around US$16.50 per 60-kilogramme bag at the Paranagua Port, up 23.3 percent compared with May 2006 prices.

 

Celeres told its farmer clients to fix prices for the 2007/08 crop on the Brazilian Commodities & Futures Exchange, or BM&F this week to protect from discounts in the Brazilian soybean market. Discounts were 34 cents below the July soybean contract on the Chicago Board of Trade on Tuesday and 27 cents below the August CBOT soybean contract.

 

Brazilian farmers maintain their speculative stance, hoping soy prices will push higher on poor US crop news and declining US soybean stocks.

 

"Everyone here is hearing that soy prices will hit US$9 sometime soon. They are waiting and hoping," said David Brew, a broker at Brasoja in Rio Grande do Sul, Brazil's no. 3 soy producing state.

 

"There has not been a lot of volume in the futures market this week for the 2008 crop, but farmers are locking prices for July and September 2007 on the soy they've got left," said Loraine Coleta, a grain brokerage for Link Corretora.

 

Brazil's soy market negotiated 13,814 contracts in May compared to 10,652 contracts in May 2006. BM&F soy futures volume is down however compared to February, March and April volume.

 

Brazil negotiated 98,180 soy future contracts on the BM&F in 2006 compared with 47,397 in 2005 and 7,225 in 2004, showing improving signs of liquidity in the country's commodities futures market.

 

CBOT soybean futures declined on Tuesday on positive weather news in the midwest. July futures were around US$8.26 per bushel with August soybeans around US$8.34 per bushel.

 

Brazil is the no. 2 soy producer behind the US.