Dow Jones Newswires report that the Brazilian Vegetable Oils Industry Association (Abiove) wrote to producers after a number of farmers went to court to break forward contracts for the 2003-04 marketing year following the discovery of yield-reducing Asian soybean rust and a subsequent run-up in soybean prices.
The American Soybean Association (ASA) writes that around 5 per cent of farmers in Goias, Brazil's fourth biggest soy-producing state, went to court to break soy contracts closed before harvesting after prices increased significantly at the start of this year and Asian rust fungus decimated production in parts of the state.
According to the ASA, the farmers argued that the subsequent price rise made the contracts unfairly balanced in the trading companies' favour.
Abiove noted that the industry also lost out on the price rise last year as most of the purchases were hedged on the Chicago Board of Trade. The court cases, along with low prices, have been a key factor in the low level of forward sales for the 2004-05 crop, which is currently being planted.
Brazil is the world's number two soy producer after the US and its soy business represents about 32 per cent of overall Brazilian farm trade.
Wheat, rice, corn and soybeans are all key grains used for sourcing food ingredients found extensively in food formulations. But commodity prices have been high for cereals because the world has lost its grain - corn, wheat, soybean - buffer zone.
Soy prices reached 15 year highs in recent months on the back of a drawdown in global stocks last year but relief is expected this year with the US department of agriculture estimating that the global soy stocks-to-use ratio has moved up by two days to 90 days.
The September WASDE (World Agricultural Supply and Demand Estimates) released by the US government projects an increase in global stocks - by 1.3m mt for end of 04/05.