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MUMBAI, Aug. 16

THE global outlook for oilseeds has deteriorated over the last four weeks to a considerable extent. Marketmen are watching with keen interest developments across the globe as threats to crops in different origins are causing turbulence in the market and the prospects of tightening supplies are getting increasingly worrisome.

Apart from the projected decline in US soyabean output, world rapeseed production is projected 1.8 million tonnes lower from last month and 2.3 mt from last year to 33.9 mt in 2002-03.

Lower area and drought-damaged yields are forecast slashing Canadian canola production to 3.9 mt, according to the US Department of Agriculture (USDA). The harvest estimate would be Canada's smallest since 1992 and worse than last season's drought-reduced crop of 5.1 mt.

Consequently, Winnipeg canola prices have surged 25 per cent since May. Canadian exports of canola are forecast sliding to 2.2 mt, which would be barely enough to cover all of Japan's import requirement.

Similarly, the drought gripping much of Australia is creating a poor outlook for that country's rapeseed output. Production is seen plunging to 1.2 mt from 1.7 mt a year ago. Typically, about three-fourths of Australia's rapeseed is exported.

Together, Canada and Australia normally account for 50-60 per cent of world rapeseed exports; so the short crops will exacerbate supply availability for some major importers such as China and Mexico, USDA pointed out.

For China, given a projected domestic soyabean harvest of 15.6 mt, the current forecast of its soyabean imports of 14 mt is considered adequate to meet expected needs for protein meal. Yet, despite the resumption of China's imports and crushing soyabeans this summer, supplies of vegetable oil remain tight in the country. Domestically produced oil prices are higher and costs of importing palm oil have also become more expensive.

With domestic output of vegetable oil unable to match the expected growth in consumption, China may require an infusion of imports in 2002-03, according to USDA. China would be a potentially good market for imports of rapeseed next season, but production shortfalls among the major suppliers will limit demand.

For 2002-03, rapeseed imports by China are forecast unchanged from 0.8 mt the previous season. The lack of alternatives is seen making the largest import gains for soyabean oil (rising from 375,000 tonnes to 800,000 tonnes), while palm oil purchases plateau near 2.2 mt, the agency observed.

On July 1, China's Health Ministry implemented new rules for biotech food imports, distinct from regulations already in place by the Ministry of Agriculture and the Bureau of Quality Inspection. These require submission of technical information about their edible and nutritional qualities before they can be approved for import.

But the Ministry subsequently announced that it would not require importers to obtain import licenses until January 1. Importers can apply to the Health Ministry for licenses beginning December 21. This clarification temporarily removes another obstacle to soyabean oil imports; so traders in China have made more recent purchases of soyabean oil.

Imports of palm oil by India and China are likely to be curbed by thinning supplies from the major producers, USDA observed. For the current 2001-02 season, Malaysian palm oil production was trimmed back this month to 11.7 mt because of a downward revision in tree area. Although output has failed to keep up with last year, large stocks at the beginning of the marketing year sustained a stable export pace.

Combining a lower 2002-03 area estimate with currently unfavourable moisture conditions, next season's output forecast was also scaled back to 11.8 mt Stocks have been gradually shrinking for more than a year now, pushing prices to their highest level since early 1999. Palm oil exports by Malaysia are seen slipping to 10.25 mt from 10.35 mt in 2001-02.

Widespread dry spell in India since late June has rendered oilseed crops moisture-stressed. Area under soyabean and groundnut is seen declining. As yields turn sub-normal, production of both the oilseeds is slated to decline.

Indian vegetable oil imports typically peak at this time of the year as domestic output wanes and festivals boost seasonal consumption. The new wave of oil imports now beginning could endure even longer this year because of the smaller domestic harvests, USDA pointed out.

For 2002-03, Indian soyabean oil imports are forecast rising to 1.9 mt from 1.65 mt this season, while palm oil imports are seen up to 3.65 mt from 3.4 mt. Yet, vegetable oil imports may offset only a portion of lost domestic output because their high prices cold moderate the growth of consumption, the agency argued.

Although planting season for Brazilian soyabeans is months away, the current misfortunes of oilseeds crops elsewhere are providing a strong boost to Brazilian prices. A steep deterioration of the exchange rate has only magnified the impact on farm prices.

Since March, soyabean prices in local currency have risen 75-80 per cent. The large incentive to grow soyabeans is signified by farmers making forward sales at a much higher than usual rate. Brazil's 2002-03 soyabean area is projected rising to 17.5 million hectares, 7 per cent above the previous year.

Expected production would climb to 48 mt, from 43.5 mt of 2001-02. On top of large carryover, the ample crop is forecast sharply rising Brazilian soyabean exports to 22.2 mt, compared with 16.2 mt in 2001-02. USDA said, adding that exports of soyameal from Brazil should benefit, rising to a projected 12.95 mt.

For Argentina, the projection of soyabean production is at 30 mt (previous year 29.5 mt). However, Argentine exports are forecast higher at 10.6 mt as they take advantage of a drop in US supplies and a favourable exchange rate to sell their own substantial stocks.

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