The Hindu Business Line : Higher prices to expand US soya crop

EVEN though the overall crop is expected to set new record, serious concerns about the size of the upcoming South American soyabean harvests due to unfavourable weather have developed. From an initial expectation of 61.5 million tonnes (mt), the Brazilian Government recently scaled the crop size down to 57.7 mt.

The concerns are magnified in the US market by the extreme tightness of supplies, with carry-out stocks there expected to be the smallest for 27 years. Futures at Chicago were at their highest since 1988 when they reached $10 per bushel.

But there is a hope of some relief from high prices in the latter part of the year. Current high prices are most likely to encourage higher production, as American farmers would bring more area under soyabean during 2004-05. The US government believes that on the back of rising prices, farmers will plant more soyabean.

The planting season begins in May and the US is by far the world's largest producer; but its crop was affected by adverse weather for the second year running with production of 65.8 mt in 2003-04, down from 74.8 mt in 2002-03.

Soyabean planting for 2004-05 is expected to reach the record level 30.1 million hectares (mha) in the US, up from 29.7 mha of the previous year because farmers are expecting strong prices to continue. The harvest commences by September.

However, despite anticipated higher acreage, the size of crop is subject to the vagaries of weather. Unfavourable weather affects yields. Assuming normal weather and satisfactory yields, the prices of soyabean and ingredients could ease in the next 12 months bringing relief to manufacturers and processors. .

Interestingly, despite high prices, companies supplying soya-derived products are enjoying a buoyant market as consumer demand for such products keeps on rising. Several soya-based products are to be launched in the coming months.

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