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EU Biotech, SARS, South American Beans

posted on May 9, 2003

Despite tight supplies and planting delays a bull market has yet to ignite. The reasons are myriad. In some cases demand has been constrained because of aberrant circumstances like the outbreak of SARS in Asia. Market demand also lags because of the development of a robust South American production capability and communication systems that can report to the bushel, where grain and soybean stocks are. There is little mystery left in the supply side of the equation.

If there is uncertainty, it may lie in the politics that define demand. For instance trade rules continue to vex multiple sectors of agriculture. Supply, disease, trade-altered demand, all these factors were at play in the markets this week.


EU Biotech, SARS, South American Beans

Since 1998, the European Union has denied access to new strains of biotech crops. The moratorium has been one of the stumbling blocks to finalizing the most recent fair trade agreement between the U.S. and Europe. This week, farm state lawmaker Charles Grassley of Iowa, tired of the impasse, took the fight to the Bush Administration. Grassley wants U.S. Trade Representative Robert Zoellick to plead the case of U.S. farmers with the World Trade Organization.

So far, Grassley has been stalled off by the Oval Office, most recently citing the need for concentration on the war with Iraq. With that problem under control, Administration officials have promised to study the issue and get back to the senator in two weeks.

Though the lack of access to Europe is affecting the market, Severe Acute Respiratory Syndrome, or SARS, is having a more direct impact on prices. China has severely curtailed its purchase of soybeans which pulled the price down from last week highs. The blame is being place on the reduction in the number of Chinese citizens going out for meals, thereby reducing the need for meat and, concurrently, reducing the need for feed.

It is still uncertain how long it will take demand to ramp back up once the disease has been brought completely under control.

One other factor affecting soybean prices is the record crop in the Southern Hemisphere. According to analysts, the South American crop is projected to exceed the total U.S. harvest. This revelation is on top of the fact that Brazilian exports alone are on track to be greater than the U.S. for the third year in a row. Numbers released by the Office of the Brazilian Secretary of Agriculture show a growth in exports of 80% over last year bringing in $798-million, approximately $350-million more than the United States.


Tags: agriculture biotechnology birds crops diseases European Union influenza news South America