May 31, 2006

 

Brazil's soy market seen to benefit from dollar, CBOT rise

 

 

Some Brazilian soy exporters are expecting decent volume Tuesday (May 30) on stronger US dollar and higher soybean futures on the Chicago Board of Trade.

 

On Tuesday, the dollar rose 4 percent against the Brazilian real in afternoon trading, and the Chicago Board of Trade July soybean contract held around US$5.83 per bushel at mid-day.

 

"The currency exchange is going to bring good volume today," said a trader at a Brazilian soy exporter in Sao Paulo.

 

"I think you're likely to see farmers take advantage of the dollar strength (Tuesday). You'll probably see a day similar to last Friday," said Helio Sirimarco, a consultant for brokerage firm Ativa Corretora in Rio de Janeiro.

 

Last week's rising dollar compensated for falling soy prices on the CBOT, bringing soy farmers to market in the southern states.

 

On Friday, producers sold roughly 2,000 tonnes of soy to traders at the Paranagua port in Parana, the second busiest shipping port in Brazil, at prices between 29.10 Brazilian reals (US$12.38) per 60-kilogramme bag to 29.50 reals, Sirimarco said.

 

Mato Grosso do Sul sold the same volume with most action coming out of the third largest soy producer, Rio Grande do Sul, where 10,000 tonnes of soy were sold to trading companies, Sirimarco said.

 

Soy prices were quoted at 30.00 reals per bag in early afternoon trading in Paranagua on Tuesday. Soy premiums remain high, around 22 cents over the CBOT July soybean contract, according to brokerage firm Alianca Corretora.

 

Soy volume remains nonexistent in Mato Grosso, the leading soy-producing state, because of protests by local soy growers. Protests have lightened up over the last week on the heels of a government-announced emergency farm-aid package, but farmers are threatening to return to their previous measures, which included shutting grain silos.

 

The local Estado newswire reported Tuesday that farmers are road-blocking with tractors routes BR 163 and BR 364 from all soy shipments. Protesting farmers are asking for reductions in diesel-fuel taxes. Diesel fuel is one of rural Brazil's top overhead expenses.

 

Steve Cachia, a market analyst for grain and soy trading firm Cerealpar said the south is dominating the soy market right now and he expects producers to take advantage of the dollar and CBOT rise again Tuesday while the centre-west remains on the sidelines.

 

"I doubt (southern farmers) are going to wait for volatility to knock out the prices in Chicago. Chicago will be bad for Brazil on all news that the US soy crop is going well," Cachia said.

 

Positive news in the US soy belt tends to lower soybean futures in Chicago because of supply factors.

 

Brazil is the second largest soy producer behind the US and is expected to have harvested roughly 55.2 million tonnes of soybeans in 2005/06, according to official estimates.