October 13, 2008


Brazil's soy market slams to halt on global financial crisis

Brazil's soy market has slammed to a halt on Friday (October 10, 2008) as all eyes were on the global financial crisis, analysts said.


"It's a disaster. With the Chicago Board of Trade down there's no business being done as virtually nobody will sell at these prices," said a chief trader at a major US multinational in Sao Paulo.


November soy on the CBOT reached the daily trading limit, falling 70 cents to US$9.10 per bushel Friday, after plunging from nearly US$14 a bushel a few months ago.


The stronger dollar continued to compensate for the CBOT losses over the last few months, with current trading at BRL 2.32 to the US dollar on Friday. The Brazilian real hasn't been at those levels since 2005.


The trader said soy fundamentals aren't being considered and all eyes are on the financial crisis. "We're not trading soy now, we're trading in panic," he said, noting he doesn't see any new crop or weather data to help lift soy prices.


But the trader added that although the stronger US dollar against the Brazilian real helps exporters to get better prices for their soy, farmers aren't willing to sell at current prices.


Producers can currently make a profit at around US$70 per tonne per hectare in Mato Grosso, Brazil's No. 1 soy-producing state, but they want to sell at over US$100 per tonne per hectare, the trader said.


Mato Grosso is thousands of kilometers from the main grain ports of Paranagua and Santos, and they face the highest costs for fuel and transport in Brazil.


Steve Cachia, a senior commodities analyst at Cerealpar, agreed that even though the dollar is giving some support to soy prices, the market is very quiet.


Some business for the old 2007-08 soy crop has been done by producers who need cash in areas such as the south of Brazil, which has more soy available because they harvest last, Cachia said.


He added that soy was traded for BRL 47 per 60-kilogramme bag at Paranagua port Friday compared to BRL50 per bag Thursday.


Cachia said that the new 2008-09 soy crop has been impacted by rising fertiliser prices, and therefore farmers are keen to get more for this crop.


David Brew, a broker at Brasoja in Rio Grande do Sul, the No. 3 soy-producing state, said that with the CBOT limit in place, even if companies wanted to do business on Friday they couldn't.


"The USDA numbers were one more stone on the grave," Brew said.


The USDA reported 2008-09 U.S. soy production at 2.983 billion bushels, up 49 million from the September estimate of 2.934 billion.


"Nobody really wants to sell, although in a few cases producers may sell to get credit to pay debts or sell before things get even worse," he said.


A small amount of the 2007-08 old soy crop was bought by local crushers and some exporters, but purchases were very limited this week, he added.


Brazil should harvest between 60.1 million and 61.2 million tonnes of soy in the 2008-09 crop, compared to 60.02 million tons from the 2007-08 soy crop, the National Commodities Supply Corp, or Conab, said this week.


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

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