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02. February 2004 Lack of Availability Cuts U.S. Crush Estimate Lack of available soybeans is limiting prospects for both exports and domestic crush. The most recent forecast reflects a 272 thousand tonne cut in U.S. exports for 2003-04 in order to free up soybeans so that the 2003-04 crush can be increased by 272 thousand tonnes to 38.8 million tonnes, according to analysts. This is still 5.17 million tonnes below the previous year and requires that the crush estimate for January through August be reduced by 18 percent or 5.06 million tonnes from the previous year — an extremely large cut in the time remaining in this marketing year. Meanwhile, the market has been slow to reflect the likely magnitude of the cuts domestic users of soybean meal and soybean oil will need to make. Analysts are expressing concerns that late summer price volatility will make planning difficult, especially for livestock feeders. Ocean Freight Rates At Record Levels Since late-September 2003, the cost of moving freight in dry bulk vessels of all sizes and on nearly all routes has swelled to record levels. Last week was no exception, with the rate out of the Center Gulf up nearly $10 per tonne. What is notable about this trend, the rate daily rate increases from the Center Gulf. First it jumped a record $2.39 a tonne from January 27 to January 28. Then on the morning of January 29, it surged $3.99 to $68.54 per tonne. At the start of 2004, this rate was $51.36 per tonne and $26.04 one year ago. From the Pacific Northwest (PNW) to Japan, the rate was $44.92 per tonne on January 29, up from $41.45 on January 2 and $18.30 one year ago. The spread between the Center Gulf and the PNW presently stands at a record $23.62 per tonne. This spread is used as a barometer to determine which port range is most competitive to source grain. The general rule of thumb has been that a spread of more than $8.50 favors shipment from the PNW. The spread surpassed $8.50 during December 2003 and hit $10 just after the New Year. Last week’s rate surge in the Center Gulf ocean rate and the slow increase in the PNW rate have given the PNW the competitive advantage. But, to move crops to the PNW in a rapidly is no easy task. The western railroads are still trying to catch up with their delivery delays that built up this crop year. The rail delays have stacked up while moving this year’s large corn and wheat harvests and to keep up with the fast pace of exports during the first five months of the crop year. FDA Bans Feed Made From Mammalian Blood And Blood Products The Food and Drug Administration (FDA) on January 26 announced updated rules regarding animal feed and human food to strengthen existing firewalls that protect Americans and cattle from exposure to bovine spongiform encephalopathy (BSE). FDA says its additional measures further strengthen it’s 1997 "animal feed" rule, FDA said. To implement these new protections, FDA will publish two interim final rules that will take effect immediately upon publication, although there will be an opportunity for public comment after publication. The first will ban the specified materials from FDA-regulated human food (including dietary supplements) and cosmetics. The second is designed to lower even further the risk that cattle will be purposefully or inadvertently fed prohibited protein and will implement four specific changes in FDA’s present animal feed rule. The rule will:
FDA still sees no reason to ban place feeding ruminant protein to non-ruminant animals such as chickens and pigs, Food and Drug Administration (FDA) Deputy Administrator Lester Crawford told the Senate Agriculture Committee last week. Lawmakers inquired as to why the feeding ban didn’t include the feeding of ruminant proteins to animals like chickens, turkeys and hogs. "The actions that we take will be subject of interim final regulation," Crawford explained. "They have to be science based. There has to be a risk — to animal or public health — that is accepted in the scientific community. Pigs and chickens are not susceptible to BSE." Asian Rust Found In Rio Grande do Sul Asian soybean rust has been detected in eastern Rio Grande do Sul’s soybean area. The fungus was detected near the town of Nao Me Toque, which is about 100 kilometers southwest of Passo Fundo. This is this season’s first appearance of the disease in Rio Grande do Sul; it was first detected in Mato Grosso this season in mid-November. And over the course of the last several weeks, it has been reported throughout the Center West, as well as Parana, Sao Paulo, and Bahia. Last season, Brazil’s farmers were caught unprepared for the disease with significant losses reportedly occurring in Bahia and Mato Grosso. Soy Complex Closes Higher On Argentina’s Crop Forecast And Supply Concerns The soy complex closed higher January 29 reflecting concerns about dry conditions in Argentina. Dry weather has caused Argentina’s Agriculture Minister to reduce its soybean crop forecast to a range of 35 million to 37 million tonnes from 37 million. Meanwhile, U.S. soybean exports for 2003-04 will likely be up to analysts’ expectations of 25.6 million tonnes, which would force the 2003-04 crush to drop nearly 5.06 million tonnes below the previous year. The crush during the first 4 months of 2003-04 was just 81,600 tonnes below the previous year. Unless the United States imports an unheard of quantity of soybeans or soybean meal and oil, prices are headed to sharply higher levels because strong exports are rapidly depleting an already small U.S. soybean crop. March bean futures closed up $1.56, finishing at $297.25 May was $1.10 higher, closing at $297.44 and July gained $0.73, ending at $293.85. March meal was up $0.88, closing at $277.89; May was $1.32 higher, finishing at $277.56; and July decreased $1.54 ending at $274.14. March oil closed $3.09 higher to finish at $640.88; May was up $4.19, closing at $638.67; and July lost $3.97, ending at $634.70.
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