October 8, 2008

Brazil's soy trade helped by local demand; exports slow


Brazil's soy exports remain seasonally slow this week, while local crushers continue to buy soy, analysts and brokers said Tuesday (October 7).

The strength of the US dollar against the Brazilian real has helped to bring some sellers to the market this week, said a chief trader at a major US multinational in Sao Paulo.

Brazilian resellers and merchants, who buy soy from local farmers in exchange for inputs such as fertilizers, have been selling mainly to local crushers but also some for export, the trader said, without giving names.

November soy on the Chicago Board of Trade rose 4 cents to US$9.26 per bushel on Tuesday, after plunging from nearly US$14 a bushel a few months ago.

The stronger dollar has compensated for much of the CBOT losses over the last few months, with current trading at 2.31 Brazilian reals to the US dollar on Tuesday. The real hasn't been at those levels since 2005.

The trader said soy premiums on Tuesday saw sellers asking for 80 cents over the December CBOT contract, while buyers offered 70 cents over the same contract at the port of Santos.

There's little agreement at this level, with Brazilian soy exports being slow as prices reach some 30 cents above the soy prices from the US, he said.

Still, he expects one or two vessels to dock at the main Brazilian ports up until the end of the year with pre-agreed contracts.

Paulo Gilioli, a trader at grain brokerage firm Cerealpar in Mato Grosso state, Brazil's No.1 soy producer, said that local crushers continue to purchase soy while some exports were made by the large players such as ADM and Bunge, but with small volumes.

Bunge bought around 1,500 tonnes of soy for export for BRL39 per 60-kilogram bag of soy, he said.

David Brew, a broker at Brasoja in Rio Grande do Sul, the No. 3 soy-producing state, said that local demand for soy remains steady with local crushers still needing to buy soy to crush into animal feed or for local biofuels contracts.

Brazilian soy producers are also doing some washout trade, buying back what they had originally sold to customers, at a small profit, he said.

"Soy exports from Brazil are usually slow this time of year, because it's the Brazilian inter-harvest period and the US soy crop starts to enter the global market," said Steve Cachia, a senior commodities analyst at Cerealpar.

The first soy crop estimate for 2008-09 by Brazil's National Commodities Supply Corp., or Conab, on Wednesday is unlikely to lift the market later this week, as all eyes are on the financial crisis in the US and Europe, Cachia said.

Soy premiums on Tuesday at the Paranagua port had buyers offering 70 cents over the CBOT November soy contract, while there were no sellers. Buyers offered premiums on par with the March CBOT soy contract, with sellers asking for five cents over, according to Cerealpar.

A trader said that many Brazilian soy farmers are still waiting for prices at around US$12 or US$13 per bushel.

But the trader added that with the US dollar and CBOT prices at current levels, producers in states such as Mato Grosso state, the No.1 Brazilian soy producing state, can still make a slim profit even with higher costs for inputs such as fertilizers.

Farmers in Brazil, the No. 2 soy producer behind the US, are planting soy this month.

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