February 16, 2010

Brazil's dipping soy prices enhance exports

The falling price of Brazilian soy is increasingly enhancing its competitiveness on export markets, as shippers forecast a record month and neighbouring Paraguay starts a bumper harvest.

While soy prices in CBOT have tumbled by about 10% this year, those in Brazil have in many cases fallen more, with values in Rondonopolis in Mato Grosso state falling by nearly one-quarter last month.

The Brazilian declines, under the pressure of the start of what is expected to be a record harvest, has left prices at the port of Paranagua only "a few cents per bushel" above those in Chicago for May delivery and "considerably more competitive" at a basis level compared with US gulf ports.

US cash prices have been boosted by a squeeze on short-term supplies attributed to a dearth of farmer selling and logistical problems caused by winter storms. 

"As harvesting of the record crop accelerates, weakening soy prices at both interior and export locations increasingly turn the cost advantage toward Brazil," the USDA said, in a follow-up report to last week's global crop supply and demand estimates.

The report comes in the middle for what shippers believe will be, despite carnival celebrations a record month for Brazilian soy exports, with shipments hitting 3 million tonnes compared with 690,000 tonnes in February last year.

"The port will not stop, it will keep rolling right through [Carnival], and from the second half of February the insanity will begin," a Paranagua shipping agent told Reuters.

Kory Melby, the Brazilian crop consultant, said he expected soy volumes at ports to "increase exponentially" over the next two weeks, after earlier deliveries were held up by logistical problems such as rail system bottlenecks.

A lack of silo capacity was increasing pressure on merchants to get soy to ports and on to ships, he added. The queue of lorries waiting to deliver to the railhead at Alta Araguaia in Mato Grosso reached 25 miles long, he reported last week.

Meanwhile, in neighbouring Paraguay, where farmers also started harvesting this month, the crop is on course to hit 7.1 million tonnes, production which, like that forecast for Argentina and Brazil, would set a record.