The Hindu Business Line : Suspense mounts over US soya crop

WITH each passing day, suspense over the size of the next US soyabean crop is mounting. Behaviour of the weather in recent weeks, especially in the Midwest has not been one to warrant a serious concern; but doubts persist.

The first half of this month is said to be crucial because of expectation of cooler temperatures that could potentially hurt yield. No wonder, the world oilseeds and vegetable oil trade is eagerly awaiting the next US Department of Agriculture (USDA) report due on September 13.

The last report issued on August 12 took many by surprise for scaling the size of next harvest down to 78.3 million tonnes from the earlier expectation of 80 mt. Will there be a further reduction this month? Many believe the US soyabean crop has already been made and the possibility of a further significant reduction is remote. But for every optimist there is a sceptic too. Experience of 2003 when sudden changes in crop numbers sent the market into a tailspin is still fresh in players' minds.

Given the current tightness in soyabean supplies and projected low carryover into the new season, any further reduction in forecast crop size can take the market much higher than forward prices currently traded.

The China factor would also come into play. Entry of China has the potential to cause a price spike, notwithstanding the expectation that global oilseeds production in 2004-05 would be a record at upwards of 370 mt and soyabean crop of about 220 mt.

Indian crop conditions, although considerably improved from the scare of a near-certain disaster caused by prolonged dry spell in July, are far from satisfactory. On current reckoning, harvest of anything between 105 lakh and 110 lakh tonnes oilseeds looks a possibility in the kharif season. If realised, it would mean a reduction of nearly 25 lakh tonne from kharif 2003.

Edible oil import requirement for the festival season has not been covered fully. Market participants are still waiting for the announcement of the much-expected reduction in tariff values. Desperate attempts are on to lobby the Government for a reduction or correction in carotenoid value for palm oil.