October 10, 2007

 

Brazil soy market slows, awaits USDA report for price directions

 

 

This week was once again decidedly slow for Brazil's soy market.

 

Sporadic purchases were made by local crushers catering to the domestic market, and the usual international buyers bought just enough to cover their needs, but otherwise players were notably absent, said market participants.

 

Soy quotes were practically nominal this week, with little or no business done due to sliding Chicago prices and a weakening dollar.

 

Soy prices on the Chicago Board of Trade rose Tuesday to US$ 9.502 for the November contract and to US$ 9.804 for the March contract.

 

"Up until last week, Chicago's gains were covering any problems caused by the weakened dollar," said one trader at a US multinational in Sao Paulo.

 

Now, however, a combination of low Chicago quotes and an exchange rate hovering around the BRL1.80-per-dollar level, at seven-year intraday lows, has brought the market into a stagnant period.

 

"This between-harvests period is generally stagnant anyway," said Steve Cacchia, a trader at local grain brokerage Cerealpar. According to Cacchia, producers who need to are selling just enough to pay their bills, with sales of both old and new crops practically grinding to a halt.

 

About 8 percent of Brazil's 2006-07 soy crop is left, while more than a quarter of the national 2007-08 crop is already sold, according to Celeres, a local agribusiness consultancy.

 

In Brazil's No. 1 soy growing state of Mato Grosso, nearly half the new crop is already spoken for.

 

Producers are waiting for new soy market news from the USDA to resume selling of their new crop. Farmers here are holding on to their remaining soy in hopes of better prices, which may just be on the horizon for next week, according to Cacchia.

 

Players will be tuned into the USDA report, to be released this Friday.

 

If numbers are positive, they could bolster CBOT prices and make selling more attractive to Brazilian soy farmers.

 

Besides this week's USDA figures, the weather has been a main factor in soy trading. Significant planting is not yet underway, which analysts believe could lead to a shortage of soy in January due to later harvesting, and an increase in prices.

 

According to analysts, the dry weather has also contributed to a further forecast growth in the planted area of soy in No. 2 soy state Parana, and Brazil's southernmost state of Rio Grande do Sul.

 

Some producers, unable to plant their summer corn crops due to lack of rain, have traded in their corn seeds for soy this week. Celeres expects Parana to have an extra 60,000 hectares of soy fields this crop.

 

Soy exports so far this year total just under 21 million tonnes, down from the 21.8 million in the same period last year. More soy is destined for the domestic market these days, said the trader from the US company.

 

"Brazilian soy has become more expensive and some of our demand has shifted to the US and Argentina this week," the trader said. Expectations are that soy exports will fall short of previous forecasts of 25 million tonnes for this year.

 

"On the other hand, we are exporting more soymeal and oil," said Cacchia.

 

On Tuesday, prices at the port of Paranagua varied between BRL43.00 and BRL43.50 per 60-kilogram bag, up from last week' BRL42.00.

 

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