24/02/05 SAO PAULO (Dow Jones)--The Brazilian soy market is beginning toreact to higher prices on the international soy market, where concernsregarding the drought in southern Brazil have impacted prices.Earlier this week, Rio Grande do Sul crop agency Emater told Dow JonesNewswires that continued dry weather in the southern state of Rio Grandedo Sul could prompt losses of over 25% to the region's soy crop, but someanalysts believe losses could surpass 35%."If it doesn't rain, losses will definitely increase," said RenatoSayeg, a trader and analyst at Tetras in Sao Paulo.Sayeg said given current conditions, the harvest is likely to reach amaximum of 58 million metric tons.While prices are starting to increase due to lowered harvestprojections, sales levels are still limited on the Brazilian market."The increase in prices in Chicago hasn't impacted sales in Brazilbecause producers are waiting to see the full impact of the weather," saidAntonio Sartori, the president of Rio Grande do Sul-based Brasoja.Nonetheless, as larger amounts of new-crop soy hits the market, saleslevels are likely to increase.However, sales levels continue to be significantly below historiclevels.According to Celeres, producers have sold 34% of their 2004-05 crop asof Friday, well below the five-year average of 46%.Harvest levels are in line with historical averages and the marketestimates that Brazilian producers will have harvested roughly 15% of thetotal crop through the end of this week, up from 7% as of last Friday.Despite concerns about the Brazilian crop, traders added that theworldwide crop is still expected to be the largest ever, which has givenbuyers a greater deal of flexibility.A 60-kilogram bag of soybeans at the Paranagua port stood at 33.00 to34.00 Brazilian reals ($1=BRL2.59) Friday compared with BRL31.20 toBRL32.00 last week.In Ponta Grosso, northern Parana, soybeans were quoted at BRL30.00 toBRL31.00, similar to last week's levels.At Paranagua port, soybean premiums stood at 20 to 25 cents per bushelabove Chicago Board of Trade futures for February/March delivery. Soybeansare quoted at 6-10 cents above the CBOT for April delivery.Soy pellets were quoted at $10-$12 per short ton below CBOT quotes forApril delivery.A cold front will reach southern Brazil late Thursday and should bringscattered showers to the region through Saturday. These rains are notexpected to revert the drought-like conditions in the region.Brazil is the world's No. 2 producer and exporter of soybeans.