November 29, 2006

 

Brazil's soy farmers patiently awaiting higher prices

 

 

Brazil's soy farmers sat on the sidelines so far this week, especially in the centre-west, even as soybeans maintain levels over US$7 per bushel on the Chicago Board of Trade.

 

"Everyone here is thinking what I'm thinking. We are optimistic, waiting for higher prices, and for the time being no one is selling," said Celso Saltarelli, president of a farmers association in Mato Grosso do Sul state. Saltarelli cut 20 percent out of his soy fields this year to plant just 100 hectares of soybeans.

 

As further signs of slow business Tuesday (Nov 28), the government soybean auctions sold just 35 percent of the 1 million tonnes offered in nine states. In a second auction, offered to soy crushers, just 21 percent of the 1 million tonnes offered were sold. Most of the business occurred in northern Mato Grosso, where some 67 percent of the 9,260 tonnes offered were sold.

 

The auctions were created in May to facilitate soy sales at a time when prices in the centre-west were well below the cost of production. Soy farmers and traders bid for the right to receive a government subsidy over the strike price the government has set at 22.50 Brazilian reals (US$10.32) per 60-kilogramme bag. The highest premium is roughly 5.00 reals per bag.

 

There were hints Tuesday that the government will slow the number of auctions it holds in 2007 because prices have become so favourable.

 

Not all farmers agree that prices are so favourable, however, mainly in the centre west, said Steve Cachia.

 

"The auction volume is within expectations. Right now the market has stagnated because prices dipped a bit in Chicago and farmers are waiting to see what is going to happen with the auctions," Cachia said.

 

Soybean prices closed down at US$6.99 per bushel for the March CBOT soybean contract.

 

Many farmers have taken advantage of the price rises in recent weeks. Cachia said some 25 percent of the new 2006/07 crop has been sold at this time. Brazil should harvest around 55 million tonnes, according to private estimates.

 

Soybean premiums didn't budge from the seller's side on Tuesday in comparison to Monday's premiums of 26 cents over the March CBOT soybean contract. Buyers were willing to increase premiums to 22 cents over the March CBOT, however, edging closer to farmers' price ideals.

 

Soymeal and soyoil premiums both remained unchanged on Tuesday. Soymeal was 3 cents under the December CBOT soymeal contract and soyoil is still 100 cents over the December CBOT soyoil contract, according to brokerage firm Alianca Corretora.

 

"Farmers want US$12.50 a bag and not the US$12 we are willing to offer them so we are not at an impasse," said a trader at one of Cargill's soy crushing units.

 

Prices remain favourable in the southern soy powerhouse states of Parana and Rio Grande do Sul, close to 30 Brazilian reals (US$13.76) per 60-kg bag. Prices at the Paranagua Port in Parana state were 34.00 reals on Tuesday, the same as Monday's closing price, Alianca said.