July 12, 2004

 

 

Brazil Soy Market Quiet On Discounts, Stock

 

Brazil's soybean market remained slow over the past week as export discounts remain sky high and farmers held tight for second-half price spikes, traders said.

 

"Business is much slower than it should be at the moment. But unless there is a significant change in price levels the situation will remain the same," said David Brew of the Porto Alegre-based Brasoja brokerage.

 

Discounts for August soybean shipments from Paranagua against Sep soybean futures on the Chicago Board of Trade widened 30 cents to $1.10 to $1.20 per bushel over the past week as exporters still wait for payment on shipments sent to China. Up until two weeks ago, China was banning Brazilian soybean imports from 23 companies after finding traces of fungicide in a number of shipments.

 

"The risk of shipping from Brazil is still great," said one Sao Paulo-based trader.

 

Concerns about exporting to China were heightened by reports that Chinese quarantine officers had seized and destroyed a shipment of U.S. soybeans after discovering it to be infested with phytophthora sojae, an organism responsible for soy rot. U.S. officials said they were yet to be informed of the intervention.

 

"At least this shows China doesn't have a specific problem with Brazil," said Cesar Borges de Souza, acting president of the Brazilian Vegetable Oil Industries Association, or Abiove.

 

A lack of international demand has also been a key factor in rising discounts, traders said.

 

Meanwhile, farmers in the south of the country continue to hold back stocks in the belief that local prices will rise at the end of the year as they have done in many of the last 10 years.

 

They do this despite the fact international futures indicate prices will drop sharply after September, when the U.S. crop arrives on the market.

 

Local prices dropped compared with the week before, offering well-sold farmers little incentive to make stocks available.

 

At the principal export port of Paranagua, soybeans were trading at around 44.00 to 46.00 Brazilian reals per 60-kilogram bag ($1=BRL3.04) on Friday from BRL45.00 and BRL47.00 last week, while in Ponta Grossa, northern Parana, soybeans stood at BRL41.00 and BRL44.00 or down one real from one week before.

 

Brazil's soybean exports have been sluggish in the first half of the year, totaling 11.2 million metric tons. Shipments will have to pick up pace in the next three months before the U.S. crop comes on line if shipments are going to reach the 20 million tons forecast for this year.

 

"But the line ups really don't indicate any increase in pace," said one Sao Paulo-based trader.

 

As reported, local analytical firm Agroconsult forecast Brazilian soybean output will reach 65.7 million tons in 2004-05 season, some 33% higher than the 49.3 million tons produced in the weather- and disease-affected last crop.

 

However, the growth of soybean area planting will be clipped this year by sliding international prices and increased costs of production, especially for fertilizers, it said.

 

"Farmers in the center-west are seeing their profit margins will be eaten away by rising labor costs and input and machinery prices," said Steve Cachia, analyst at the Curitiba-based Cerealpar brokerage.