September 24, 2008

   

Brazil's soy trade remains slow this week

     

 

Brazil's soy trade remains at a crawl this week because of the unclear direction of soy prices and because of volatile markets, analysts and brokers said Tuesday (September 23).

 

"The US dollar rose against the Brazilian real today but the Chicago Board of Trade fell, so they cancelled each other out, while on Monday the reverse was true," said Steve Cachia, a soy market analyst at brokerage firm Cerealpar.

 

Brazilian soy farmers traded only small volumes of the old 2007-08 crop and have done virtually no business this week for the new 2008-09 crop, due to the unclear direction of soy prices, said Cachia.

 

Brazil's new 2008-09 soy crop was 17 percent sold as of Sept. 19, compared with 21 percent on average over the last five years, according to Celeres, a farm agricultural consultancy.

 

November soy contracts dropped 26.50 US cents to US$11.78 a bushel on the CBOT on Tuesday. While the US dollar traded at 1.83 Brazilian reals Tuesday, down from last week's peak of BRL1.96.

 

Soy premiums on Tuesday at the Paranagua port had buyers offering 65 cents over the October CBOT soy contract, while sellers asked for 80 cents over the same contract. Buyers offered 65 cents over the November CBOT soy contract, with sellers asking for 80 cents over, according to Cerealpar.

 

Brazilian farmers also are waiting for clear signals from the international financial markets and for the latest data regarding the size of the new US soy crop, Cachia said.

 

A chief broker at a US multinational agreed that Brazil's soy trade continues to be slow this week. "All of the recent gains of the dollar versus the Brazilian real were offset by falls on CBOT," the broker said.

 

Although soy crushers are buying small volumes of soy in Brazil, the soy export trade has almost dried up as US soy begins to enter the international markets, he said.

 

David Goncalves, a soy consultant at FC Stone, said Brazilian soy farmers have stopped selling due to the turbulence in the global financial markets.

 

"Although the stronger dollar helped to compensate for losses on CBOT, the Brazilian soy trade remains slow," he said.

 

David Brew, a broker at Brasoja in Rio Grande do Sul, the No. 3 soy-producing state, agreed. Farmers are also worried about high production costs such as those for fertilizers, and this makes them more cautious about selling their soy at lower prices than they had a few months ago, he said.

 

Brazil harvested 60 million tonnes of soy in the 2007-08 soy crop, the National Commodities Supply Corp., or Conab, said recently. The 2007-08 soy harvest rose almost 3 percent from the previous 2006-07 soy crop, it said.

 

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