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7. June 2004 U.S. Not Adequately Prepared For Asian Rust Federal agencies, including USDA, are not prepared for a potential outbreak of the Asian strain of rust fungus, the American Soybean Association said June 3. Ron Heck, the group’s president, said that ASA is urging USDA "to more rapidly undertake development of a national strategy for controlling and mitigating the potential for an Asian soybean rust infestation in the continental United States." In a prepared statement, ASA said it is now "seeking to ensure that USDA and other government agencies take the critical steps necessary to mitigate the impact of soybean rust upon arrival." ASA says there are a number of actions USDA, the Environmental Protection Agency and other federal agencies must take that are critical to ease the potential impact of the fungus. Among them is approval of effective fungicides for use on soybean rust, and to ensure sufficient quantities of these products be locally available in advance of a rust infestation. Brazil To Scrutinize Soybean Exports Brazil is imposing tighter sanitation controls on soybean cargoes, after China turned away at least two Brazilian soybean shipments tainted with fungicide. Reuters reports that sanitary agents from the Brazilian Agriculture Ministry’s food safety department are expected soon to impose a limit of one percent foreign material in soybean cargoes, such as dirt and plant material, both for domestic and foreign markets. The current limit is 2%. Meanwhile, last week China rejected a third soy cargo from Brazil, saying it is contaminated with a harmful chemical known as carboxin. An industry source told the news service that Chinese quarantine authorities had suspended Brazilian soybean imports from Cargill’s Brazilian unit, Louis-Dreyfus Asia, Archer Daniels Midland Company’s Brazil unit, the Nobel Group and three Brazilian firms. China May Cancel Some Brazilian Shipments And Switch To New Crop U.S. Beans Brazilian exporters may fail to deliver up to two million tonnes of soybeans to China because of barriers raised by Chinese authorities, Sergio Mendes, president of the National Cereal Exporters Council said last week. "All but one shipment are paralyzed because of the ban. It is extremely risky to send soybeans to China," said Mendes. He said if exports are delayed further, Chinese authorities would seize the opportunity to cancel contracts and buy from the United States later in the year. "The contamination threshold is so low that it is impossible to risk shipments there," he said. Mendes said Brazilian exporters had sent three million tonnes of soybeans to China this year out of an estimated five million tonnes that had been sold up to May. It is obvious that China wants to renegotiate these shipments, he said. China To Remain Oilseeds Importer China’s highly stretched agriculture sector cannot keep up with expanding domestic demand for oilseeds and products or grains and the country will have to continue high imports, newsletter Oil World said last week. "In our assessment more than 70% of Chinese soybean crush requirements will have to be imported in 2004-05," it said. The newsletter was commenting on recent news of Chinese buyers rejecting soybean cargos on the grounds that they were contaminated. Oil World said Chinese quarantine authorities had recently rejected soybean shipments with a fungicide contamination of 0.06%, which is well below the international standard of a maximum 0.2% contamination. "This has created a high degree of uncertainty and confusion in South America as well as on the world market and it has contributed to the price weakness, primarily in the second half of May 2004," the newsletter said. "The uncertainty in the market was fueled by reports that Chinese crushers plan to cut their soybean imports by 40 to 50% in July-December 2004." Thailand Undecided On Future Of 5% Import Tax On Soymeal The Thai government’s subcommittee on feedmeal is still undecided over whether to remove a 5% import tax on soymeal at a meeting on June 3, said Siripol Yodmuangcharoen, director-general at the Department of Internal Trade at the Commerce Ministry. Local feedmeal producers, meal users and farmers in the livestock sector have been urging the government to remove the tax, as they are suffering from high soymeal prices. Support is especially vocal from farmers who say the removal of the soymeal import tax will help reduce the cost of raising live hogs. However, local soymeal producers oppose the proposal. Soymeal prices have risen to around 15 baht a kilogram from around 9-10 baht/kg recently. The higher prices were triggered by lower global production, which pushed up world soymeal prices. Siripol said the subcommittee agreed to set up a joint committee comprising both government officials and representatives from relevant industries to study the soymeal market and prices in Thailand as well as the impact of an import tax cut. The subcommittee will consider the results of the study at the next meeting before making any decision on the tax cut, he said. However, the subcommittee has not set a date for the next meeting, Siripol said. Soy Complex Lower On Dry Weather And Potential Chinese Cancellations The soy complex closed lower on June 3 reflecting a dry weather outlook and ongoing concerns about the potential for China to cancel a substantial number of cargoes. Expectations for a tight old-crop situation appear to have been undermined by lackluster soybean meal basis levels, but that could be an indication that the crush has not slowed much from April’s rate, although some contend that a lack of slowdown in the crush indicates that soybean supplies are larger than expected. While the soybean basis is at lofty levels, it has eased in recent weeks in some areas. The June 30 stocks report will provide an important gauge of how tight remaining soybean supplies are, but by the time it comes out, the July contract will be entering its delivery month and August soybean futures may have questionable utility as a source of old-crop soybean supplies. As such, August soybean meal and oil may have more potential to reflect the prospective tightness in old-crop supplies. July bean futures closed down $15.98, finishing at $296.15; August was $13.87 lower, closing at $286.78 and September lost $13.60, ending at $264.00. July meal was down $12.90, closing at $280.54; August was $14.00 lower, finishing at $273.15; and September decreased $13.23 ending at $259.92. July oil closed $23.37 lower to finish at $615.08; August was down $22.71, closing at $607.15; and September lost $17.42, ending at $596.34.
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