November 28, 2007

 

Rising dollar helps Brazil soy business this week
 

 

Brazil's soy business is steady this week, helped by a strong dollar and attractive international prices, brokers, analysts and traders said on Tuesday (November 27, 2007).

 

This week, business for the new 2007-08 soy crop has been better than for the same period over the last two years, said David Brew, a broker at Brasoja in Rio Grande do Sul.

 

"A lot (of soy) is being sold, and we see good volumes," Brew said without giving details.

 

The dollar in Brazil has been strengthening over the last several days following expectations of an economic slowdown in the US and is now worth US$0.99, up from seven-year lows at the start of the month, of around US$0.94.

 

However, soy is not really easy to buy, because many farmers are still anxiously waiting to see whether the prices will go up, Brew said.

 

"It also doesn't help that although the dollar is up, CBOT has been lower," he said. Soy futures on the Chicago Board of Trade fell Tuesday to US$11.05 per bushel for the March contract.

 

Leonardo Sologuren, analyst at agribusiness consultancy Celeres, agreed that the market conditions are favorable this week.

 

According to Celeres, 32 percent of the new soy has already been sold by November 23 versus 26 percent the same time a year ago. Sales have risen one percentage point compared with last week.

 

Of the total, sales are most advanced in Mato Grosso, with an estimated 45 percent sold. Parana, the second-largest soy-growing state, has sold 17 percent of the new crop already, and Rio Grande do Sul has sold 15 percent, Celeres said in a report Monday.

 

However, a trader at a US multinational was less positive.

 

"The higher dollar this week has not done much to increase offerings for new business," he said.

 

The trader said farmers have sold a significant portion of their crop, and beyond the general, steady flow of fixing prices with the big soy crushers for 2007-08 soy, there has been no bump up in business this week.

 

"Farmers are bullish and looking for a tight US soy supply to bring Chicago prices up to US$12 a bushel next year," the trader said. "I don't think you'll see any significant uptick in sales now until the harvest. Farmers will play the weather market now in the summer."

 

Paulo Gilioli, a broker at Cerealpar, also said that the market is "very cold," because a substantion portion of the harvest has already sold in Mato Grosso. This causes slower business, despite the higher dollar and better prices in Chicago, he said.

 

Crop Development 
 

In terms of Brazil's 2007-08 soy crop, farmers have already planted 72 percent as of November 23 and plant development is going fine, with no major problems at this time, Celeres said Monday.

 

Mato Grosso has 89 percent of the crop seeded, Parana has 85 percent and Rio Grande do Sul has 50 percent planted as of November 23. Brazilian farming consultancy AgRural said Brazil should harvest 62.4 million  tonnes of soys in 2007-08. AgRural lowered its volume estimate from a previous call of 62.8 million tonnes, due to a late start to the 2007-08 planting season in Mato Grosso because of dry weather in early October. As a result, farmers opted to plant cottonne instead.

 

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