May 11, 2007

Logistics favour continued US-China soy trade

Logistical advantages like location and ocean freight costs will continue favouring US soybean exports to China despite expected soy expansion in South America and reduced production from the US Midwest, the US Soybean Export Council said in Sao Paulo Thursday (May 10).

"Our customer base around the world has questioned whether supply would be an issue for us because of the impact of biofuels or a shift in acreage, but we have a consistent supply and large inventory. I see the export trending positive overall," US Soybean Export Council Chief Executive Officer, Dan Duran, told Dow Jones Newswires.

Duran said Chinese soy importers had inquired about soy supply as the US farmers make room for corn to feed ethanol demand. When asked if Chinese importers were warning about turning to South America for soybeans, Duran said the US has logistical advantages that are hard to beat.

For starters, the two countries share the same latitude. Shipments of US soy to Chinese ports are a relatively straight line across the Pacific Ocean. South American soy leaving Brazil and Argentina have to go around the southern tip of Chile near Antarctica and traverse the entire Pacific from south to north. The other option is to go across the south Atlantic Ocean, past South Africa to the Indian Ocean, then through South-east Asia before eventually reaching China's coast.

"The Chinese have been very comfortable and enthusiastic about our ability to supply them," Duran said, adding that the US should ship some 13 million tonnes of soybeans to China this year. By comparison, Brazil has exported slightly over 1 million tonnes of soybeans to China between January and March, according to government figures.

Duran said pilot projects in some states to use soyoil to produce biodiesel would largely provide short-term opportunities to farmers, but, "overall, in the US, soy will continue to be produced for food," he said.

Duran was in Sao Paulo on Thursday talking about joint-marketing efforts with Brazilian soy producers in India and elsewhere.