September 5, 2007

 

Brazil soy market heats up amid strong demand

 

 

Brazil's soy market heated up on Tuesday (September 4) and is expected to see high demand from buyers all week, with favourable pricing keeping farmers in the game, brokers and traders said.

 

"A lot of business is being done today," said Silmara Gallo, a broker for Cerealpar in Mato Grosso, Brazil's No. 1 soy producing state.

 

"Farmers are closing deals with buyers for 2008," she said.

 

Local prices are enticing farmers to market the little soy they have left as well as close contracts with major soy buyers like Archer Daniels Midland, Bunge and Cargill.

 

Local prices at the Paranagua port were 41 Brazilian reals (US$21.13) per 60-kilogramme bag on Monday.

 

A soy buyer from one of the US multinationals said buyers is out in full force. "There's demand out there for everything right now, soy meal, soy beans, soy oil. Everyone wants soy today," the trader said.

 

One reason for the increased demand is food companies anticipating purchases of soymeal to feed chickens and hogs for the upcoming holiday season in December. Another is the Argentina energy crisis a few months ago, which had international buyers turning to Brazil to make up for setbacks in Argentina.

 

"Overall, we are looking at a very favourable scenario this week and probably for the next month," said Anderson Galvao Gomes, a soy market analyst for agribusiness consulting firm, Celeres.

 

Brazil starts planting soybeans in October, and on Tuesday the National Commodities Supply Corp, or Conab, estimated that soy growers are expected to increase planted area by 6 percent to just over 21 million hectares.

 

Gomes estimates that growers here will expand to 21.9 million hectares.

 

Conab said Brazil should harvest between 59 million and a little over 61 million metric tonnes of soybeans in the 2007/08 season, beating this past season's record 58 million tonnes, judging by official estimates.

 

"I'd say that right now there is actually more demand out there than farmers willing to sell," said Stefano Passinato, a soy analyst for consulting group AgRural.

 

"The buyers are willing to pay the high prices, but farmers in some states, like Sao Paulo, have a lot of other crops to choose from to raise cash for the upcoming planting season," Passinato said.

 

Soybeans in northern Parana state are fetching around BRL36.00 (US$18.48) a bag compared with BRL27.00 (US$13.86) last year.

 

Farmers purchased most of their fertilizer earlier in the year, around May and June, on fears that massive sugarcane demand would lead to a scarcity of fertilizer and an inevitable price increase. As a result, farmers are well situated with fertilizer and don't have a lot of immediate cash needs, Passinato said.

 

"Farmers are going to sell at these prices, but many of them are going to keep waiting to see what happens with the US crop," Passinato said, adding that some buyers might have a hard time finding sellers - or will have to keep prices high this week.

 

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