September 9, 2009

Little trade is being done on the Brazilian soy market because of a scarcity of supply, higher US prices and unfavourable foreign exchange rates.

 

CBOT September soy futures settled eight-cents higher at US$9.69 per bushel, and November soy finished 14 1/2 cents higher at US$9.36 1/2 per bushel on Tuesday (Sept 8).

 

In addition to the higher prices, Brazil's national holiday on Monday contributed to the limited trade, according to Glauco Monte, a risk consultant at FCStone.

 

Monte said the unfavourable exchange rate has also damped producers' interest to sell their beans. One dollar stood at around 1.82 Brazilian reals on Tuesday.

 

Monte said that most buyers and sellers were on the sidelines and little trade is being done.

 

US trading company Cargill, however, purchased small lots of beans for BRL48 per 60-kilogramme bag in Ponta Grossa in Parana, the No. 2 soy-producing state, on Tuesday, he said.

 

Monte said although some Brazilian-based soy crushers have stocks to last through to October, others have already ceased operations to undertake annual maintenance.

 

He said that sellers are asking for high prices. For instance, soy premiums on Tuesday were around 200 cents to 225 cents over the November soy futures contract on CBOT.

 

Brazilian agricultural consultancy Celeres on Tuesday said Brazil's soy farmers have sold 13 percent of their new 2009-10 soy crop as of September 4. Celeres said sales figures as of September 4 were slightly below the five-year average of 15 percent and steady from its previous research on August 28.

 

Leonardo Menezes, an analyst at Celeres, said Brazil's soy trade was at a standstill last week due to a strong decrease in international soy prices and is likely to remain at a snail's pace this week.

 

Buyers and sellers have been largely unable to agree on price, Menezes said.

 

Steve Cachia, a grains analyst at Cerealpar, said Brazilian soy farmers had been hoping in recent weeks for prices at around US$10.50-US$11.00 per bushel.

 

But with the slide in soy prices on CBOT last week, producers remain unsure whether to hold out for a late rally or to start selling their old and new soy at lower prices, he said.

 

Cachia said that last year Brazilian soy farmers chose to gamble and wait for higher prices. The gamble paid off and most received better prices.

 

Although they are following the same approach this year, the strategy is more risky because of the bumper soy crops expected in the US and South America.

 

Brazilian producers are hoping that some negative weather in the US could push up prices, he added.

 

Industry participants said the National Commodities Supply Corp.'s estimate of 57 million tonnes for the 2008-09 soy crop season was as expected. The estimate didn't impact upon trade, they said.

 

Conab hasn't provided an estimate for the new 2010-2011 soy crop, but private consultancies such as Celeres peg the crop at a record 64.7 million tonnes.