March 28, 2007

 

Brazil's soy farmers holding out for USDA report

 

 

Brazil's soy farmers are focused on the ongoing 2006/07 harvest and on the possibility of higher soybean prices following the release of a US Department of Agriculture report this Friday (Mar 30), analysts said.

 

The USDA will release its planting intentions report this week. Brokers from Sao Paulo to Chicago are all betting for a significant reduction in US soy fields planted.

 

If the reductions are greater than expected, soy prices will rise. Brazilian farmers are holding out for that possibility this week, said Flavio Franca, a soy market analyst for consulting group Safras & Mercado.

 

"With prices, premiums and the dollar all in decline, only farmers who really need cash are selling into the market this week," Franca said. "The scenario remains unchanged from last week."

 

Brazil's 2006/07harvest is underway and so far has not had any major glitches in deliveries, said Tiago Simon, a soy trader at Sperafico Agroindustrial, a soy crusher in Mato Grosso.

 

Some 51 percent of the crop has been harvested, according to a Monday report by consulting firm Celeres.

 

Official estimates put the crop at 56.7 million tonnes.

 

"Farmers fixed prices already for a good bulk of their crop and now are sitting back. It's a seasonal thing at this point," said Anderson Galvao Gomes, a senior soy analyst at Celeres.

 

"To get farmers excited about this market again in the near term will all depend on US corn farmers," said Helio Sirimarco, a broker at Fator Corretora in Rio de Janeiro. "If they plant a lot of corn over those soy fields, you could see prices close to US$8 a bushel (for soy) again. The market here is waiting."

 

US corn acreage is expected to expand this season because of a high demand for ethanol, which the US produces from corn.

 

Soybean prices at the Chicago Board of Trade were lower again Tuesday at US$7.56 per bushel for May and US$7.99 for November soybeans.

 

 

Local Prices & Premiums

 

Local prices at the Paranagua Port in Parana state were 32.50 Brazilian reals (US$15.77) per 60-kilogramme bag, down from BRL33.50 on Friday, according to brokerage firm Alianca Corretora.

 

Soybean premiums were 25 cents below the May CBOT for April deliveries and 23 cents below the May CBOT for May deliveries on Monday. Premiums held steady over the last two business days for soybeans.

 

Soymeal and soyoil are also steady. Soymeal premiums remained unchanged at 26 cents below the May CBOT soymeal contract for both April and May deliveries. Soyoil premiums were 430 cents below the May CBOT soyoil contract for April and May deliveries, the same as Friday, Alianca said.

 

Soy prices are expected to continue to decline by around 5 percent in the weeks ahead as Brazil comes to the final laps of its record soy harvest, local consultancies said.

 

They all recommend that farmers fix prices or outright sell in the spot market. The other strategy would be to hold out longer, towards the start of the inter-harvest period in August.

 

A little over half of the crop has been sold, according to consulting group AgRural.