November 9, 2006

 

Brazil sets soy price minimums; details premiums

 

 

Brazil's Agriculture Ministry published late Tuesday (Nov 7) its soy price minimums and soy premiums in nine states during auctions in the 2006/07 soy season.

 

The first auction takes place on Friday and is part of a 1 billion Brazilian real (US$465 million) subsidy programme for soy growers in the centre-west and northern soy states. The government created the auctions to facilitate the soy trade in that part of the country. Farmers in that region sold soybeans below the cost of production in the 2005/06 season.

 

In northern Mato Grosso, 250,000 tonnes of soybeans will be offered with a maximum subsidy price of 5.51 reals per 60-kilogramme bag in the extreme north and 4.01 reals closer to the centre of the state. In the southern part of the state, 85,000 tonnes will be offered with a maximum subsidy price of 2.57 reals per bag.

 

Mato Grosso do Sul will have 63,000 tonnes offered with a maximum subsidised price of 2.57 reals.

 

Bidders are in the auction for the right to receive the subsidy. During bidding, the winner is the one willing to accept a lower subsidy.

 

The minimum price farmers will receive in the participating states is 22.50 reals per bag.

 

The remaining participating states, volume, and the subsidy in which bidders will be disputing includes:

 

State       Volume Offered   Premium (In reals)

Bahia            30,000            2.57

Goias            20,000            1.03

Maranhao      15,000            2.57

Minas Gerais  10,000           1.03

Tocantins      10,000            2.57

Piaui              8,000             2.57

Para              3,000             4.01

 

There will also be a smaller auction offering 2,000 tonnes in the capital district in Brasilia with a maximum premium of 1.03 reals to be disputed between participating bidders.

 

"These are complicated auctions and every week there are new questions being asked by the major traders," said Marcos Ricardo Marino, a broker at Cerealpar that buys soy at auction.

 

"It's bureaucratic, but it brings volume to the market, especially in the centre west, and that makes them interesting," Marino said.

 

This is the first time the government has run a soybean auction before the crop was harvested. The subsidy programme for soy began in May and will continue in the 2006/07 season in an attempt to lessen the impact of one of rural Brazil's worst financial crises in decades.

 

Industry pays the spot price of soybeans during the transactions, but the government guarantees the winning bidders the extra money they won at auction and pays farmers.

 

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