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31. May 2004 Crush Still Adjusting To Short Supply; Oil Stocks Remain Low The Census crush report pegged the April crush at 3.06 million tonnes, slightly below trade expectations. The estimate was sharply lower than the previous month’s crush figure of 3.52 million tonnes due to seasonal downtime and maintenance, and lack of available soybeans. Meanwhile, soybean oil stocks were lower than expected at 744,000 tonnes, also on the low end of trade expectations. This is down from the March stocks level of 842,000 tonnes. Strong domestic use and shorter production stemming from slower soybean crush are the principal reasons for the decline in oil inventories. Senate Bill Would Provide $4.6 Billion for Mississippi Projects A bipartisan group of senators whose states depend upon the Mississippi River for at least some of their transportation needs has introduced legislation aimed at modernizing both Mississippi and Illinois River locks and dams. The legislation would authorizes $2.3 billion for seven new locks and $1.46 billion for ecosystem restoration. An additional $850 million will be paid from the Inland Waterway Trust Fund, which is funded by private users. Half of the cost of the locks will come from the trust fund, which collects barge fuel tax. Principal sponsor Kit Bond (R-Mo.) notes that the current water transportation system, designed to last 50 years is nearly 70 years old. "The current system is in decline," said Bond. "Jobs, markets and habitat are at stake. In order to address these problems the [Army] Corps [of Engineers] must be allowed to begin modernizing and improving the locks and dam system now." In a statement, Bond pointed out that freight shipping on the nation’s highways and railroads are projected to grow 70 percent and 85, respectively, in the future and that those transportation modes cannot handle the increase. Waterways, therefore, are an alternative. China Bans Two More Brazilian Soy Exporters; Rio Grande do Sul The Problem Port Concerns about the flow of Brazilian soybeans to China heightened May 24 after Chinese authorities banned local soybean shipments from two more major exporters, raising the number of embargoed companies to four. Quarantine authorities announced that Louis Dreyfus Asia Pte Ltd. and ADM do Brasil Ltda would be temporarily banned from selling any Brazilian soybeans to China due to contamination of lots. The companies will be added to a list of firms that includes Noble Grain Pte Limited, Cargill Agricola S/A, Irmaos Trevisan S/A-Ind Com, E Agricultura, and Bianchini S/A Industria. All these firms were banned after a shipment of 58,000 tons was found to be tainted by fungicide-treated seeds. According to a statement on the Chinese State Administration of Quality Supervision Web site, Louis Dreyfus exported the tainted cargo, which arrived in Guangdong province, while the suppliers of the cargo were ADM do Brasil Ltda, Cargill Agricola S/A. All the shipments were loaded, or being loaded, at the southern port of Rio Grande. The situation has led to cooperatives in Rio Grande do Sul to sharply slow the delivery of soybeans to Rio Grande port due to a dramatic slowdown of exports, according to the state cooperative federation Fecoagro. "As a result, the co-op’s silo (with a capacity of 500,000 tonnes) is virtually full and we stopped sending trucks to avoid having long lines," said Rui Polidoro Pinto, the Fecoagro president On May 25, a port authority spokesman said there were currently no soy shipments being loaded after the last shipments waited 10 days for clearance from the Agriculture Ministry before leaving to load at other ports. Some Of China’s South American Soy Orders Could Be In Jeopardy Domestic problems over credit and tumbling soymeal prices may be putting large soy orders to China in jeopardy. Many crushers in China, the world’s top soy importer, are seeking to cancel or delay shipment of high-priced South American cargoes, threatening contracts for millions of tonnes of the oilseed. Industry observers said many of the crushers had run out of cash following a credit tightening by the government, which is trying to rein in investment in fixed-assets and inflation caused by surging prices for raw materials, including soybeans. Traders estimate some two million tonnes of soybeans could be at risk, if not more, as Chinese crushers had contracted seven to eight million tonnes from South America this year. "It’s a disaster," a trader based in Shanghai said. "The biggest issue is the payment problem... Maybe they are no longer able to pay. Maybe in two months, we will see some crushers going bankrupt." Venezuela Cancels GM Soy Project Environmental and rural organizations in Venezuela have succeeded in pushing the government to cancel a planned project to plant Roundup Ready genetically modified soybeans. According to Venezuelan Agriculture minister Arnoldo Marquez, a contract to plant up to 500,000 hectares with GM soy had been signed with Monsanto three years ago. "Several tests were carried out at Meza de Guanipa, and now the president has cancelled it," said the minister. Opposition to the Monsanto deal had been led by peasant organization Via Campesina who argued that use of GM crops was not compatible with other aspects of government policy. Venezuelan president Hugo Chavez regularly speaks out against the influence of foreign multinationals in Latin America. Opponents of GMOs are now calling for clear legislation against the cultivation and sale of GM crops in Venezuela. "We need to consolidate the prohibition of GMOs as a State Policy so that all ministries work in a coherent manner to achieve the goal of a Venezuela Free of Transgenics," said Lorna Haynes of the Action Network for Alternatives to the use of Agrotoxins in Venezuela. Soy Complex Lower On Fund Selling And Export Sales The soy complex closed lower on May 27 reflecting fund selling and sales by exporters that offset expected Chinese cancellations. However, all the news was not particularly bearish as the April crush and exports sales were not outside the range of trade expectations. It does not appear that the underlying fundamentals have dramatically changed in recent weeks except for some erosion of some U.S. export prospects to Mexico (some sales have been shifted from the United States to Brazil). Also, news of a new occurrence of bird flu in Texas could put further pressure on the market. July bean futures closed down $18.37, finishing at $302.03; August was $16.17 lower, closing at $286.41 and September lost $15.43, ending at $259.78. July meal was down $22.05, closing at $283.62; August was $19.84 lower, finishing at $273.92; and September decreased $18.08 ending at $259.70. July oil closed $28.22 lower to finish at $608.03; August was down $23.37, closing at $599.21; and September lost $19.18, ending at $584.22.
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