October 3, 2007

 

Brazil soy market stalls; Mato Grosso farmers wary of weather

 

 

Brazil's soy market is dragging its feet this week, with roughly 26 percent of the 2007-08 crop sold as of September 28, against 25 percent by September 21, two agribusiness consultancy firms said this week.

 

Meanwhile, farmers in Mato Grosso, Brazil's No. 1 soy state, are concerned about continuous dry weather and their inability to plant soy due to lack of rain.

 

Mato Grosso begins planting before other Brazilian soy states and their crops should have already been underway.

 

But late rains have stalled planting, and that has a direct impact on farmers who plant other crops, mainly cotton and corn. The longer it takes for them to plant soy, the harder it is for them to get cotton and corn in the ground, both highly traded commodities.

 

"Farmers who have cotton contracts may end up not planting soy at all if it doesn't rain soon," said Daniel Sebben, an agronomist at agribusiness consultancy, AgRural, in Mato Grosso.  

Mato Grosso cotton must ideally be planted by January 15, while farmers who plant corn as their winter crop have until February 20.

 

Rain is not expected in Mato Grosso until after October 10.

 

"We won't plant here 'til it rains," said Antonio Galvan, president of the Farmers Union of Sinop in northern Mato Grosso. Galvan plants around 2,000 hectares of soy.

 

"There's no definitive time to plant. The problem is deciding what to do about other crops if we are forced to plant late. We can't plant corn if soy is still in the ground," said Ricardo Visioli, a soy grower in Parana state, the No. 2 soy producer.

 

Moreover, a dry winter has groundwater level low, making precipitation all the more important this month.

 

Local consultancy Celeres said on Monday that weather will play an important factor in soy prices both here and in Chicago this season considering a much smaller crop in the US, the world's No. 1 soy producer.

 

Trading this week has stalled following a weaker dollar, currently trading at seven-year lows of 1.82 Brazilian reals, and slightly lower Chicago Board of Trade soy futures.

 

Consulting firm Celeres said 26 percent of the 2007-08 crop is already spoken for as of September 28, up slightly from last week's 25 percent. The 2006-07 soy is 92 percent sold, against 91 percent in last week's report. Competing consulting group Safras & Mercado put the old-crop sales closer to 90 percent.

 

Traders at a US multinational in Sao Paulo said business has ground to a halt so far this week.

 

Bunge has roughly 70,000 tonnes of soymeal waiting to be loaded at the Paranagua Port in Parana state, destined for Iran and France. Another 119,000 tonnes of soy are waiting to be loaded to Portugal.

 

Cargill is waiting to load about 23,000 tonnes of soymeal at the export corridor in Paranagua. The destination was not listed, according to the Transcar Shipping Agency. Cargill is also waiting to load about 118,000 tonnes of soy from the Paranagua export corridor this week.

 

Archer Daniels Midland comes in last this week, with about 116,000 tonnes of soy waiting to load in the export corridor of Paranagua, Transcar Shipping Agency reported.

 

There are currently two-day delays at the Bunge terminal in Paranagua and 10-day delays in the export corridor.

 

In Santos, the largest soy export terminal, ADM has 20,000 tonnes of soy waiting to load this week bound for Rotterdam. ADM also has 37,500 tonnes waiting to load for Europe on around Oct. 19, according to Transcar.

 

Cargill is expected to load around 16,000 tonnes of soymeal bound for France later this week out of Santos, but no soy. Corn has become a more popular item, according to the shipping report.

 

"The market is dead," said Steve Cachia, a senior commodities analyst at grain brokerage firm Cerealpar.

 

"Then again, if you look at places like Mato Grosso, about half of their new crop is already sold because of favorable prices. They're in no hurry to sell," he said.

 

Celeres said that 39 percent of the Mato Grosso crop was sold as of September 28, compared to 38 percent the week ending September 21. At this time last year, just 25 percent of the crop was sold in advance in Mato Grosso.

 

The No. 2 producer, Parana, has sold 12 percent of its new crop as of September 28, compared to 11 percent as of September 21. Last year at this time, Parana soy growers sold 7 percent of their soy crop.

 

On Friday, prices on the physical market in Paranagua stood at 42.00 Brazilian reals (US$23) per 60-kilogram bag, but dipped to around BRL41.00 by Monday.

 

Soy prices on the Chicago Board of Trade fell Tuesday to US$9.437 for the November contract and to US$9.73 for the March contract.

 

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