September 3, 2008

 

Brazil soy brokers bearish; fundamentals changing on-week

 

 

Brazilian soy brokers are bearish on their outlook for soy futures this week, following what is likely to be similar sentiment on the Chicago Board of Trade with soy futures expected to take a beating all day Tuesday (September 2).

 

"We still have a gap to fill on the downside for November, and that is resistance of US$12.50 or around US$12.25. We lost the weather premium of hurricane Gustav. I'm bearish on commodities for today and probably the whole week," said Luiz Vilera, a soy broker at Terra Futuros in Sao Paulo.

 

Whether the recent downside trend is purely technical or a bit fundamental still remains to be seen, but one thing seems to be certain: soy futures are on their way down Tuesday.

 

"No one is fixing prices right now, that's for sure. We are going to fall to the limit today," said a broker at Link Corretora in Sao Paulo. If prices fall by 70 points, trading is halted for hitting that limit on the downside.

 

"Today is going to be a defining moment for soy prices for the week," the Link broker said.

 

A rising dollar, coupled with falling oil prices and better weather conditions in the US Midwest has added to fundamental pressures as well on soy futures.

 

"The scenario has changed and not just a little. November can hit US$12 resistance today. It was US$13 last week," said a broker at Hencorp Commcor. "Look for soy to follow oil all week," he said.

 

Should the soy price drop become more permanent, Brazil will unlikely expand its soy area and that could mean a smaller global soy supply.

 

"(Brazilian) farmers will still plant, but if prices keep falling you might not see them expand," said Vilera.

 

Brazil is the world's No. 2 soy producer and exporter behind the US.