December 20, 2006
Brazil's soy market enters holiday mode; trade slows
Brazil's soy market is on holiday and trade is unlikely to return to a normal pace until the second week of January, traders said Tuesday (Dec 19).
Most of the local soy crushers have already started collective holidays, with only few buyers in the local market Tuesday.
"The physical soy market is nonexistent. We're waiting for the new crop and that's still a couple months a way," said a trader at Coimex, a soy exporter.
Moreover, falling soybean prices on the CBOT this week gave farmers another reason to call it quits for the year. Soybean prices are below US$7 per bushel for March through August contracts of the CBOT, after being over US$7 per bushel for many of those contracts the past several weeks.
Traders were not surprised by the falling prices, however, assuming commodities funds would start to sell for traditional year-end profit taking.
"The market has stopped. If we still had soy over US$7 per bushel then maybe you'd see some business," said Steve Cachia, a soy market analyst for Cerealpar, a brokerage firm.
No soy premium and discount figures were available this week as companies enter the holiday period.
Traders at Coimex and some US multinationals said that they were "optimistic" about soybean futures going forward.
"We're counting on a range between US$6.50 and US$8.00 a bushel next year," said one trader at a US firm in Sao Paulo.
Soy traders owe their bullish sentiment to the US corn market, with less soy likely to be planted in the US in the years ahead to make way for corn to feed ethanol demand.
"I have my own target price," Cachia said about January soybean prices, but didn't want to reveal it. "I think we are in good hands right now. The fundamentals have not changed much. The Brazilian soy crop is doing fine. Price swings now will be purely technical in nature," he said.
Brazil is expected to harvest around 56.1 million tonnes of soybeans in the 2006/07 crop.
Brazil is the no. 2 soy producer behind the US.
