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3. May 2004 Brazil Lowers Its Crop Estimate Brazil’s Crop Supply Agency (CONAB), which is part of the Ministry of Agriculture, issued its April Production Report last week forecasting Brazil’s soybean crop at 50.2 million tonnes, down 7.5 million from its February forecast. CONAB forecast Mato Grosso’s production at 14.5 million tonnes; Parana was forecast to produce 10.2 million tonnes of soybeans; and Rio Grande do Sul production is expected to be 5.5 million tonnes. March Crush Exceeds Expectation The U.S. Census Bureau said soybean crush for the month of March was 3.52 million tonnes, one million bushels higher than industry expectations. Census also said soyoil stocks were much lower than previously thought at 842,000 tonnes. Pre-report industry estimates averaged 870,000 tonnes. Although the crush figure was above industry estimates, tight supplies are holding it well below normal. The previous three-year average on crush for the month of March is 52.2 million tonnes, according to Census Data. Industry experts say that if the industry is to reach USDA’s forecast for total domestic usage of 40.1 million tonnes, processing rates must be cut 680,000 to 708,000 tonnes per month for the rest of the marketing year, which many doubt is possible. PNW Export Levels Come at a Price The record high ocean freight spread to Japan has boosted exports through the Pacific Northwest (PNW) since late January. As PNW volume grows, lifting capacity has come at a premium as a variety of grades, classes, and protein levels of grain are being segregated among the silos. This leads to an underutilization of storage since specific lots of grain cannot easily be commingled within individual silos. Moreover, some vessels that were due at port have been switched, leaving segregated grain lots in underutilized silos until the intended vessel arrives. Unloading time for trains at the elevators has been held up by the lack of capacity at some PNW elevators. In many instances grain is being loaded directly from rail to ship. As a result, unit train delivery times have grown and delays increased across the system. Last week the Burlington Northern Santa Fe Railway gave notice that for each shuttle train held short of the unloading facility, that facility may be charged $1,000 per hour. This announcement will be effective on May 5 and will be determined at the discretion of the BNSF grain desk. India Likely Will Delay Tariff Reduction On Soyoil A recent drop in global soyoil prices could prompt the Indian government to reduce tariff values on imports of the oil, but any revision is unlikely to happen soon because of ongoing parliamentary elections, a senior industry official said April 29. Tariff values are a set of fixed prices used by the government as a basis for calculating import duties. The tariff value of crude soyoil in India is currently at $643/tonne. The tariff value for crude palm oil is at $504/tonne, for refined palm oil at $543/tonne, crude palm olein at $532/tonne and refined palm olein at $552/tonne. The import duty on crude and refined soyoil is at 45%. Crude palm oil carries a duty of 65%, while refined, bleached and deodorized palm olein carries a duty of 70%. While India’s import duty structure for edible oils is not expected to be altered anytime soon, there was room for the government to revise tariff values, particularly for soyoil, said D.N. Pathak, executive director of the Indian Vegetable Oil Processors Association. Any change in tariff values would also affect the final amount of duties paid by oil importers, Pathak said. "The elections are going on. I don’t expect any changes in terms of the duty structure in the near future," he said. A revision of tariff values, however, was possible, though highly unlikely, he said. "The price of soyoil has come down about $70 per tonne . So (a reduction of tariff values) is a step that the present government can take now. But I don’t expect it to happen until a new government is formed," he said.
Many Obstacles Stand In The Way Of A South American Soybean Market While local industry officials in Argentina and Brazil talk about an exchange on the scale of those in Chicago, there are several reasons for caution. Significant complications exist in the plan for a region-wide South American soybean market that can compete with the CBOT and many in the United States are skeptical it can work. "There are some complications," said Ricardo Marra, president of the Mercado a Termino de Buenos Aires, Latin America’s top agricultural commodities futures market. "We have export taxes in Argentina and Brazil has some financial regulations that limit deposits abroad, so there are some obstacles to a regional market." Another obstacle may be the sheer habit that traders, even local ones, have of operating in Chicago. Many of the traders in Argentina operate in the futures market in Chicago and analysts believe it could be difficult to break that mentality. Analysts also say that an obstacle could be the need is for South American countries to become more reliable politically and economically. The idea for a South American market has been on the table for a very long time but concerns about economic stability has kept the idea from coming to fruition. Soy Complex Higher On Lower Than Expected Soyoil Stocks The soy complex closed higher on April 29 reflecting new estimates of smaller-than-expected soyoil stocks. Some analysts believe the industry is underestimating how large 2003-04 Census exports will be. As a result, the market also could be underestimating how deep the cuts in the crush will have to be in the coming months. Prices to date have not led to rationing as domestic use of soybean meal and oil were record large in January and March. Much higher prices could be seen in the weeks and months ahead with prices becoming increasingly volatile. May bean futures closed up $6.61, finishing at $372.76; July was $7.35 higher, closing at $367.43 and August gained $4.59, ending at $341.90. May meal was up $4.63, closing at $342.48; July was $3.53 higher, finishing at $340.28; and August increased $2.65 ending at $323.75. May oil closed $21.83 higher to finish at $762.13; July was up $20.50, closing at $750.00; and August gained $16.09, ending at $718.92.
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