| SAO PAULO
SAO PAULO Aug 12 Brazil's soybean market will
see abundant supplies and lower prices next season, which will
challenge farmers and favor traders with low costs and good
financials, said Cargill's main soybean executive in the
In about a month, Brazilian farmers will start sowing what
is expected to be a record soybean crop, more or less at the
same time the U.S. harvests the biggest soybean crop in history.
"In previous years, it was necessary to move supplies
quickly. Now that we have ample stocks everywhere, consumers are
not in a rush to buy," Paulo Sousa, Cargill's director for
grains and soybean crushing in Brazil, said on Tuesday.
That will help pace Brazil's oilseed sales and exports, but
also will squeeze margins and demand higher cost control and
"To carry stocks is very capital intensive. Someone must
pay. There is a financial cost in keeping grains stocked.
Physical infrastructure is also necessary," Sousa told reporters
after an event at Cargill's headquarter in Sao Paulo.
Brazil's center-west grain belt has a storage deficit, which
big food companies and trading houses, such as Cargill Ltd
or Bunge Ltd, have tried to capitalize on by
building their own silos and warehouses.
Some farmers also have started to use giant polyethylene
bags to keep grain protected when conventional storage is full
or not available to avoid having to sell when prices are weak.
Cargill's strategy for the 2014/15 season will be to
optimize the use of its warehouse and cargo routings, Sousa
"Companies like us, with more than 120 storage facilities in
Brazil, will ... move grains to places were we can be more
competitive, with lower costs to access mills and ports," he
Sousa, who oversees Brazil's second largest soybean trading
and crushing business after Bunge, said he expects a shift in
futures market prices, in which longer contracts will be higher
than spot contracts, something that has not been the case for
almost three years now.
"In a few months, market prices will go from a backwardation
to a 'carry' position, which will reward stocking," he said.
Backwardation is when futures prices in the future are lower
than the current spot price, which induces selling of the
physical commodity rather than paying to store it.
Currently, however, a spot contract for soybeans on
the Chicago Board of Trade (CBOT) is still 20 percent higher
then the nearby contract November , while global
supplies are still tight.
(Editing by Reese Ewing and Andre Grenon)