July 11, 2006
Brazil to auction one million tonnes soy to farmers on Jul 13
Brazil's Agriculture Ministry said Monday (Jul 10) it will offer one million tonnes of soybeans to farmers and cooperatives in an auction Thursday (Jul 13).
The amount is 300,000 tonnes more than the amount offered in the previous auction on Jul 5.
The electronic auction will be offered in 10 states in the centre-west and north of the country.
In the reverse auction, known as Pepro, farmers and cooperatives bid for the right to receive a government subsidy of not more than 4.89 Brazilian reals (US$2.25) over the spot price of a 60-kg bag of soy. The winning bidders are those willing to accept a lower subsidy premium.
Brazil will auction another million tonnes on Wednesday to industrial buyers. The auction is run the same way, only direct subsidy payments go to the industry instead of to farmers.
The auctions were designed to guarantee centre-west and northern soy farmers a higher price for their soybeans. Farmers there were selling below the cost of production prior to the creation of the new auctions in May. The first Pepro auction saw 72.8 percent of the total volume sold to farmers and local cooperatives.
Joao Paulo Moraes Filho, an auction coordinator at the National Commodities Supply Corp, said the government increased the amount to help meet the one billion reals dedicated to soy subsidies for 2006.
"We've adjusted the offering to attract more people. We've got the money promised for it, so that's the volume we need to sell in order to meet the maximum we have available in the budget for these new auctions," Filho said.
Last week's Pepro auction cost the government 25.3 million reals in direct subsidy payments to farmers and cooperatives.
This marks the first year that Brazilian soy growers have ever received a direct subsidy from the government. Subsidy payments will be made starting in January, Filho said.
Brazil is the world's the second largest soy producer and exporter, after the US.
