8/11/04, INDIA (Oilmandi) - GOING by current indications, howeverincipient, history made in 2003 could repeat itself this year in the US,world's largest producer of soyabean; and if it does, the internationalvegetable oil market may witness another frenzied price behaviour withspeculators having a field day at the cost of those with genuineunderlying exposure.

It is becoming increasingly clear that the US will not after all harvest80 million tonnes (mt) in October. Weather concerns that started to appeara few days ago are spreading and are said to be potentially negative foryields. There are reports of early cold weather beginning to move into theMidwest.

Based on the US Department of Agriculture (USDA) forecast of a recordworld oilseed production of 225 mt in 2004-05 (of which the US willcontribute 80 mt), the global oilseed and vegetable oil market has grownprogressively softer over the last three of months.

The reputed Oil World weekly from Hamburg recently placed the preliminaryoutput number for the US at 78.7 mt and world production at 215 mt. Thekey to price movement is the extent of decline from the forecast level. "The question today is not whether there will be a decline in Americansoyabean production, but how much will the decline be", commented atrading house representative.

In 2003-04, world soyabean production was 169.1 mt, of which the USaccounted for 65.8 mt.

Interestingly, the USDA had initially forecast domestic production of 78mt; but aberrant weather during August and September last year droveactual production down considerably.

When the agency's monthly report reflecting the crop loss in the US wasreleased in the second week of October 2003, many players who usuallyplace great reliance on it were caught unawares by the sudden reduction inproduction estimate.

Currently, fund buying is keeping the soya complex well supported.

Ominously, there are no negative reports from China, which is headed toharvest a record 17.5 mt. It is for this reason, the next report of theUSDA scheduled for release on August 12 is keenly awaited.

Meanwhile, Indian soyabean production is likely to suffer by as much asone million tonnes in 2004-05. Prolonged dry spell in July hurtgermination.

Notwithstanding an expansion in area under cultivation, yields areexpected to be lower than normal. The revival of monsoon towards the endof July has of course helped arrest further losses; but it not expected toundo the damage already suffered.