November 30, 2005

 

Brazil's domestic soybean prices fall on increased supply

 

 

Domestic quotes for soybeans fell Tuesday to 28.75 real (US$13.06) for each 60-kilogramme bag at the Paranagua port in Parana, compared to 30.50 real/bag last week as supply continues outstripping demand.

 

A record US harvest of 82.8 million tonnes of soybeans, 46 million tonnes of soy in world stocks and a large 2006-07 Brazilian crop--projected to be around 53 million tonnes--have traders and cooperatives expecting tight margins for months to come.

 

Farm cooperative Coopatrigo, in Rio Grande do Sul state, for example, bought 60-kg bags of soy Tuesday from farmers for 23.50 real. The soy was from the 2004-05 crop now being commercialised. The price of 2004-05 soy last year was between 30 and 31 real/bag.

 

Prices per bag have dropped since May 2004, when they were at a high of 50 real.

 

"The trend is for prices to drop further," said Adriano Carloto, a salesman at Coopatrigo. He expects a large harvest and a drop in soymeal demand on account of bird flu in Europe and Asia to continue affecting demand in the short term.

 

"Bunge called me today to buy soybeans at 25.50 real/bag. Those are not favourable margins for us, and luckily our farmers have good cash flow. They didn't have to sell at these prices this week," Carloto said.

 

Producers are unlikely to sell on the future markets if prices keep dropping, said AgroConsult analyst Andre de Bastiani. In Mato Grosso, one of Brazil's top soy-producing states, soy closed Tuesday at 21.50 real compared with 26.50 real over the same period last year, and stable from last week's price quote.

 

Premiums for December delivery were 70 cents over at the CBOT, compared with 60 cents over last week, but the increase in price is an attempt to get producers to sell, de Bastiani said, and a recognition of low domestic prices.

 

"These premiums aren't as significant. Look at April and May premiums, when Brazilian soy from the new harvest will be leaving the ports," said de Bastiani. "There you're looking at 15 cents over Chicago."

 

Nevertheless, Brazilian soy is leaving portside. Some 5,000 tonnes, or roughly 83,000 bags, left Sao Francisco do Sul port Tuesday, said Seneri Paludo of AgRural, a soy market research firm.

 

"We sold about 3,000 tonnes today," said a trader in Sao Paulo. "That's ridiculously low and is worse than what we got rid of last year at this time," he said, without revealing numbers.

 

Producers and traders said the Brazil soy market will heat up with international prices between US$6.20 and US$6.50/bushel. January contracts on the Chicago Board of Trade fell to US$5.52/bushel, compared with US$5.58/bushel on Monday.

 

Normal rainfall is expected throughout most of Brazil's main soy-producing states for the next two weeks, according to ClimaTempo weather service on Tuesday. Rio Grande do Sul will have less rainfall than normal within the next two weeks.