November 15, 2005

 

Brazil soy sales slowing despite rising international prices

 

 

Rising international prices for soybeans and soymeal on Friday had no effect on Brazilian soy sales as the US dollar continues its slide against the Brazilian real.

 

November soybean contracts at the CBOT were up 2.77 percent to US$5.93 a bushel Friday. March, May and July 2006 soybean futures contracts also rose more than 2 percent.

 

Soymeal futures were up 3.5 percent to US$181.70 per short tonne for December contracts and up 3.2 percent to US$182.40 for January 2006 contracts. March, May and July soymeal contracts also rose at least 3.23 percent.

 

But a weak dollar, which fell to its lowest since April 2001 on Friday, to BRL2.16, is "unsustainable," said Fernando Muraro, a market analyst at AgRural. The dollar hit 2.21 real to the dollar on Monday.

 

"Anything lower than 2.2 real is unsustainable," he said. "Early in the year everyone thought that the dollar would strengthen by now, but we are seeing the opposite happening."

 

A political crisis in the Brazilian government led many business leaders and market analysts to assume the dollar would rise against the local currency.

 

"With this scenario, the soy producer will only sell if they need money to pay for next year's harvest," Muraro said of Brazil's 2005-06 crop.

 

Premiums of 54 cents over the CBOT at Paranagua port moved some soy to market on Friday, with roughly 6,300 tonnes shipped.

 

The weak dollar has caused Brazilian farmers to hold on to an estimated 6.7 million tonnes of soy from the 2004-05 crop, compared with 4.8 million tonnes in 2003-04, AgRural estimated in a report released Monday.

 

"Even when you consider that last year was a smaller crop, the stock numbers are still higher than usual," Muraro said.

 

Brazil sold 87 percent of the 2004-05 crop as of Friday, compared with 92 percent of the 2003-04 crop in the same period last year. Future contracts from the large producing states in the central-west have increased national future sales numbers to 7 percent of the 2005-06 crop as of Friday, compared with just 5 percent over the same period last year.