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09. February 2004 Impact Of Avian Influenza Outbreak On United States The expanding outbreak of avian influenza in Asian poultry flocks has become an increasing concern for the soybean market. Ten countries are reported to have avian influenza since South Korea’s first outbreak in mid December. They now include Vietnam, Japan, Thailand, Hong Kong, Cambodia, Laos, Indonesia, China and Taiwan. Malaysia and Philippines have not reported any flu outbreaks or unusual mortality. However, it seems unlikely that these two countries would escape due to their proximity and flight patterns of migratory and wild birds. Excluding China, these countries annually import about 19 million tonnes of soybeans and soybean meal in meal equivalent. It appears that no more than 50 percent of this is fed to poultry. So, if there was a 10 percent reduction in poultry production, on the order of 1 million tonnes of soybean meal demand potentially could be lost. The likely demand impact probably falls somewhere between 0.5 and 1.5 million tonnes on an annual basis with a similar quantity at risk in China. However, China may have to increase its commercial poultry production to make up for a reduction in non-commercial production if the commercial sector can remain free of the disease. If avian influenza has a negative impact on world soybean and soybean meal import demand, it may occur too late to have an impact on U.S. exports as Asian import demand largely will shift to South America within a month or two and U.S. exports of soybeans and products already are forecast at record low levels during the latter part of the 2003-04 marketing year. If South American export prospects are undermined, it would leave more South American soybeans available to compete in the export market against new-crop U.S. soybeans this fall. Unless a reduction in Asian import demand allows South America to somehow export more soybeans and products to the United States, avian influenza ultimately could have a negligible impact on old-crop soybean prices with the potential for it to be positive for soybean futures if U.S. poultry production expands to take advantage of export opportunities to Asia. Ban On GMO Soybeans Leads To Logistical Nightmare At Port Of Paranagua Brazilian soy exporters are concerned that a ban on genetically modified organisms at the main grains port of Paranagua and a record soy crop will lead to a logistics nightmare in coming months. "Our only hope is that the federal government will convince the port to allow GMOs before the start of the harvest," said Sergio Mendes, executive secretary of the National Association of Cereal Exporters, or ANEC. Transport and Justice ministries are set to meet with port authorities this week to work out a solution. Time is of the essence as harvesting of the 2004-05 soy crop, estimated at nearly 60 million tonnes, has already begun and will peak in February and March. Federal laws freed the planting and sale of GMO soy for the first time in Brazil this season. Parana, however, took a hard line passing a law banning GMOs from entering or being produced in the state. The Supreme Court eventually overruled the law, but so far the state has not complied with the decision. Rather than impose an all-out ban on genetically modified beans, exporters are proposing that the port use its main silo for conventional soy and reserve the rest for GMO beans. "The situation is very worrying. We need to find a solution quickly or everyone could lose out," said Jose Roberto Correia, director of Brazilian port authorities association, Soceppar. In an attempt to limit possible delays, exporters have been avoiding closing contracts for Paranagua port this season. "Brazil already lost orders of around 1 million tonnes to Argentina earlier this month due to concerns about Paranagua," said Mendes, adding that this was equivalent to around $280 million in revenues. The orders were from China, and according to Mendes unless the situation is resolved Brazil will lose more business as China returns to the market in coming weeks. Despite the potential for chaos come the peak export period, port authorities stay they will maintain the GMO ban. "The port is well prepared. Everything is ready to flow smoothly and we are hoping for record volume this year," said Orsival Francisco, Paranagua port commercial director. He added that the port has made some adaptations in relation to last year, which will allow it to increase average capacity to 100,000 tonnes per day. He also said that only trucks which have a ship waiting at the port will be allowed into the loading area. "The port will no longer be used as a storage area. This year there will be greater coordination been trucks and ships," said Francisco. Meanwhile acting Parana state governor Orlando Pessuti recently said the state will maintain its ban on GMOs even if this means some delays. "We are reinforcing inspections at all state borders and we will do everything in our power to prevent GMOs being sent to the port," said Pessuti. The state has 28 inspection points on the border with Santa Catarina, Mato Grosso, Sao Paulo and Paraguay. "Somebody will have to back down. Only time will tell," said ANEC’s Mendes. Philippines May Cancel Import Duty On Soybean Meal For Six Months The Philippine Department of Agriculture has announced that it will push for the duty free importation of soybean meal for six months to help the domestic poultry and hog raisers cope with the increasing cost of feeds, according to information from USDA. The Philippine Department of Agriculture will ask the Cabinet-level Tariff Related Matters committee to allow the duty-free soybean meal. The Agriculture Secretary, Luis P. Lorenzo, Jr. in his opening remarks at the start of the Philippine Food Expo 2004, on January 28, said that his department will push for the duty-free importation of soybean meal to help local poultry and hog raisers cope with the rising cost of feeds. Soybean meal is currently assessed a 3% tariff and is considered a substitute for corn. There is no domestic production of soybeans in the Philippines. Soy Complex Closes Higher On Combination Of Bullish Elements The soy complex closed higher February 5 reflecting a mix of various bullish elements and heavy technical buying. Soyoil saw its biggest boost on a bullish Statistics Canada report that put Canadian canola stocks under trade expectations, allowing oil to reach the highest level since July 1988. Rumors switching delivery of soybeans from South America to the Pacific Northwest, talk of China import South American soyoil, higher cash basis and fund selling combined to boost prices. Soybeans made the biggest gain in the soy complex in part due to the export sales report that revealed that China was not done buying soybeans from the U.S. The export sales report revealed that China was the biggest customer, purchasing 124,700 tonnes and the primary destination for actual shipments of 399,700, which was nearly half of the total 801,400 tonnes of exports. And, with exuberant ocean freight rates, China was switching delivery of soybeans from South America to the Pacific Northwest. Soyoil was boosted to a new contract high primarily from Statistics Canada’s canola stocks figure was well below early trade estimates. March bean futures closed up $9.74, finishing at $305.80 May was $9.46 higher, closing at $305.52 and July gained $8.08, ending at $299.09. March meal was up $5.84, closing at $278.11; May was $4.74 higher, finishing at $276.46; and July increased $4.19 ending at $271.39. March oil closed $20.06 higher to finish at $678.36; May was up $20.94, closing at $677.03; and July gained $18.08, ending at $667.33.
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