China And Brazil Negotiate Agreements On Fungicide And GMO Issues

China and Brazil have reached agreement on a number of sanitary issues that had been threatening Brazil’s soy exports to China. Following a meeting with Chinese quarantine authorities in Beijing, an official from the Brazilian Agriculture Ministry said he had received assurances that China would not immediately reject soy cargoes found to contain the fungicide known as carboxin. “If they find something, they are going to notify the Brazilian embassy to avoid cargoes being immediately refused,” Gilson Westin Cosenza, international consultant for Brazil’s Department for Inspection and Plant Protection. Alleged carboxin contamination caused China to reject several shipments of Brazilian soybeans between April and June of last year.

Westin also indicated that problems relating papers required for genetically modified Brazilian soybean shipments would soon be resolved. “There’s no problem in this area – new documents have already been provided,” he said. Beijing has been refusing to issue new import permits for Brazilian soybeans since January 1, citing Brazil’s failure to provide documents guaranteeing the safety of the oilseed.

Westin also said officials had provided assurances that new Chinese sanitary standards for soyoil would not hamper trade. The rules relate to hexane, a product used to extract edible oils from seeds and vegetables.

Monsanto Continues To Press Brazilian Farmers For GMO Royalties

Monsanto will have to fight for its royalties on its genetically modified RoundUp Ready soybean technology from Brazilian farmers this season, according to analysts. Last year President Luiz Inacio Lula da Silva allowed Monsanto to charge farmers 0.60 Reals per 60-kilogram bag for using seeds originally smuggled from neighboring Argentina. However, the farm lobby Brazil’s Congress reacted to the company’s plan to double royalties in the 2004-05 season by inserting a clause in a new law permitting royalties only on seed sales. Since the sale remains illegal, the law technically means no more royalties.

Monsanto could probably get the new royalties clause overturned through the courts, arguing it contravenes existing patent law, observers suggest. However, Brazil’s legal system works slowly and a decision may not come in time for the current harvest.

This dilemma has forced Monsanto to negotiate payments directly with farmers this year, using the threat of impounding Brazilian GMO soybeans at European and Asian ports as pirated material. As a result, Brazilian farm representatives admit their constituents will have to pay something. Nobody in the soy industry wants ships cargo impounded, according to Carlos Sperotto, president of the Rio Grande do Sul Agricultural Federation, the main farmers group in the state where 90% of Brazil’s GM soybeans are grown.

Indian Soymeal Exports Decline

Indian soymeal exports are expected to decline by more than 26% over the course of the 2004-05 season reflecting weak international prices and higher domestic demand. According to the Soybean Processors Association of India (SOPA), the country is likely to export only 2.5 million tonnes of soymeal in 2004-05, down from 3.4 million tonnes in 2003-04. Rajesh Agrawal, the SOPA’s chairman, said: “Large buyers like South Korea have covered huge quantities from South America and the U.S., as Indian prices were high.”

Agrawal explained that India was unable to be very competitive in its soymeal export prices this year mainly because of firm local prices of soybeans. He added that the U.S. and South America were aggressively selling soymeal but Indian farmers were holding back soybean sales in the hope of an increase in domestic prices.

Indian farmers enjoyed favorable prices in 2003-04, but a record U.S. soybean crop for 2004-05 and forecasts of huge crops in Brazil and Argentina have depressed global soymeal prices in the current season. During the October to December quarter, Indian soymeal exports reached 512,000 tonnes, which was nearly half the level of shipments reached in the same period of the 2003-04 season. SOPA’s assessment is supported by recent statistics from the Solvent Extractors Association of India (SEAI), which showed a decline of more than 55% in Indian meal exports over the third quarter of 2004. Moreover, SEAI has projected that Indian meal exports will fall by as much as 30% over the 2004-05 season as overseas demand dries up in the face of competition from other major origins.

Meanwhile, India’s domestic consumption of soymeal has been strong because of good growth by the poultry industry. India is expected to consume more than 2 million tonnes of soymeal in 2004-05, up from 1.5 million tonnes in 2003-04. Over the October to December quarter Indian companies had already sold around 500,000 tonnes in the domestic market.

Malaysia To Implement Tree Re-Planting Program For Palm

Malaysia, the world’s largest palm oil producer, plans to boost replanting of old palm trees if a bearish trend in vegetable oil prices continues, Haron Siraj, chief executive of Malaysia’s Palm Oil Promotion Council said last week. Replanting, which is done on a small scale each year, reduces palm oil production and supports prices since there is no oil output from new trees for three years. “Right now there is not much urgency but if the market falls further then we will want to accelerate replanting,” Siraj said.

Siraj said that about 10% of the 3.8 million hectares under palm cultivation have trees older than 25 years and need replanting to increase production. “The estates are doing it (replanting) on their own, but we feel it is not sufficient,” he said. “We want to accelerate if prices fall badly.” He added that high stocks of palm oil, which have reached 1.4 million tonnes, have also put pressure on prices.

Soy Complex Mostly Higher On Tight Supplies And Slow River Movement

The soy complex closed mostly higher on January 20 reflecting tight supplies. River movement also has become difficult and producers are continuing to hold rather than sell their beans because of the large U.S. crop. For the 2005 crop, USDA is predicting a possible 10% yield loss from Asian rust and 61 million tonnes of production by Brazil, lower then the last official USDA estimate of 64.5 million tonnes. March bean futures closed up $2.02 finishing at $192.26; May was $0.83 higher, closing at $191.43 and July gained $0.55 ending at $193.27. March meal was up $3.75, closing at $175.16; May was $1.98 higher, finishing at $173.83 and July increased $1.32 to finish at $175.93. March oil closed $1.10 lower to finish at $431.22; May decreased $2.20, closing at $432.98; and July lost $2.65, ending at $435.19.

Because of the Martin Luther King, Jr. Holiday and the “Inauguration Day”, USDA’s export sales the report for week ending January 13, will be released on Monday, January 24, 2005. The ASA Weekly will update the exports table next week.