June 3, 2004

 

 

Brazil Government May Suggest China Check Soybean Quality

 

Brazil, China's second-biggest source of soybeans, may propose next week China inspect shipments of the oilseed at Brazilian ports. This is to assure quality and prevent interruption of trade worth more than $2 billion a year.

 

Agriculture officials in Brazil are discussing that plan with farmers and traders, and may also require shippers to obtain government assurances their cargoes are not contaminated, said Jose Mario Ferreira Filho, first secretary at Brazil's Beijing embassy.

 

"Brazil's agriculture ministry is taking steps to define new rules on the quality of soybeans for export,'' the official said in a telephone interview. "We are having very constructive contacts with the quality control authorities here on this.''

 

Brazilian soybeans shipped by Cargill Inc., Louis Dreyfus and other trading companies have been rejected by Chinese authorities since April 29 because of contamination by pesticide- laden soybean seeds. The shipments violated China's food-safety regulations, Chen Xitong, an official at China's quality inspection bureau, said in an interview yesterday.

 

At least three ships, carrying about 150,000 metric tons of soybeans, have turned back, prompting China's quality inspection bureau to block further Brazilian soy shipments from Archer Daniels Midland Co., Bunge Ltd., Cargill, Louis Dreyfus and three other trading companies, a China State Grain Administration official said yesterday.

 

Processors in China, the biggest soybean importer, have the capacity to crush 27.4 million tons of the oilseed in 2004, up from 26.4 million tons last year. Capacity rose 5.6 million tons between 2002 and last year, helping to boost its 2003 soybean imports by 83 percent to 20.7 million tons.

 

China banned Brazilian soybean shipments several times in the past year because of sanitary problems. In November, Brazil pledged more inspections to ensure shipments meet international quality standards. Brazil, second to the U.S. as a supplier of soy to China, shipped 6.5 million tons of the oilseed to China last year, valued at $2.2 billion.

 

Soybeans for July delivery on Brazil's BM&F exchange rose 0.8 percent in after-hours trading to $266 a ton, after a 3.1 percent gain yesterday.

 

The interruption in supplies from Brazil has reversed a decline in China's soybean prices.

 

"It won't be easy to resolve this quality problem China is experiencing with supply from Brazil, so it's had an effect on domestic prices,'' said Liu Ri, head of research at Liaoning Cifco Futures Co. in Dalian, one of China's three biggest soybean futures trading companies.

 

Soybeans for November delivery on the Dalian Commodity Exchange have risen 3 percent this week to 3,071 yuan ($371) a ton at the close today from 2,981 yuan on Monday. That is after a decline in prices for soybean meal and cooking oil in China pushed Dalian's November soy down 9.1 percent from 3,267 yuan on April 30.