July 23, 2008

  

Brazil soy market sees little business this week

 

 

Brazilian soy buyers and sellers are doing little business this week due to recent price falls on the Chicago Board of Trade (CBOT), said brokers and traders on Tuesday (July 22).

  

"This week and last week, the soy market has absolutely ground to a halt due to lower prices in Chicago," said a trader at a US multinational in Sao Paulo.

  

Despite a slight improvement in CBOT soy prices on Tuesday, CBOT prices were still "absolutely hampering" soy business in Brazil, he added.

  

Soy futures on the CBOT were seen Tuesday rising 7 cents higher to $14.16 per bushel for the August contract, after several days of falls.

  

Moreover, the trader saw little agreement between soy buyers and sellers.

  

Premiums at the port of Santos for Brazilian soy saw buyers asking for 40 cents over the August CBOT soy contract and 45 cents over the September CBOT soy contract, with no sellers for either contract, he said.

  

Brazilian soy is traded at either premiums or discounts to CBOT soy futures, depending on the shipping month. Those price differences tend to change daily, and with CBOT soy prices falling, the market is still looking for what it can agree upon with regard to discounts or premiums for nearby, and future, Brazilian soy shipments.

  

Steve Cachia, a soy-market analyst at brokerage firm Cerealpar, agreed that physical soy trade is slow this week.

  

"Physical soy business is almost dead, with prices dropping and scaring away buyers," said Cachia.

  

With most farmers having sold a large percentage of their soy and having already purchased their inputs for the next harvest, they are willing to speculate for higher soy prices with the remainder of their crop.

  

Cachia notes that some sellers even hope that new data from the US may reverse current positive weather outlooks which are supporting the lower soy prices.

  

Farmers were further discouraged from selling soy by the fall of the US dollar against the Brazilian real. The dollar is currently worth 1.58 Brazilian reals. It started the year at BRL1.75, declined to BRL1.60 by June and fell below that for the first time on June 25.

  

According to Cerealpar, soy premiums at the port of Paranagua saw buyers asking for 45 cents over the August CBOT contract with no sellers, while buyers were asking for 55 cents over the CBOT September contract with sellers wanting 45 cents over.

  

David Brew, a broker at Brasoja in Rio Grande do Sul, the No. 3 soy-producing state, said that soy business is generally quiet.

  

"People were seemingly shellshocked by the falls in Chicago and many found it easier to do nothing than to do something," he said.

  

They are staying away from the market at the moment, he said.