October 29, 2008

Weaker dollar, falling CBOT stalls Brazilian soy trade


A double whammy of lower prices on the Chicago Board of Trade and a weaker dollar against the Brazilian real kept Brazilian farmers from selling their old and new soy Tuesday (October 28), traders and brokers said.


Despite CBOT November soy prices climbing on Monday and at the beginning of Tuesday, the contract closed down 14 1/4 cents to US$8.78 3/4 a bushel Tuesday, far from the sky-high prices of US$14 a bushel a few months ago.


Moreover, while Brazil's soy trade was lifted by the strong dollar last week at peaks of BRL2.53 on Thursday, since then the dollar has weakened due to Brazil's Central Bank intervening to strengthen the real. Subsequently, the dollar gradually slumped to BRL2.18 by the end of Tuesday.


The stronger dollar usually encourages Brazilian soy exporters to sell their beans because they are paid in US dollars.


Brazilian soy producers remain reluctant to sell and large multinationals such as ADM, Cargill and Bunge, as well as local crushers, have been just buying hand-to-mouth to satisfy their current needs, said Glauco Monte, an analyst at consultancy FC Stone.


Monte said buyers and sellers were doing small volumes of business at between 85 and 95 cents over the CBOT November soy futures contract Tuesday at Paranagua, the main soy port.


Monte added that Brazilian farmers are looking for US$10 over the CBOT price in order to sell, however, current prices are far from this level.


A chief trader from a US trading company said most local crushers already have stocks to cover them for October and November. He added that Brazil's soy export market has almost dried up with a flow of cheaper soy coming from countries such as the US.


The trader said that the US Department of Agriculture's latest crop production estimates changed "practically nothing." Buyers and sellers are more concerned about the dollar, oil and equity prices, rather than the USDA numbers and soy fundamentals this week.


The USDA cut its estimate for harvested US soy acreage from the 2008-2009 soy crop by 1.1 million acres in a revised report released Tuesday. Yield remained unchanged, but ending stocks for the new crop year were cut as well, to 205 million bushels from 220 million bushels.


Local consultancy Agrural, in its latest research Tuesday, said that 16 percent of Brazil's 2008-09 soy crop was sold this month versus 38 percent at the same time last year.


William Balbino, a trader at Cerealpar in Mato Grosso, the No.1 soy producing state, also saw business trickling to a snail's pace this week. He said that at BRL39 per 60-kilogram bag, local soy prices didn't encourage sales Tuesday in Campo Novo in Mato Grosso, down around one Brazilian real from last week.


In the Brazilian futures market, Balbino said that little business was done. The continuing global market turbulence means little interest in futures, he said.


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

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