Thursday 29 January 2004(Oil World Flash) - Soya oil prices will besupported by the lower than expected soybean crushings in the 10 Asiancountries affected by the poultry crisis. We have already seen a pickup inChinese purchases of palm oil and soybean oil recently. The Argentineexport basis of soybean oil has strengthened lately. But while Chicagofutures were down sharply, flat prices showed only little change duringthe week in review.

On the MDEX palm oil futures recovered today and closed with gains of 13ringgit for February, 18 ringgit for March and 25 ringgit for May. Asiandemand recovered as traders have returned from the Lunar New Yearfestivities. Palm oil prices are currently undervalued relative to soybeanoil and other vegetable oils. On the average of Jan 1-28 RBD palm olein(fob Malaysia) was offered at a discount of US-$ 115 vis-a-vis crudesoybean oil (fob Argentina). It is the largest discount in five years andshould stimulate foreign demand. This is likely to result in a pickup inMalaysian exports and a decline in palm oil stocks during February andMarch.

US soybean crushings were higher than expected at 144.8 Mn bu in Dec 2003,but down by 3.6% from a year earlier, according to today’s Census report.This brings the cumulative crush in Sept/Dec 2003 to 15.36 Mn T or 564 Mnbu, down by only 0.6%. Due to the very tight US soybean supplies for theremainder of this season, combined US soybean crushings and net exportswill have to be reduced substantially by almost 10 Mn T from last year inJan/Aug 2004.

Argentina and Brazil will have to fill the gap, which requires a furthersharp increase in soybean production there. Total US soya oil stocksincreased slightly to 719 Thd T as of end-Dec 2003. Domestic disappearanceof soyaoil was up by 2% and of meal by 8% from Dec 2002.