September 20, 2006

 

Brazil's big soy traders holding out for November and beyond

 

 

Large soy trading companies in Brazil have purchased close to a million tonnes of soybeans over the past few months in government auctions and will not likely return to the market going forward, brokers and traders said.

 

The government has been offering over 3 million tonnes of soybeans at auctions each month. Trading companies such as Archer Daniels Midland and Bunge have purchased volumes sufficient enough to keep demand low as much of that soy has yet to be delivered.

 

"The auctions require producers to sell the soy within a certain time period and we have soy pulling in up until November," said a soy buyer at a large US multinational.

 

Brokers in the centre-west soy belt see the physical market on pause until January and possibly into February.

 

"The big players bought millions of tonnes of soybeans at these auctions since June and a good part of that will be delivered in the next few months. These guys are full until next year," said Paulo Gilioli, a broker at Cerealpar in Mato Grosso, Brazil's leading soy producing state.

 

Business boomed late last week out of the southern states, however, with 15,000 tonnes moving out of Rio Grande do Sul, the no. 3 soy state, on Friday. On Monday, 2,000 tonnes were sold to fulfil contract obligations, making the state the most active over the last several days, according to Helio Sirimarco, a consultant for brokerage firm Ativa Corretora in Rio de Janeiro.

 

Some 1,500 tonnes were sold and shipped out of Mato Grosso do Sul on Monday, with similar volume at the Paranagua Port in Parana, Sirimarco said, adding the international soy exporters were the principal buyers.

 

Mid-sized local soy buyers had a better week last week as soybean price increases on the Chicago Board of Trade helped facilitate business. Prices were rising in Chicago on news of a possible cold snap in the US Midwest.

 

On Tuesday, soybean futures fell from recent gains, with the November CBOT contract falling 8 3/4 cents to close at US$5.44 1/4 per bushel. May and July 2007 contracts, the most interesting here because that's when Brazil's soy harvest will be complete, also fell on Tuesday.

 

"Last week we had about 40,000 tonnes of soybeans delivered, but again that's all from the auctions. This week has been quiet with Chicago's declines not helping the matter," said Thiago Simon, a soy buyer at mid-sized crusher Sperafico Agroindustrial.

 

Brazil is the second-largest soy producer behind the US.