24/11/04 - Soya oil prices are likely to appreciate in Jan/March 2005, dueto seasonally low production and a decline in world stocks. An importantprice-determining factor will be the development of Chinese soya oilpurchases. Reduced Chinese purchases in recent months and the sharpdecline in Argentine and Brazilian soya oil exports to China in Sept/Nov2004 were major bearish factors for soybean oil. As we point out below,the decline in Chinese soya oil imports during Oct/Dec 2004 will lead to apronounced reduction of Chinese stocks, resulting in higher domesticprices as well as pent-up demand and higher soya oil imports in Jan/March2005 and subsequent months. (For more details see below.) The US dollarweakened further yesterday and fell to a new 9-year low against majorcurrencies. The Euro rallied to a record high of 1.3103 dollar in Germany.There is ongoing concern in the market about the huge deficits in both theUS trade balance as well as the US budget. World crushings of soybeans areincreasing seasonally. For Oct/Dec 2004 we expect a world crush of 45.9 MnT, up by 2.4% from a year earlier. This compares with year-on-yeardeclines of 6.0% in July/Sept and 1.7% in April/June 2004. US soybeancrushings reached a new record in October and are likely to establish arecord level in Oct/Dec 2004. But soybean crushings are still runningbehind the year-ago level in Europe, Japan and some other importingcountries. The weak world import demand for soybean meal kept Argentineand Brazilian soybean 2 0 0 4 crushings below the year-ago level inOctober and we expect the soybean crush in the two countries to be alsodown from last year in Oct/Dec 2004.

But South American and world soybean crushings will increase sharply fromabout March 2005 onward, driven by higher new-crop supplies in SouthAmerica and accelerating world offtake of soya oil and meal. With globalsoybean crushings likely to rise by 12% from a year earlier in April/June2005 and by 11% in July/Sept (according to our current estimates), weexpect soybean meal prices to come under additional pressure in the secondhalf of this season. World demand for soybean oil will be strong and theoil will have to finance a growing share of the crush value.In Argentina favourable rain was received yesterday in central and westernparts of the Buenos Aires province, but soil moisture supplies have becomelow in southern and eastern parts of the province. Tandil and TresArroyos, the most important sunflower growing regions, received less than50% of normal rainfall in the first 23 days of November.It has also been unfavourably dry in many parts of Cordoba with averagerainfall during the first 23 days of Nov only 46% of the normal quantityreceived in the full month of November. Rainfall was also below normal sofar this month in Entre Rios as well as in most of Santa Fe and La Pampa.

In Brazil it was largely dry yesterday with hardly any rainfall receivedin central and southern areas, but good precipitation in northern parts ofthe country, primarily in northern Goias, Maranhao and Tocantins, whichare outside the major soybean growing region.

In Europe vegetable oil prices recovered yesterday, following Monday’sstrength in US soya oil and also therecent price appreciation of Malaysianpalm oil. Sun oil and rape oil maintain their high premiums vis-a-vis soyaoil and palm oil. Soya oil demand in the EU is still poor, as most edibleoil manufacturers try to prevent incorporation of soya oil due tolabelling requirements for oil produced from GM soybeans.