June 14, 2006

 

Brazil's soy market volume returning to normal

 

 

Brazil's soy market started to turn to normalcy this month, and the trend continues this week with trading companies fixing prices for soybeans on the futures market as farmers give in to decent international soy prices.

 

"Business is good. Chicago futures are good. We bought 10,000 tonnes at Paranagua Monday and I suspect farmers will close prices so long as there are dry weather concerns in the US," said a soy buyer at a large Brazil-based soy exporting company in Sao Paulo.

 

July soybean futures on the Chicago Board of Trade rose 14 1/4 cents to US$6.00 per bushel on Monday but were expected to open 4 to 6 cents lower on Tuesday.

 

The dollar has made up from any fall in soy prices, however. It gained 2.3 percent over Monday's close to slightly top 2.30 Brazilian reals in early morning trading on Tuesday. The Brazilian real weakened Tuesday on US inflation worries, which means markets expect a rate hike in the US that ultimately makes the dollar more attractive.

 

Farmers and traders are taking advantage of the rising dollar and a CBOT over US$6 a bushel for some soybean futures contracts.

 

"What's happening here now is not the physical delivery of soy from producer to industry or co-op to ports. It's all price fixing for the soy that has been sitting in warehouses without a price since early in the harvest," said Steve Cachia, a market analyst at grain brokerage firm, Cerealpar.

 

"If the dollar cooperates and if Chicago stays over US$6 a bushel you will then start to see more transfer volume leaving producers' hands," Cachia said. "Volume has returned to normal overall and will be like this right through July on US weather news. Farmers will take advantage and close deals, especially in the south and south-eastern states," he said.

 

Large US multinational buyers agreed and said business has returned to normal. "We are no longer dependent on the ports for acquiring soy. I'm buying from producers all over the place now," said a trader.

 

"If we keep seeing futures prices over US$6 a bushel, then you're definitely going to see more Brazil-based trading houses fixing prices in Chicago," said Helio Sirimarco, a consultant for brokerage firm Ativa Corretora in Rio De Janeiro.

 

Some farmers, especially in the centre-west soy belt, are waiting for yet another government announcement regarding farm aid expansion, due on Wednesday. Farmers are asking for loan deferments and 100 percent roll over of overdue debts, instead of 50 percent of government debts extended for southern farmers and 80 percent of government debts extended for centre-west farmers.