July 16, 2008

    

Brazil soy sales continue to slump due to failure to reach agreement on prices 

   
  

Brazilian soy buyers and sellers can't seem to agree on a price this week, and with futures falling on the CBOT on Tuesday (July 15, 2008), the physical soy market here has slowed substantially, brokers and traders said.

 

First, there is very little soy left in the interior of Brazil. Second, farmers in the southern states who are accustomed to selling to exporters remember when per-bag prices were around 58.00 Brazilian reals (US$36.47 per 60-kilograms) at the Paranagua Port in Parana state just last week.

 

This was compared to free-on-board soy prices of BRL55.50 this week, according to Soma Corretora, a soy exporter brokerage firm.

 

In Mato Grosso, the leading soy state, physical trade has been slow this week with large differences on price between both sides.

 

Farmers are asking for more money than the big three crushers are willing to spend, said Paulo Gilioli, a broker at Cerealpar in Mato Grosso. The big three include Archer Daniels Midland (ADM), Bunge (BG) and Cargill.

 

With CBOT soy futures falling on Tuesday to one-week lows at US$15.50 per bushel for August, premiums became all the more difficult to immediately negotiate for exported soy.

 

Brazilian soy trades at either premiums or discounts to CBOT soy futures, depending on the shipping month. Those price differences tend to change daily, and with CBOT soy prices falling, the market is still looking for what it can agree upon with regards to discounts or premiums for nearby, and future, Brazilian soy shipments.

 

Part of the slide in Brazil soy prices were due to speculation.

 

In the futures market, Brazilian traders participated in the sell-off on Tuesday following news about the dollar and declining oil prices, which pushed the Dow Jones-AIG Commodity Index down 2.86 percent.

 

"The engine for high commodities has been oil prices and once those fell, spec buyers started selling soy along with other commodities. Brazil followed suit and producers took part in the second wave of selling down here," said a broker at Link Corretora in Sao Paulo.

 

Most of Brazil's soy has been sold at this time. If strikes in Argentina were to end, Brazil's hopes for a soy premium would be substantially reduced.
   

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