December 6, 2006

Brazil's new soy crop sales stall on price declines

Brazil's soy market remains quiet again early this week, continuing from a general decline in business that started late last week as soybean prices began falling off a cliff.

Farmers were happy to see prices near US$7 a bushel for forward-looking contracts in March and May on the Chicago Board of Trade. Brazil starts to harvest the 2006/07 soy crop in March. But over the last few business days, that benchmark figure has been pushed farther out for November and January 2008 CBOT soybean futures.

On Tuesday afternoon, CBOT soybean futures declined to US$6.59 a bushel for January and US$6.75 per bushel for March in relatively quiet trading.

"To make matters worse, the dollar has weakened today (Tuesday) so the run we had in the past has come to a brief end," said a soy buyer at Coimex, a soy exporter.

The dollar declined to 2.152 reals on Tuesday after closing at 2.164 reals on Monday. The weaker the dollar, the less income farmers get from their soybeans.

Perhaps one of the better indicators of slow business here this week is the unmoving soy premiums. Premiums will likely change before the end of business on Tuesday, however, because of price declines. A trader at a US multinational in Sao Paulo said premiums rose to 33 cents over the March CBOT soybean contract, compared with 22 cents for the past three days.

"Premiums are rising to attract buyers, but there's still very little activity for new crop," the trader said.

Soyoil premiums were 100 cents above the January soyoil contract on the CBOT. Premiums for soyoil haven't moved over the last three days. Soymeal premiums were 4 cents below the January soymeal contract on the CBOT.

On Monday, soybeans sold for 34 Brazilian reals (US$15.81) per 60-kilogramme bag at the Paranagua Port in Parana state, according to Alianca Corretora, a commodities brokerage. Port prices will likely accompany the falling price trends on Tuesday.