September 13, 2006

 

Brazil's soy market sidelined by weak international prices, low supply

 

 

Brazil's soy market was sidelined again this week as soybean prices continue to fall on the Chicago Board of Trade and available soy dwindles for local buyers.

 

"There's very little soy left to sell. If there is 5 percent left in Mato Grosso I'll be surprised," said Paulo Gilioli, a broker at Cerealpar in Mato Grosso, the nation's leading soy-producing state.

 

Soybean prices in Chicago traded lower Tuesday (Sep 11), hitting US$5.31 per bushel for the September contract and US$5.43 for November. For Brazil's new crop, to be harvested March through May, prices continue to fall below the US$6-per-bushel mark where they were in late July.

 

"Even when prices for the new crop were pretty good back in July, farmers did the math, calculated the dollar risks, and saw that even over US$6 a bushel the prices were not attractive for a lot of these guys," said Flavio Franca, a soy market analyst for agribusiness consulting firm Safras and Mercado.

 

The dollar is worth 2.17 Brazilian reals, down slightly from Monday's close.

 

Premium prices have risen to make up for the falling soy market. Buyers were quoting 56 cents over the November CBOT soybean contract and 25 cents over the May CBOT on Monday, which still puts the bushel price under US$6.

 

"There is very little business to speak of in the southern soy states and in the center-west no one is selling," Franca said.

 

A trader at Cargill said that farmers wanted too much for their soy, at least 24.00 reals (US$11.05) per 60-kilogram bag.

 

"We can pay 21 reals. Max," said the trader. A lot of the big crushers have ample soy in storage and are contributing to the weak demand for business in Brazil.

 

Add that to the fact that most of Brazil's soy has already been commercialised, according to traders, and the best hope for business here is new-crop price fixing.

 

"We have nothing left to sell. We won't really start looking at this market again until next year," said Januario Turcatto, a soy buyer at mid-sized farm co-op Comacel in Rio Grande do Sul, Brazil's third biggest soy producing state.

 

"We hope the market picks up later in the week because farmers plant in three weeks and need to guarantee at least some of their production costs," said Gilioli.

 

Brazil-based soy traders purchased under 17 percent of the 1.5 million tonnes of subsidised soybeans offered at auction Tuesday as soy availability starts to dwindle in the local market and demand starts to falls along with it.

 

Brazil is the second largest soy producer behind the US.