September 12, 2007

 

Brazil soy market heats up; farmers fix 2008 soy futures

 

 

Demand remains high this week for Brazilian soybeans, as farmers hold on to the last of their product from the 2006/07 crop, awaiting better prices, brokers said Tuesday (September 11).

 

According to Celeres, 87 percent of last year's crop has been sold, slightly below the 88 percent registered in the same period for the 2005/06 crop, and the 91 percent average over the last five years.

 

The lower sale volume results from a combination of higher prices and increased production, according to Celeres analyst Anderson Galvao Gomes.

 

Producers are focused on locking in prices for the 2007/08 crop, of which around one-fifth has already been sold, according to local brokers.

 

The 20 percent sale of this year's crop, which will begin to be planted next month, is in line with last year's results for the same period. Brazil should harvest around 60 million tonnes of soybeans in 2007/08, according to various private estimates.

 

About half of the early sales are being negotiated with Chicago Board of Trade May 2008 soybean contract. However, in Mato Grosso, Brazil's main soy-growing state, farmers are mainly focusing on March contracts this week, due to the state's earlier planting and harvest periods.

 

Trading on the internal soy market is generally low-volume this week. "Producers are betting on price hikes," said Diogo Gomes, a trader at Parana-based Cerealpar brokerage.

 

Market eyes will be on the US Department of Agriculture production report scheduled to be released Wednesday and the effect it may have on soy grain prices on Chicago Board of Trade.

 

The usual players are keen on purchasing Brazilian soy this week, including major soy buyers Archer Daniels Midland (ADM), Bunge (BG) and Cargill, along with Louis Dreyfuss and Agrenco.

 

Prices on the domestic physical market in the Paranagua Port are unchanged from last week at BRL41.00 (US$21.29) per 60-kilogramme bag, compared to BRL27.00 (US$14.02) per bag in the same period in 2006.

 

The Brazilian real-dollar exchange rate has remained relatively stable over the last week, dropping slightly to BRL1.92 against the greenback, from BRL1.96 last Tuesday.

 

There are some comments on the market regarding the increase in planted area for the 2007/08 soy crop, after the National Commodities Corp, or Conab, released its estimate last Tuesday. Expectations for expansion of planted area range from just over 21.9 million to 22.5 million hectares.

 

Rising CBOT soy futures in the last week of August and first week in September may, in fact, stimulate farmers to increase planting above Conab's estimate, analysts said this week.

 

"However, there are still serious problems involving credit and debt rollover for Brazilian soy producers," said Anderson Gomes.

 

Brazilian ports saw just under 16.3 million tonnes of soybeans shipped overseas from January to July 31, 2007, down from just under 17.9 million tonnes exported in the first six months of 2006.

 

Steve Cachia, a soy market analyst for Cerealpar, said soy exports climbed to 18.4 million tonnes until the end of August.

 

Brazil is the No.2 soy exporter behind the US.

 

US$1 = 1.9250 Brazilian reals (BRL)

 

As of September 12, 2007