November 2, 2005

 

Brazil's soy producers holding out for higher prices
 

 

Higher international prices for soybeans have yet to translate into a selling spree among Brazilian soy farmers.

 

Roughly 20 percent, or 9 million tonnes, of soybeans are still sitting in stocks, according to trade company estimates.

 

Normally in the second half of the year, the domestic market is more competitive. Companies are buying in an active market, but this year Brazil premiums are hovering between 65 cents and 70 cents a bushel over the Chicago Board of Trade futures for November compared to 40 cents to 45 cents in the US, said a trader from a multinational agribusiness company.

 

"The market has gone north, to the US," the trader said.

 

Buyers are interested, but soybean producers are still holding out for high prices, said Emilio Ramos, domestic market analyst at AgRural, an agriculture market research firm.

 

"A lot of the soybean from the 2004-05 crop has already been sold and I expect that many producers will use the rest for collateral if they run into financing problems," Ramos said.

 

In the major soybean region of the centre-west, steady rains are favourable for the new 2005-06 crop. Mato Grosso state, Brazil's no. 1 soy producer, has 1.65 million hectares planted as of last Friday. AgRural estimates that the state will decrease its soy planted area to 5.5 million for the 2005-06 crop from 6.1 million hectares last year.

 

In Mato Grosso do Sul, 440,000 hectares have been planted as of Friday, with a soy crop planting area estimate of 1.8 million hectares. The 2004-05 planting area was 2.03 million hectares.

 

"The land area will drop a bit because of credit problems, but not that much. The sky is not falling," said Seneri Paludo, an agronomist at AgRural. The average Brazilian farmer is tapped out on credit, with Banco do Brasil saying Tuesday that it was closing lines of credit to risky borrowers in Mato Grosso do Sul state. State-owned banks constitute roughly 30 percent of Brazilian farmers' credit lines.

 

Nationwide planted area and production estimates are down 0.9 percent respectively, according to AgRural's Oct 21 soy report.

 

At Paranagua port, a 60-kilogram bag of soybeans was quoted Monday at 30.00 real, down from a high of 32.50 real seven days before.

 

Farmers are lowering their production estimates, though their numbers are having no impact on trading companies' estimates of a bumper crop, even with a possible 3 percent drop in soybean production.

 

Brazil's 2004-05 harvest was 51 million tonnes, 10 million tonnes short of market estimates.