Local feed millers facing soymeal supply squeeze

Local feed millers facing 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.

There was market talk Indonesia had finalized a few deals for
U.S. soymeal in the past few days at about $241 a ton C&F. "What
I have heard is mainly for July shipments," said one Singapore-
based grains and oilseeds trader.

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.

Indonesia was declared free from foot-and-mouth in 1990 and
since then has imposed bans on meat and animal products from
nations hit by the disease, and only recently on grain imports.