August 29, 2007

  

Brazil's soy market offer down, awaits rising prices at CBOT

 

 

Brazil's soy market had only small sales volumes this week as farmers keep the leftovers of the 2006-07 crop in stock and wait for prices at the Chicago Board of Trade (CBOT) to rise.

 

"The market almost stood still this week, with near to zero offers and high international demand," said a soy buyer in Mato Grosso do Sul and Parana state.

 

September contracts at the Chicago Board of Trade were negotiated around US$8.57 per bushel, while November contracts were slightly higher, at US$8.73 per bushel.

 

Still, prices are far from the over US$9.50 per bushel earlier this year.

 

But experts expect CBOT prices of over US$9 per bushel in the coming week, while internal prices have already reached a three-year high.

 

"The old (2006-07) crop has almost completely been sold, the stocks are low, and so the prices continue to go up," said Maria Amelia Tirloni, an analyst at the Mato Grosso office of Agencia Rural consultancy.

 

The old crop, or 2006-07, was 83 percent sold by August 24, or 2 percent over the August 17 figures, according to data published Monday by agribusiness consulting firm Celeres.

 

"We had prices of BRL38 per 60-kilogramme bag in Paranagua, BRL33 in Rondonopolis and up to BRL39 in Santos yesterday, the highest soy prices since 2004. But even at those price levels they couldn't find a seller," said Stefano Passinato, an analyst at the Curitiba office of Agencia Rural consultancy.

 

Farmers and experts have two main reasons to believe that prices will go up.

 

The actual US soy crop is expected to be smaller than estimated before, due to unfavourable weather conditions in the US.

 

"We heard something about a 10 percent smaller US soy crop," a trader said.

 

Another reason why Brazilian soy farmers are sticking to the leftovers of the 2006-07 crop is that the federal bank Banco do Brasil decided to prolong agriculture credit lines.

 

"With these credit lines expiring only in October or November, farmers don't have to sell immediately, and therefore have some more extra time to wait for higher prices," Passinato said.

 

Meanwhile, 17 percent of Brazil's new 2007-08 soy crop was sold as of Aug. 24, 2 percent over last week's figure, according to Celeres.

 

This number is much higher when compared to sales figures for the same period in 2006, when only 11 percent of the future crop was sold.

 

But last year's lower numbers were caused by then very low prices of only US$6 per bushel, while now prices for the March and May 2008 contracts are around US$9 a bushel.

 

Brazil has shipped 16.3 million tonnes of soybeans to world markets from January to July, down from 17.9 million tonnes over the same period last year.

 

Experts estimate that the 2006-07 soy crop produced 58.2 million tonnes, while figures for the 2007-08 crop are expected to reach 61.5 tonnes.

 

Brazil is the No. 2 soy exporter behind the US.