South America Calling

Brazil's Soy Market Slow, Despite Strong Prices

Accustomed to seeing soybean prices slide in March with the arrival of the South American crop, Brazilian soybean farmers have been pleasantly surprised this month by rising local prices.

But the dream scenario has not prompted a rush to sell.

Indeed, the market has been markedly quiet over the last week as prices hit new peaks. Instead, farmers concentrate on harvesting their crop.

Brazilian farmers had sold 52% of the 2013-14 crop as of Friday, down from last year but ahead of the five-year average of 48%, according to Safras e Mercado, a local farm consultancy.

Soybeans were quoted at R$60.00 per 60-kilogram bag in Sorriso, Mato Grosso on Tuesday, up 12% on the month and 25% on the year. At Ponta Grosso, northern Parana, the price was R$73, up 7% on the month and 24% on the year.

Prices have been driven by rising international quotes and also, when looking at the yearly comparison, by a 17% devaluation of the Brazilian real.

But having sold half their crop in most of Brazil and nearly three-quarters in Mato Grosso, farmers are being cautious in light of the losses.

At the turn of the year, Brazil's crop looked in excellent condition. But dry weather in January and the first half of February hurt crops in the south and southeast and deferred the dream of becoming the world's No. 1 soybean producer for another year.

Celeres was the latest local consultancy to lower its soybean forecast, this week clipping its number by 6% to 84.9 million metric tons. That puts its figure at the low end of estimates, which range from 84 mmt to 89 mmt.

As I have discussed a number of times previously, Brazilian farmers are currently very well capitalized and see no need to sell, especially given apparent firm Chinese demand that is exemplified by tight export premiums at Brazilian ports.



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