December 10, 2008

Brazilian soy exports rise on more Chinese purchase, strong US dollar

Although the soy futures on the Chicago Board of Trade, or CBOT, in the US opened 4.50 cents higher at US$8.16 per bushel Tuesday, the key driver of Brazil's soy trade recently has been the stronger US dollar against the real.

When the dollar rises against the Brazilian real, Brazilian producers generally are inclined to sell because they get more for their crop in the local currency.

The US dollar soared to above BRL2.50 last week, and remained strong on Tuesday at BRL2.47, compared to its lowest recent point of BRL1.55 in August.

"Brazil's soy trade was especially helped last week by the soaring dollar and we sold more beans than the week before, mainly to Chinese buyers," said a trader at a major US multinational.

The trader said that business was done at differentials of 20 cents under the May soy futures contract on CBOT. Differentials are the price difference between Brazilian soy and the CBOT futures price.

The Chinese have been primarily buying soy from the US, where more beans are available during their harvest, but they are still also taking beans from the southern hemisphere, he said.

The Brazilian soy export business to China and other nations should pickup in March onwards when the new 2008-09 beans are harvested, the trader said.

The Europeans still aren't buying soy and they remain exceedingly bearish, he said.

Overall, Brazil's soy business is quiet ahead of the Christmas season. Steve Cachia, a soy-market analyst at brokerage firm Cerealpar, said that Brazil's old 2007-08 soy crop is almost finished and producers are only waiting for a "miracle" rise in prices in order to sell their remaining stocks.

Trade for the new soy 2008-08 soy crop, which is currently being planted, is also slow. This will remain almost at a standstill for the rest of the year due to low prices and the slow Christmas period, Cachia said.

Cerealpar said on Tuesday that soy premiums at the Paranagua port, Brazil's main port for grain shipments, had buyers offering 65 cents over the January soy futures contract on CBOT, while sellers were asking for 90 cents over the same contract.

Glauco Monte, a soy consultant at FCStone, agreed that buying is sporadic. Buyers and sellers remain caution due to volatile prices and trade just what they need, he said.

Brazilian agricultural consultancy Celeres said Brazilian farmers had sold just 22 percent of their 2008-09 soy crop by December 5, steady from 22 percent the week before and compared with a five-year average of 32 percent.

They had also sold 97 percent of the old 2007-08 soy crop by December 5, the same as the week before and 98 percent over a five-year average, according to Celeres.

The number is within the range of Conab's previous estimate on Nov. 6 that put the soy crop at between 58.3 million and 59.3 million tonnes for 2008-09. This compared to 60 million tonnes from the 2007-08 soy crop.

Traders said the new Conab data didn't stimulate soy prices and was in line with its previous estimates.

Private estimates for the 2008-09 soy crop vary considerably. Brazilian consultancy Agrural said Friday that Brazil's 2008-09 soy crop should be around 61.8 million tonnes across 22 million hectares.

Others, such as a major US multinational, are contemplating 62 million tonnes and FC Stone expects 59 million tonnes. FC Stone's Monte said that concerns about dry weather in the south of Brazil or the lower use of inputs such as fertilizer could lower the size of the crop.

Brazilian agricultural consultancy Celeres said Brazilian farmers have already planted 87 percent of the new 2008-09 soy crop by December 5. This is up from 79 percent the week before and compared with a five-year average of 91 percent.

Mato Grosso, Brazil's No. 1 soy-producing state, has planted 99 percent of its soy area, while Parana, the No. 2 producer, has planted 98 percent, according to Celeres.

Brazil is the world's No. 2 producer of soy after the US.