March 23, 2007

 

Brazil to start soy auctions as US dollar falls against local currency

 

 

Brazil will start its soy subsidy auction programme on March 28 in response to a collapsing US dollar against the local currency, the National Commodity Supply Corp (Conab) said Thursday (Mar 22).

 

"There will be interest for sure on part of farmers in the north of Mato Grosso as this dollar gets worse," said Joao Paulo Moraes Filho, director of the oilseeds department at Conab.

 

Prices in the north of Mato Grosso are near or below the government price minimum of 22.50 Brazilian reals (US$10.97) per 60-kilogramme bag, Filho said.

 

Mato Grosso is Brazil's top soy producer, responsible for roughly 15 million tonnes out of Brazil's total 2006/07 crop estimate of 57 million tonnes. Northern Mato Grosso accounts for roughly 45 percent of the state's crop.

 

Roughly 62 percent of the state's crop has been sold already, according to Maria Amelia Tielone, a soy market analyst at agribusiness consulting firm, AgRural, in Mato Grosso.

 

"A week dollar and declining premiums are pulling good soy prices from many producers in the north. That's where the interest will be," she said.

 

The auctions will run the same way they have in the past, including the same centre-west and northern soy states, with the bulk of the offerings being in Mato Grosso.

 

Trade tends to slow in regions were auctions are held because farmers prefer to try winning a premium over the price minimum at auction rather than fix prices with soy crushers.

 

On Thursday, the dollar was trading at BRL2.055 after closing Wednesday at BRL2.059. The dollar hit similar levels in May 2006. Farmers throughout Mato Grosso and elsewhere quickly protested and refused to sell soybeans into the market. The government then promised to extend public farm debt payments out to four years from the traditional 12 months, and created its first ever soy subsidy programme worth some BRL1 billion.

 

In other parts of the country, soy prices are over or near BRL30.00 per bag. Prices will continue falling as Brazil's harvest gets underway. Soybean premiums are also declining, taking further reductions from the international soybean prices as quoted on the Chicago Board of Trade.

 

Brazil is the world's no. 2 soy producer and exporter behind the US.