July 2, 2008

    

Brazil's farmers continue to wait for higher soy prices even as it hits new highs

   
   

Brazil's soy market continued to see small volumes of business this week as local soy producers held out for higher prices, brokers and analysts said Tuesday (July 1, 2008).

 

Despite soy futures hitting a record US$16 a bushel at the CBOT, soy farmers are still waiting out for higher prices, said brokers.

 

"We're only seeing small volumes of soy business," said Steve Cachia, a soy market analyst at brokerage firm Cerealpar.

 

Soy were selling between 52 Brazilian reals (US$32.4) and BRL53 per 60-kilogramme bag last week, while they hovered around BRL54-BRL55 a bag this week, Cachia said, citing prices at the port of Paranagua.

 

With low soy stocks in the US and a feeling that more bad weather might be on the way, the international markets do not need much more encouragement to drive prices up.

 

"Brazilian soy farmers tend to look at round numbers and now possibly BRL60 is the next stage," Cachia said.

 

Soy premiums at the Paranagua port saw little agreement between buyers and sellers.

 

According to local brokers and traders, buyers were offering 10 cents under the July CBOT soy contract, while sellers asked for 5 cents above.

 

Buyers offered an even price against the August CBOT soy contract, with sellers asking between 5 and 10 cents over.

 

"Brazil's soy trade is unlikely to change much during the rest of this week, although some profit taking may occur before the July 4 national (holiday) in the US," Cachia said of futures trading.

 

David Brew, a broker at Brasoja in Rio Grande do Sul, said besides bad weather, soy producers are also looking at the weak dollar against the Brazilian real, higher crude oil prices and strong fundamentals this week, which further add to their willingness to wait for even better soy prices.

 

Nonetheless, a trade director at a leading US multinational soy exporter was more positive. "Business is better today, due to CBOT moving up...and sellers coming to the market," the trader said.

 

The trader was unconcerned about the US weather, though demand amid already tight supply concerns is expected to keep an edge in the market, and Argentina continues to be "a mess," he added. Argentina's problems have been good for Brazil. More merchant ships meant lower freight costs. Moreover, the less Argentina exports, the more international soy buyers turn to Brazil for supply.

 

Whatever is left in Brazil at this point will have to last until the next harvest, which is in March.

 

Brazil's 2007-08 soy crop is 80 percent sold as of June 27, agribusiness consultancy Celeres said Tuesday.

 

Celeres estimates Brazil harvested 59.7 million tonnes of soy this season. The harvest is over, and planting of the new crop begins in October.
   

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