November 5, 2008
Brazil's physical soy trade remains at a crawl this week, with the dollar slumping against the Brazilian real Tuesday, 4 November 2008 and farmers more concerned with planting, said analysts and brokers.
With the dollar falling against the Brazilian real on Tuesday, 4 November 2008, gains on CBOT were cancelled out and farmers were unwilling to sell, said the chief trader at a major US multinational.
Although November soy contracts sharply rose US 36.2 cents to US$9.64 a bushel on the CBOT Tuesday, 4 November 2008, this did little to stimulate Brazilian soy trade as the dollar traded lower against the Brazilian real.
The US dollar slipped to BRL2.11 (US$0.98) Tuesday, 4 November 2008 from recent peaks of around BRL2.50 (US$1.15).
When the dollar is strong against the Brazilian real, this usually helps to stimulate Brazilian producers to sell because they get more for their crop in the local currency.
A broker said large multinationals such as ADM, Bunge and Cargill were in the market this week, but buying only small volumes of soy. These companies have stocks, but they need to continue buying to supply overseas contracts for soy meal and soy oil, said the broker.
David Goncalves, a soy consultant at FC Stone, said that it has been rare recently for CBOT prices to go up and for the dollar to rise against the Brazilian real at the same time. He said on Tuesday, 4 November 2008 that the decrease in the dollar more-or-less cancelled out the gains on CBOT.
Moreover, new US soy crop data from private consultancies such as Informa Economics also failed to trigger buying or selling in Brazil, with local soy farmers concerned with planting. Brazilian farmers started planting soy last month.
The latest data from Informa Economics Tuesday, 4 November 2008 estimated US soy production at 2.987 billion bushels, with a yield of 40.2 bushels per acre. This is down slightly from the US Department of Agriculture's latest projection of yield at 39.5 bushels per acre.
Buyers are also still concerned about the volatility of prices and the credit crunch, and therefore cautious about making large purchases, said Goncalves.
Steve Cachia, a soy market analyst at brokerage firm Cerealpar, said that farmers are only selling small amounts of soy to raise cash for urgent needs. But if possible they prefer to sell corn and hold onto their beans.
Brazilian farmers are opting to sell their corn rather than soy. With a glut of corn in the local market, farmers think that soy have a better chance to rise in price, so they are holding onto their beans.
Cerealpar said that soy premiums at the Paranagua port Tuesday, 4 November 2008 had buyers offering US 85 cents over the December soy futures contract on CBOT, while sellers were asking for US 100 cents over the same contract.
On Tuesday, buyers were also offering US 20 cents under the April/May soy futures contract on CBOT, while sellers were asking for US 15 cents under the same contract, with only small volumes of business being done.
Brazilian soy Tuesday, 4 November 2008 were being sold at BRL 48 (US$22.20) for a 60-kilogram bag at Paranagua, the main grain port.
Celeres said that Brazil's new 2008-09 soy crop was 29 percent planted by Friday, 31 October 2008, compared to a five-year average of 21 and 16 percent the week before.
More Brazilian farmers are trying to plant earlier to allow more time to plant their corn crops and avoid the periods of frost later in the season, said Cachia.
This year, some soy farmers in Brazil's southern state of Rio Grande do Sul faced problems due to the rain. However, on the whole, the soy crop is progressing well, said Cachia.
Brazil should harvest between 60 and 61 million tonnes of soy in the 2008-09 soy crop, said the National Commodities Supply Corp., or Conab recently.
On Thursday, Conab will issue its second estimate for the 2008-09 soy crops.
Brazil is the No. 2 soy producer behind the US.