August 8, 2007

 

Brazil soy supply dwindles, market crawls

 

 

Brazil's soy supply continues to dwindle this week and farmers are more interested in selling corn than dipping into what's left of the 2006/07 soy crop, traders said.

 

Paul Gilioli, a broker at grain trader Cerealpar in Mato Gross, the country's leading soy producing state, said there is "very little soy left in Mato Grosso these days, and buyers are more interested in corn. Soy growers stopped fixing 2008 prices this week on price volatility."

 

Brazilian farmers have rushed to lock in prices for 2008 soybeans, with around 14 percent of the crop sold already, according to agribusiness consultancy Celeres. Last year at this time, just 6 percent of the crop was sold in the futures market.

 

Traders at a US multinational in Sao Paulo also said that trade was trickling in.

 

"There's not a lot of news happening in Brazil's soy market these days," a soy buyer at the Sao Paulo company said. "There've been no problems at the ports, the market is well bought and exports are still somewhat disappointing because our soy prices are so high."

 

Soybean prices are more than 30 Brazilian reals (US$15.78) per 60-kilogramme bag throughout all of Parana, Rio Grande do Sul and Mato Grosso states, the top three producers.

 

Soybean premiums for nearby shipments remain in positive territory, making Brazilian beans more costly than US soy for August through November, according to Alianca Corretora, a brokerage firm.

 

Soybeans are trading at a discount for new crop soy, however, currently at around 40 cents below the March soybean contract on the Chicago Board of Trade (CBOT).

 

CBOT soy futures are trading higher on Tuesday afternoon on dry weather concerns in US soy regions. August soybeans are 9 1/2 cents higher at US$8.35 1/2, and November soybeans are 7 1/2 cents higher at US$8.57 1/2. Brazil beans are around 20 cents higher for August.

 

The biggest Brazil soy news of the week was a report by Celeres showing that Brazil would increase soy planted area by 5.4 percent to around 21.9 million hectares. Some states, like Rio Grande do Sul, will actually reduce area in favour of corn, Celeres said.

 

Brazil will not be increasing soy area as much as some originally thought. Anderson Galvao Gomes of Celeres originally estimated a 9 percent increase, but competition from sugarcane and corn, coupled with high farm debts and a weak US dollar, will likely lead to smaller expansion.

 

"We don't know yet here in Rio Grande do Sul if corn is going to move in on soy because of prices. It's still too early to say," said David Brew, a broker at Brasoja in Rio Grande do Sul.

 

On Monday, Celeres said 78 percent of the soy crop for 2006/07 has been sold as of Aug. 3, compared to a five-year average of 82 percent. Farmers are still willing to speculate on higher prices and watching the weather in the US.  Unlike the US, Brazil soy growers tend to sell into the spot market and don't lock in prices in the futures market in advanced sales.

 

On the port side, 157,500 tonnes of soybeans are currently loading in the export corridor of the Paranagua Port, the No. 2 soy export terminal in Brazil. Shipments by Cargill Inc., Archer Daniels Midland (ADM), Coamo Cooperative and charters are heading to Germany, Spain and China this week. Three more ships are waiting to load this week. Cargill will load 60,000 tonnes for Belgium, with two charters going to Holland and China.

 

At the Santos port, Brazil's No. 1 soy exporter terminal, Noble Grain recently shipped 60,000 tonnes of soybeans to an unmarked destination, according to the port line-up report by Transcar Maritime Shipping Agency.

 

Archer Daniels Midland is expected to load 28,000 tonnes of soybeans by Friday and Cargill is expected to load around 9,000 tonnes by Wednesday.

 

In Rio Grande do Sul ports, Bunge Ltd. (BG), Louis Dreyfus et Cie. and Archer Daniels Midland all have significant bulk shipments going out this week. Bunge loaded 57,000 tonnes recently for Thailand and will load another 82,000 tonnes in two separate ships bound for Thailand and Morocco.

 

Dreyfus is loading 60,000 tonnes bound for China on Wednesday.

 

Brazil has shipped 13.4 million tonnes of soybeans to world markets from January to June, down from 14.5 million tonnes over the same period last year.

 

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