January 18, 2007

Brazil to end soy auction next week

Brazil will offer four million tonnes of soybeans in its last two subsidy auctions of the year, the Agriculture Ministry said in a press statement on Wednesday (Jan 17).

Less than a third of the soybeans offered at auction on Tuesday was sold to buyers.

The auction programme was created in May 2006. Auction participants competed for the right to receive a subsidy over the strike price of soybeans. Strike prices were set around 22.50 Brazilian reals (US$10.51) per 60-kilogramme bag. The subsidy programme was created to help farmers' commercial soybeans last season. Most farmers in the centre-west and northern soy states were selling below the cost of production, threatening to default on loans to government banks and private trading companies.

The Agriculture Ministry auctioned off and provided subsidies to 3.3 million tonnes of soybeans so far in the 2006/07 crop. Some 87 percent of that volume was purchased in Mato Grosso, the no. 1 soy producing state.

The government said earlier this year that it would only continue with the auctions if prices warranted. Soybean prices are trading well over US$7 per bushel on the Chicago Board of Trade compared to around US$5.50 per bushel in the 2005/06 season.

With the last two auctions scheduled for Jan 23 and Jan 30, farmers in the centre-west and north will have to return to fixing prices with local trading companies rather than waiting to do business in the auction system.

Brazil should harvest around 55 million bags of soybeans from the 2006/07 crop. Brazil is the no. 2 soy producer behind the US.