Feb 5, 2004 - In the USA the severe tightness in soybean supplies and theneed to sharply cut soybean exports and crushings has created a verybullish scenario which should drive prices to new contract highs in themedium term. The sharply lower crush in the second half of this seasonwill of course also transfer the bullishness to soybean oil and meal. Itremains to be seen to what extent the logistical constraints in SouthAmerica will prevent exports from reaching the volumes the world marketrequires in April, May, and subsequent months. In the near term soybeansand products will be under technical selling pressure, primarily soybeansand meal.The bird flu in 10 Asian countries and the reduced meal demand in theaffected regions have contributed to this development. There is stillconsiderable uncertainty how quickly this serious disease can be broughtunder control. It is estimated so far that around 50 million chickens havealready been killed in these 10 Asian countries. Once the replenishment ofpoultry numbers begins, considerably higher quantities of oilmeals andfeed grains will again be required.The slowing-down of soybean crushings (as a result of the bird flu) willalso curb soya oil production in China and other Asian countries. Thiswill in turn raise import demand for soybean oil, palm oil and probablyalso for rapeseed. It is reported that China has now stepped up purchasesof soybean oil (from Argentina & Brazil) as well as of palm oil (fromMalaysia & Indonesia). We would not be surprised if in the currentsituation Chinese crushers purchase canola from Canada or Australia.Argentina & Brazil will sizably step up soya oil exports to China inFebruary. According to preliminary incomplete information, about 120 Thd Tof Argentine and 61 Thd T of Brazilian soya oil are already nominated forexport to China in the first 20 days of February.India has sizably reduced vegetable oil imports during Oct/Jan 2003/04 dueto the very sharp recovery in oilseed production. However, we pointed outearlier that total Indian stocks of vegetable oil stocks were very low asof early January. India has reportedly stepped up purchases of SouthAmerican soya oil recently. Approximately 100 Thd T of Argentine soya oilis nominated for export to India so far in February. The final quantityfor the month should, however, be higher. Domestic Indian prices ofgroundnut oil, soya oil and palm oil eased marginally this week but arestill very high as compared to preceding years. But rape oil pricesadvanced strongly and are quoted today as high as RS 510 per 10 kilos.This is surprising and may be a reflection of the current tight supplies.Or is it an indication that the rabi production prospects forrape/mustardseed have deteriorated? Sun oil prices advanced slightly dueto the tight domestic supplies. As of today (Febr 5) domestic prices arequoted as follows in RS/10 kilos in Mumbai: groundnut oil 495, soya oil432, cotton oil 420, sun oil 442, rape oil (Jaipur) 510, RBD palm olein405 and BSS castor oil 369.