August 19, 2009

Brazil's soy trade remains lacklustre this week as local buyers fail to offer attractive bean prices, according to industry sources on Tuesday (August 18).

 

September soy futures on the Chicago Board of Trade rose 7 1/2 cents to US$9.95 1/2 a bushel while November soy gained 4 1/2 cents to US$9.59 on Tuesday.

 

Although soy prices on CBOT regained some ground on Tuesday, bean prices fell sharply on Friday and Monday - leaving many buyers and sellers watching the dust settle, said industry sources.

 

"You can forget trade; there's virtually nothing happening," a chief trader at a major US soy exporter said.

 

The trader said, however, that local crushing operations of companies such as Bunge, Cargill and ADM are willing to offer high premiums to get beans as a result of the tight supply.

 

He said they can still make money buying beans with premiums of around 200 cents over the September contract on CBOT to crush into soyoil or soymeal.

 

Brazilian soybean exports, however, have dried up for the year, the trader said.

 

As a result, the export company purchased only 40,000 tonnes last week compared to more than 400,000 tonnes of beans in peak weeks between March and June.

 

"This should remain the same this week and is nothing for us," the trader said.

 

Brazil's soy farmers are in the inter-harvest period.

 

Steve Cachia, a grains analyst at consultancy Cerealpar, said Brazil's local soy prices remain unattractive for sellers.

 

Cachia said small volumes of soy were being bought at around 48 Brazilian reals (US$25.8) per 60-kilogram bag at Brazil's main grain port of Paranagua on Tuesday.

 

Soy producers, whether farmers or traders, aren't in any rush to sell their remaining beans, he said.

 

They will hold out in the hope that weather in the US leads to price increases, he added.

 

Cachia said foreign exchange also doesn't help trade. Although the dollar held more or less steady at around BRL1.849 on Tuesday compared to Monday's close of BRL1.86, the Brazilian real has soared more than 20 percent against the dollar since mid-March. This means farmers get less for their beans in the local currency.

 

Leonardo Menezes, an analyst at agricultural consultancy Celeres, added that 89 percent of the 2008-09 soy crop has already been sold. This is compared to around 88 percent in the previous week, he said.

 

With farmers' holding onto their remaining beans to speculate, the current bean prices aren't attractive to make them sell, he said.

 

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

 

US$1 = BRL1.84 (August 19)