July 10, 2007

Brazilian soy tumbles in CBOT trading

Brazil's soy market is stumbling along at the start of the week with Chicago Board of Trade (CBOT) soy futures and a weak dollar not impressing the sell-side.

"A weak Chicago and the US dollar is not allowing more business to get done today," said Steve Cachia, a commodities analyst for grain brokerage Cerealpar.

The dollar broke a seven-year intraday low on Monday, falling below BRL1.90 for the first time since 2000. The dollar's decline took away from the early afternoon gains in CBOT soybean futures. July soybeans are 1/4 cent higher at US$8.65 per bushel.

"Unless we see better prices in (Brazilian) reals, it will be difficult to see larger volume being traded for the 2006/07 crop," Cachia said. Around 77 percent of the crop has been sold, according to consulting firm Celeres.

Cachia said farmers were targeting a US$9.50 per bushel CBOT for May 2008 before getting active on next year's 2007/08 crop sales. Brazil plants soy in October.

He also said local farmers were also going to wait for market reactions to this Thursday's US Department of Agriculture report on soybean supply and demand for the 2006/07 and 2007/08 crops.

"If you want to know what's happening in the soy market, wake me up and I'll tell you. Nothing," said David Brew, a broker at Brasoja in Rio Grande do Sul, Brazil's No. 3 soy producing state.

The local futures market in Sao Paulo was closed on Monday for a state holiday. Farmers and traders tend to barter with each other, with large trading companies hedging on the CBOT or New York Board of Trade. Very little business gets done on the local futures market when it comes to farmers selling, so other factors are taking soy farmers out of the market Monday (July 9).

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