Lagging grain prices thwart Brazil's soy trade

 

 

Lower grain prices continue to dampen Brazil's soy trade despite sky-high premiums, soy industry specialists said Tuesday (July 14).

 

July soy Tuesday settled 17 1/2 cents lower at US$10.74 on the Chicago Board of Trade, while August soy ended 16 cents higher at US$10.34 1/2.

 

"The [soy] market has virtually come to a standstill as producers are unwilling to sell, even with buyers offering record premiums for their beans," said Steve Cachia, a market analyst at Cerealpar.

 

Premiums for Brazilian soy leaving the Paranagua port in southern Brazil had buyers asking for 135 cents over the CBOT August soy contract Tuesday, while sellers wanted 145 cents over the same contract, according to Cerealpar.

 

With low bean stocks in the US and Brazil as well as unattractive soy prices, buyers have been trying to tempt producers to sell their beans by offering high premiums.

 

Most farmers, however, have already sold their beans at good prices and are well capitalized, said Cachia. They can afford to speculate for better prices, he said.

 

Soy producers in Mato Grosso, Brazil's top soy-producing state, had sold 92 percent their crop as of July 10, according to local consultancy Celeres. In Parana, the No. 2 soy producer, 59 percent of the soy was sold, the consultancy said.

 

Seneri Paludo, an analyst at Mato Grosso's Agricultural Economy Institute, or Imea, said Mato Grosso's farmers aren't willing to sell at existing prices.

 

"Soy prices are still positive [regarding profit], but they are close to zero," Paludo said.

 

A chief trader at a leading US grain exporter said that the average prices per 60-kilogramme bag reached recent peaks of some BRL55 Brazilian reals (US$27.90). This price has recently plunged to around BRL49.5 a bag, he said.

 

Soy producers are accustomed to these higher prices, the trader added.

 

On the buy side, most major trading companies such as Bunge and Cargill have good stocks that can last until October. The Chinese buyers have also disappeared from the market, the trader said.

 

Glauco Monte, a risk consultant at FC Stone, said that most industrial buyers are buying the minimum amount of soy needed. "They are just buying for hand-to-mouth purposes," he said.

 

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