Ideas of Brazil strike bust dent soy rally

February 25th, 2015

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Category: Grains, Oilseeds

soybean crop red machine 450x299(Agrimoney) – Will legal action succeed in breaking Brazil’s truckers’ strike?

Initial success in a move by Brazil’s government to seek a court injunction against roadblocks operated by truckers demanding lower tax on fuel appeared modest.

In Rio Grande do Sul, for instance, where a judge ordered the removal of roadblocks, they remained in action at least as of late yesterday, according to the EFE agency.

However, with heavy fine apparently threatened, can the truckers keep it up?

‘Keep demand strong’

Investors in the soybean market were a little sceptical.

Chicago futures rose strongly in the last session, to a six-week high, on ideas that the truckers’ strike, in disrupting flow of Brazilian soybeans to port, would prompt importers of the oilseed, and of products such as soymeal, to switch to the US instead.

“Brazil’s delays in soybean shipments are thought to keep demand strong for US meal and soybeans over the next few weeks,” said Terry Reilly at Country Futures.

“Brazil’s crush will slow down as deliveries of new-crop soybeans slowed.”

‘Viewed bearish’

However, talk of some kind of bust to the roadblocks, which are also causing fuel shortages which are threatening harvest too, prompted an easing in Chicago’s May soybean contract of 0.2% to $10.16 ¾ a bushel as of 09:35 UK time (03:35 Chicago time).

Soymeal for May fell 0.5% to $344.00 a short ton.

“The Brazilian government turning to the courts to resolve the trucker strike is viewed bearish,” said Benson Quinn Commodities.

Another US broker said: “There is a potential to see a decent market response from the result” of the government’s legal action to break the strike.

‘Not a game changer’

Wheat opened lower too, as suggested by the weak close to the last session, with investors’ joy proving short-lived at a 290,000 order of US supplies by Egypt’s Gasc grain authority.

“This activity should be viewed as a good sale, but not a game changer,” said Benson Quinn Commodities.

“What the US export market needs is a programme, outside of routine spring wheat business into traditional buyers.”

And US prices are not supportive of a “programme”.

CHS Hedging said: “The competitive world wheat market and the premium for US wheat should limit US exports.”

Wheat for May fell 0.3% to $5.02 ¼ a bushel in Chicago, although holding steady at $5.38 a bushel in Kansas City, which trades hard red winter wheat, the type Gasc purchased.

It little helped that Iraq cancelled a tender for 50,000 tonnes of hard wheat, although which had been expected to end up with a purchase of a multiple of that volume.

Corn vs soybeans

This time it was corn’s turn to outperform, in adding 0.4% to $3.87 a bushel for May delivery.

It helped that Brent crude nudged a little higher, nearly to $59 a barrel, boosting prospects for a grain used largely in making bioethanol.

But soybean futures’ recent outperformance against corn has also been noted, with the two rivals in the forthcoming spring planting programmes, and pricing a big factor in which of the crops growers will chose.

Terry Reilly noted that the ratio between November soybean futures and December corn futures “climbed to 2.42 on Tuesday, up from 2.38 on Monday” and from 2.28 two weeks ago, with higher numbers favouring soybean plantings.

Another US broker said: “Soybean strength has also put the corn-soybean ratio back up to 2.42 at a time when many don’t believe we need to encourage the extra soybean acres.”

Falling exports

Elsewhere, palm oil lost early headway in Kuala Lumpur after cargo surveyor Intertek pegged Malaysian exports down 6.6% so far this month, compared with the same period of January.

That represented an acceleration from the rate of decline of 3.6% noted for the first 20 days of the month.

Palm oil for May stood 0.4% lower at 2,249 ringgit a tonne.

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