February 26, 2004

High CBOT And Bird Flu To Hit China Soy Imports

China should see a significant fall in 2003/04 soy imports as a result of the bird flu outbreak and soaring Chicago futures.

Traders are now revising downwards their estimates for soy imports by China, the world's top soy importer, to 18-20 million tonnes, compared with 23 million tonnes predicted by the U.S. Agriculture Department (USDA) after 21.42 million in 2002/2003.

"It is highly possible that total imports will be around 18 million," said one trader at an international house.

"Bird flu is one thing, high prices another...One guy asked me today if I could find a home for his purchased cargo. It's no wonder, with this kind of crazy CBOT. China has overbought."

On Wednesday, weather concerns in South America, the world's top soy producing area after the United States, pushed up Chicago soy prices to a fresh 15-½ year high during Asian hours.

The latest rally follows gradual climbs since August against a backdrop of strong Chinese demand and dwindling U.S. soy stocks after two years of short crops.

But traders said the expected drop in Chinese demand might help keep the global deficit not much larger than the 2.82 million tonnes forecast by USDA in its latest report, or even tip the balance to a small surplus.

In its February report, USDA put global 2003/2004 output at 199.73 million tonnes versus usage of 201.36 million.

USDA expected a Brazilian crop of 61 million, compared with the current market estimate of 57-59 million, and Argentine output of 36.5 million, against a market estimate of 35 million.