Indonesia faces soymeal supply squeeze

Indonesia faces soymeal supply squeeze

SINGAPORE (Reuters): Indonesian feed millers are facing a soymeal supply squeeze as many U.S. cargoes, contracted after a ban on South American supplies, are unlikely to arrive before July, regional traders said on Wednesday.

Feed ingredient importers, left with little option after Jakarta banned South American supplies on foot-and-mouth fears, are scouting to finalize some U.S. soymeal deals for prompt shipments despite relatively high prices.

Regional traders said Indonesia would need to buy much more than the normal monthly requirement for July shipments to offset a sharp fall in domestic stocks during June.

"Indonesia is short of soymeal now. There is a scarcity in the local feed market. The ban has created a situation where local availability has fallen sharply," said a leading Jakarta-based soymeal trader.

Indonesia normally imports about 80,000 to 100,000 tons of soymeal every month.

"Smaller feed ingredient buyers are actively looking for prompt U.S shipments. Nobody is interested in paying the kind of price they are paying for U.S. meal but then do we have an option?" asked another Jakarta-based oilseeds trader.

But some regional traders added that rising Chicago meal prices this week would keep trading volumes low. "Interest will be there but to a limited extent," said one trader.

On Tuesday, Chicago Board of Trade soy product futures closed slightly higher, following a late rally in soybean futures and after a higher overnight close in Malaysian palm oil futures. CBOT soymeal ended up 10 cents to $1.40 per ton.

The Indonesian ban meant that many South American soy and corn cargoes, originally bound for Indonesia, were diverted to other Asian destinations such as Malaysia and Thailand.

After the ban, the only other possible supplier was India but hardly any trade took place recently due to the end of the season there and relatively high prices, traders added.

Regional traders said Indonesian importers were paying about $240 a ton C&F for high-pro U.S. soymeal, while Argentine low-pro soymeal was available at about $30 a ton lower.

One trader said more than 25,000 tons of soymeal and about 25,000 tons of corn -- of U.S. origin contracted after the ban imposed in April -- were awaiting shipment to Indonesia. But most of these cargoes won't arrive until mid-July.

"It is unfortunate that we are facing a supply crunch for ingredients when the demand for commercial feed is showing a healthy trend," said one Indonesian feed miller.

Grain trade officials expected Indonesia's feed production to rise to about six million tons in 2001 from close to five million tons in 2000.

Feed millers said local availability had so far prevented domestic feed prices from rising.

"The local demand in June could be met from surplus stocks but I am not sure what is going to happen to domestic feed prices in July. We should remember that feed millers would be buying high- priced U.S. meal," said one feed miller.