U.S. soybean farmers have had a record-setting year, thanks in part to their investment in soybean check-off international marketing programs. Marketing year 2006-2007 ended August 31, 2007, with U.S. soybean exports totaling 30.2 million tonnes.

China retains its title from last year as the number one importer of U.S. soybeans, importing 11.4 million tonnes during this past marketing year. This is up from just over 9.69 million tonnes in the 2005-2006 marketing year. Mexico came in as the second-largest customer for U.S. soybean farmers, importing 3.84 million tonnes, followed by Japan, which imported 3.16 million tonnes.

Over recent years the European Union Commission made it clear that it wants its 27 member states to expand the use of biodiesel to 10 percent of all fuels consumed by 2020. However, such ambition comes with a fair share of challenges. EU governments may need to reconcile between the will of citizens who want to protect the environment by using homegrown oilseed feedstocks like rapeseed, and the cold, hard reality that expanding the biodiesel industry may demand the increased use of land for growing more oilseed crops and a larger demand for oilseed and biodiesel imports, reports DTN.

Oilseed imports to the EU are projected to grow by nearly 28 times from 2007 to 2013, said Conrad Caspari, managing director of Agra CEAS Consulting Ltd. Most imports will come from soybeans in the United States, Brazil, and Argentina, along with palm oil from Malaysia and Indonesia. “I don’t believe we have a climate which is particularly good for oilseeds production,” Caspari said. “Even if we were to have GM soy, it wouldn’t make a lot of difference to what we can grow. We’re not in oilseed country. We’re much better at grains than oilseeds. We have the capacity to increase rapeseed oil and rapeseed production. If we expand biodiesel production significantly, we would definitely have to rely on either imported biodiesel or imported oilseed.”

While there is expected to be an increased demand for oilseed production, Caspari said the EU biodiesel industry is unsure if it should expand oilseed-crushing capacity. “There’s an issue of whether we need to expand crushing capacity in EU, or whether we crush abroad and ship the oil,” he said. “That depends on what the bigger crushers want to do.”

The following are some highlights of the prepared remarks from USDA Chief Economist Keith Collins’ testimony on October 18 before a House Agriculture Committee hearing:

• “Soybean area forecast to rebound in 2008/09. U.S. soybean planted area is forecast to rebound to 70 million acres in 2008, regaining more than half of the 11 million acres lost primarily to corn in 2007. The soybean-to-corn price ratio, which declined to below 2 in the spring of 2007, strongly favored corn planting. In contrast, current March 2008 futures imply a soybean-to-corn price ratio of 2.7, favoring soybeans over corn. Rotation practices also favor a switch back to soybeans.”

• “U.S. biodiesel production continues to rise, setting new production records each month. Twenty percent of 2007-08 soybean oil production is expected to be used to produce about 580 million gallons of biodiesel. This compares with only 8 percent of soybean oil production being used for biodiesel in 2005/06 when about 200 million gallons were produced. Similar to ethanol, biodiesel profit margins are eroding due to sharply rising soybean oil prices. Soybean oil is the feedstock for 85-90 percent of domestically produced biodiesel. The price of soybean oil has increased over 40 percent over the past year, causing biodiesel returns above soybean oil costs plus other variable costs to decline from around 80 cents per gallon to near zero.”

“Vegetable oil prices are expected to remain strong due to strong demand, particularly for biodiesel in the EU, which is likely to keep biodiesel production capacity low and slow expansion. Although EU demand for vegetable oils will continue to pressure the profitability of U.S. biodiesel production, the EU also presents an export opportunity. Due to the $1 per gallon tax credit for blending, U.S. produced biodiesel is competitive in the EU biodiesel market. Since March 2007, net exports of biodiesel have accounted for more than 25 percent of U.S. biodiesel production. As long as U.S. biodiesel remains competitive in world markets, U.S. production is likely to grow despite weak margins.”

Senate Ag Committee Chairman Tom Harkin (D-Iowa) on October 17 said that he was “able to reach a basic agreement” with key members of the Senate Ag Committee on “elements which we want to report out of the Committee next week.” Harkin said he and Sens. Saxby Chambliss (R-Ga.) and Kent Conrad (D-N.D.) “reached a budget framework agreement and agreed on important policy decisions so we can have bipartisan support.”

Harkin said he and other members “forged compromises” with a “tight budget” and it will be reflected in the Chairman’s mark next week. “Looking at the range of geographical and philosophical views, there is a balance to our proposal,” he said. “Our proposal is a forward-looking bill for energy, conservation, nutrition, rural development and promoting better diets for all Americans. It also includes a better safety net, and support for beginning farmers and to those who want to transition into organic farming.”

In addition, Harkin confirmed the proposal will include an “average crop revenue program” (ACR) beginning in 2010 that according to sources would:

• Allow a producer to choose either a new revenue-trigger countercyclical program or the existing program (the option would be on annual basis);
• Provide a $15-per-acre payment to producers of all program crops who choose the revenue option;
• Eliminate current direct payments; and
• Eliminate marketing loans and change non-recourse loans to recourse loans.

The soy complex closed higher on October 18 as speculative buying returned to the soybean complex amid a collapse in the U.S. dollar and new highs in crude oil. Demand for U.S. soybeans has been better than expected in the early stages of the 2007-08 marketing year. As such, it probably will not take much of South American production or a bullish demand development to propel soybean futures to new contract highs. November bean futures closed up $6.34, finishing at $364.31; January gained $6.34, closing at $371.20; and March was up $5.88, ending at $375.98. December meal increased $3.53 closing at $306.55; January was $2.87 higher, finishing at $309.08; and March meal closed up $2.87 ending at $316.30. December oil closed $18.52 higher to finish at $903.67; January was up $16.98, closing at $914.47; and March gained $16.98, closing at $924.17.

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