October 11, 2006

 

Demand for Brazil's soymeal and soyoil heats up

 

 

Soymeal and soyoil demand in Brazil is rising and commercial buyers are now less gloomy than they have been in previous weeks.

 

"A lot of the big crushers already have soy and are not buying, but are definitely selling soymeal and soyoil because demand is good," said Thiago Simon, a trader a mid-sized soy crusher, Sperafico Agroindustrial, in Mato Grosso.

 

Simon said that soyoil demand has heated up in recent months because of demand from biodiesel manufacturers. Soymeal demand has been stable, but is expected to rise as the holidays approach.

 

"There's not even soyoil in the market right now to meet the demand from biodiesel companies," Simon said. Sperafico is making soyoil and shipping it to biodiesel companies to refine it for fuel, he said.

 

Food companies like Sadia and Perdigao are driving the soymeal market, said a soy buyer at Coimex, a soy exporter.

 

"Sadia is buying aggressively. They've got to feed their turkeys for Christmas. All of the industries are selling right now. Even we were in the market on Monday," the trader said.

 

The soybean market also saw some activity as international soy prices on the Chicago Board of Trade rose over US$6 per bushel for May and July delivery. The number has been a psychological marker for farmers since August as farmers gave up speculating that the dollar could actually rise against the Brazilian real during government elections. Brazilians went to the polls on Oct 1 and will go again on Oct 29 for a runoff vote. The dollar is currently trading at 2.15 Brazilian reals, relatively unchanged from Monday.

 

"Higher CBOT prices helped Brazilian soy growers this week and depending on how well he's calculated his cost, or how much debt he's got, he might actually profit," said Steve Cachia, a market analyst for brokerage firm Cerealpar.

 

Two of Brazil's largest soy crushers said that Friday and Monday were good for business, but soy complex futures fell Tuesday and took sellers out of the market.

 

"Compared to yesterday, today's been boring," said a trader at a US multinational.

 

May soybeans were trading below US$6 per bushel Tuesday. Brazil finishes its 2006/07 soy harvest in May.

 

Premiums have risen since Friday for nearby deliveries but fallen for March and May. November soybean premiums were 77 cents over the November CBOT. May soybeans were 26 cents over the May CBOT, 4 cents less than Fridays close.

 

Brazil should plant between 20.5 million and 21 million hectares of soy in the new 2006/07 crop. Northern Mato Grosso is the only region currently planting, according to Seneri Paludo, a soy analyst at consulting firm, AgRural.

 

Paludo said he expects Mato Grosso, the leading soy producer, to reduce planted area by 15 percent.

 

Reductions to Brazil's crop, however, will be made up by increased output in Argentina and another bumper crop in the US, so world soybean stocks will not be greatly affected by Brazil's shrinking soy fields.

 

Going forward, Paludo said, growers will have to spend less time waiting for the dollar and focus more on Chicago.