(Wall Street Journal) – A widespread work stoppage by Brazilian truckers is roiling global soybean markets, boosting prices that had been deflated for months by soaring production of the oilseeds.
U.S. soybean futures surged to a six-week high on Tuesday as truckers across Brazil’s main farming regions blocked roads to protest fuel-tax increases and low wages, impeding shipments to ports and fueling speculation the U.S. would enjoy increased overseas demand for soybeans at Brazil’s expense. Prices pulled back Wednesday as police officers cleared some roads, but analysts said the situation remained fluid as the protests spread to more states.
The weeklong work stoppage, along with rainy weather that has slowed the Brazilian soybean harvest, breathed life into a market that has been moribund following record U.S. production last year and expectations for record Brazil output this year. The market’s reaction highlights how U.S. prices can react swiftly to unrest in Brazil, the U.S.’s biggest competitor in growing and exporting soybeans.
The developments in Brazil surprised some investors who had placed wagers on falling prices, causing them to exit from those positions by buying futures, which boosted the market, analysts said. “When you get this kind of news catching the market at the wrong time, everyone bails to the other side of the ship,” said Dan Basse, president of Chicago-based commodities firm AgResource Co
Soybean futures for March delivery jumped to $10.29 a bushel on the Chicago Board of Trade on Tuesday, the highest intraday price for a front-month contract since Jan. 12. On Wednesday, futures fell 8.25 cents, or 0.8%, to $10.0775 a bushel, due in part to a sharp rise in crop sales in the U.S. and South America by farmers seeking to capitalize on the jump in prices. Soybean futures are up about 5% this month.
Brazilian truckers are protesting a recent increase in the federal tax on diesel fuel amid low income levels. The actions started last week in Mato Grosso state, which produces about 30% of Brazil’s soy crop, and spread around the country this week.
Truckers on Wednesday set up 99 blockades in 10 states, according to Brazil’s Federal Highway Police. At some checkpoints, truckers are allowing passenger vehicles and trucks carrying perishable goods and livestock to pass through, while stopping trucks carrying dry goods including soybeans, the police said. At other blockades, all traffic is being stopped.
The port of Santos, Brazil’s busiest and most important for soy exports, said deliveries at the facility returned to normal Wednesday morning after a blockade of the port’s access road broke up Tuesday night.
Brazil’s Attorney General’s office said it has received court orders forbidding the road blockades, and truckers and their representatives who defy the orders are subject to fines. By Wednesday afternoon, however, no fines had been issued, the Attorney General’s office said.
A spokesman at the port of Paranaguá, Brazil’s third-largest for soy exports, said a mere 33 trucks were waiting to unload at the port Wednesday morning, compared with the usual lineup of 950, potentially forcing ship-loading operations to cease by the end of this week.
The snarls have prompted speculation that China and other big soybean buyers may turn to the U.S. for more of their supplies at a time of year when importers typically shift purchases to Brazil, the second-largest producer and shipper after the U.S.
“This definitely puts in jeopardy some of Brazil’s early sales,” said Bill Nelson, a senior economist with agricultural-research firm Doane Advisory Services in St. Louis. Analysts noted, however, that there has been no sign of increased demand from China for U.S. soybeans.
Soybean futures also got a boost from last week’s forecast by the U.S. Agriculture Department that U.S. growers will plant less acreage with the crop this spring than analysts had expected.
The prospect of better-than-expected demand and lower U.S. acreage “raises the possibility that we may not be drowning in soybeans next year as we once thought,” said Anne Frick, senior oilseed analyst for brokerage Jefferies LLC in New York.
The rally follows a 28% plunge in U.S. soybean futures last year to the lowest levels in more than four years.
Some analysts said they think the rally could be short-lived, noting U.S. stockpiles are likely to remain ample and labor disputes in South America frequently have only short-term impacts on trade.
“This will more than likely all be over by the weekend,” said Karl Setzer, an analyst with brokerage MaxYield Cooperative in West Bend, Iowa.
