August 28, 2006

Little buying interest in Brazil's soy auctions

Brazil's two government soy auctions on Friday (Aug 25) attracted little interest again this week from both soy crushers and farmers, with just about 23.9 percent of the 3 million tonnes of soy offered sold, said the country's National Commodities Supply Corp (Conab).

In the first auction for soy industries and exporters, or Pesoja, a total of 35.6 percent of the total 1.5 million tonnes auctioned off were bought, or roughly 10 percent more than the amount bought last week by the soy sector. Soy offerings from Bahia, Mato Grosso do Sul, and Tocantins were completely sold, however, while 28.8 percent of the volume offered for the north region of Mato Grosso do Sul state was also taken.

On the second government auction, or Pepro--held for farmers and cooperatives-- just 12.11 percent of the total 1.5 million tonnes auctioned off were sold. However, a total of 49.5 percent of the soy offered from Mato Grosso do Sul state was sold off, while 22.4 percent of the soy from Minas Gerais state were sold.

The Brazil government has been conducting weekly soy auctions since the end of June, in order to offer producers and buyers a subsidy above the current market price to help debt-beset farmers cover the costs of production.

However, both producers and traders have griped in recent weeks about the inflexibility of the rules of these auctions. For starters, the government will only pay the subsidy starting in January, forcing buyers to pay both the market price and subsidy to farmers this year. At the same time, while soy from the current 2005/06 harvest is being auctioned, soy from the upcoming 2006/07 harvest can't be auctioned off.

Brazil is the world's second biggest soy exporter after the US.