November 24, 2005

 

Stronger US dollar fails to motivate Brazilian soy traders

 

 

The US dollar rose 1.9 percent against the Brazilian real on Tuesday, but that has not resulted in higher soy transactions in Brazil.

 

International soybean prices, closing at the CBOT Tuesday at US$5.72 1/4 per bushel for January deliveries, is below the 2005 average price of US$6.09.

 

Lower international prices reduced soybean export value by roughly US$400 million, dropping to US$4.8 billion in soybean exports between January and October, compared with US$5.2 billion over the same period last year. Volume, however, is up 9.2 percent over the same 10-month period to 20.2 million tonnes, compared with 18.5 million tonnes in the January to October 2004 period, according to numbers by market research firm AgroConsult.

 

"Add to that the fact that farmers are more worried about planting right now than selling on the futures market and you have a situation a bit worse than it was last year for sales," said analyst at AgroConsult Fabio Meneghin. 2004 Q1 saw soybean prices quoted as high as US$10/bushel, which facilitated future sales between producers and trading companies like Cargill.

 

Two traders at two different US multinational soy exporters said Tuesday that they expected the Brazilian soy market to be slow for the next 12 months. Meneghin thinks the end of December could see a return to business for the 2005-06 harvest.

 

Bird flu in Asia and an increase in rapeseed crushing in Europe for oil used to produce bio-diesel, has led to more competition for soymeal exports on the world markets, said one trader.

 

"We don't have any new contracts here. The rising dollar today (Tuesday) didn't budge our volume," the trader said.

 

"This market is still going absolutely nowhere for new sales," said a trader for a US firm in Brazil's northeast.

 

Planting has gained pace as expected across the entire country. Soy market research firm Celeres said Tuesday that 64 percent of the 2005-06 soy crop has been planted as of Nov 18, equal to the same period last year. Sixty-two percent of southern crops have been planted, with 75 percent planted in the centre-west soy belt.

 

Celeres estimates soy production from the 2005-06 soy crop to be around 58.9 million tonnes, one of the most optimistic of the private research firms'estimates thus far.

 

Normal rainfall is expected throughout most of the country within the next five days, according to the local ClimaTempo weather service.

 

Paranagua port prices for a 60-kilogramme bag of soybeans were quoted Monday at 30.50 real (US$13.86), up from the 29.50 real registered last week.

 

Other major soy shipping ports were also up by 1 real, with Santos prices quoted Monday at 30 real and Rio Grande do Sul ports quoted at 29 real.

 

Brazil soy premiums at Paranagua, the reference port for premium prices, are hovering at 55 cents a bushel over the CBOT January futures.

 

"This time of year isn't a big buying time for exports," said Seneri Paludo, a soy analyst at AgRural, an agriculture market consulting group. "But compared to other years we are doing okay, though it's not expressive. As far as the crop goes, things are going well with what we are seeing here."

Ag Rural will release updated soy estimates the week of Dec 15. Previous estimates saw a reduction in planting area by 21.8 million hectares, compared to 23.3 million hectares planted last year, and production at roughly 57.5 million tonnes for the 2005-06 crop.

 

The 2004-05 harvest brought in roughly 51.1 million tonnes of soybeans.