August 24, 2004

 

 

Cargill Opens New Soybean Plant In Brazil
 

US agri giant Cargill has opened its sixth processing plant in Brazil as demand for soybean oil in food formulations continue to rise

 

The Minneapolis maker of food ingredients, grains, oilseeds and animal nutrition products said the R$65 million (€17.8m) investment into the new soybean plant in Rio Verde, Goias will turn out some 1,500 metric tons of soybeans a day and 90,000 metric tons of degummed soybean oil a year.

 

"The availability of raw material, the local demand for soybean meal and the region's logistics - which offer a number of ways to transport the product - were instrumental in determining the choice of Rio Verde," the firm said in a statement.

 

Since the early 1990s, the US share of world soybean production has declined from about 50 per cent to less than 40 per cent. During that time, Brazil's share increased to more than 25 per cent, and similar changes are underway in the processing sector.

 

Health concerns are currently driving market demand for soybean oil as food makers introduce the ingredient into new food formulations. Ongoing research has suggested that soy not only lowers cholesterol, but also has a preventative effect on breast cancer and other hormone-related cancers.

 

Soybean oil, as well as palm oil, currently accounts for over half of all oil consumed in the world. And a recent report from market analysts Business Communications Company suggests that US production of major crude vegetable oils is slated to reach 8.6 million metric tons in 2008, with soybean oil accounting for nearly 87 per cent of the major vegetable oil production at 7.4 million metric tons.

 

But in recent months, soy ingredients suppliers such as Cargill and US firms ADM and Bunge have been confronted by soaring prices for soybeans at 15-year highs as stocks for the raw material were severely cut through poor harvests last year.

 

Despite this price pressure, Cargill has kept a handle on the market. Earlier this month, the company reported a considerable 38 per cent rise in sales for the last quarter to $1.28 billion (€1.04bn), largely attributable to risk management tools.

 

"Our team's ability to manage the price volatility and trade uncertainty that permeated markets was critical to our results," said Warren Staley, chief executive officer of the privately held firm.

 

Relief for soybean prices could be imminent with the August WASDE (World Agricultural Supply and Demand Estimates) report released last week by the US government. It suggested that soy stocks should rise significantly this year on the back of improved harvests across the globe.

 

"Overall, the estimated global stocks-to-use ratio rose by six days to 88 days, which would be the highest level in 18 years and the second highest on record," reported investment bank Goldman Sachs, adding that it had argued for several months that soybean prices "were too high given the robust global stock levels."