Bloomberg News reports that soybean prices may be headed for the biggest jump in three decades as farmers plant more fields with corn. U.S. farmers are preparing to sow the fewest acres of soybeans in 10 years. At the same time, demand is rising; creating conditions that traders say may double this year’s average price of $5.98 a bushel and allow soybeans to replace corn as the best-performing farm commodity. Higher prices in the United States will boost costs globally because soybean futures on the Chicago Board of Trade are the benchmark from Sao Paulo to Tokyo.

Global soybean supplies grew faster than consumption as new drought-resistant seeds boosted production in the Midwest, and farmers in Brazil and Argentina expanded cultivation into wild grasslands. Bloomberg News notes that grain processors and speculators are betting soybeans, used in about 60 percent of the processed food consumed by developed nations, will outperform corn during the next 11 months.

The United States’ biodiesel industry will add $24 billion to the domestic economy between 2005 and 2015, according to a study by the National Biodiesel Board (NBB). The figure foresees biodiesel growth reaching 650 million gallons of annual production by 2015. The analysis also found that biodiesel production will create a projected 39,102 new jobs in all sectors of the economy.

Additional tax revenues from biodiesel production will more than pay for the federal tax incentives provided to the industry, according to the report. Roughly $13.6 billion in revenue that would otherwise be spent on foreign oil likely will stay in the United States, the report said. This total impact of biodiesel on the economy includes the temporary impacts of construction, the permanent impacts of annual production and the direct value of biodiesel and co-products (glycerin).

“Because these plants buy local goods and local services, the second and third-round employment-generating impacts are really significant,” said the author of the report, John Urbanchuk. “You’re looking at a fairly substantial employment-generating impact. Most of these jobs are going to be located in rural communities, and you can’t overstate the impact of the biofuels’ industry on these rural economies.”

The study finds that if 498 of the 650 million gallons of estimated biodiesel demand in 2015 is produced from soybean oil, farmer-level soybean prices will increase nearly 10%. Using USDA’s 2006 Long-Term Baseline forecast for soybean prices as a starting point, soybean farmers can expect increased biodiesel demand to increase average soybean prices $0.58 per bushel by 2015, according to the report.

Seed companies are working to persuade farmers to grow the low linolenic soybean that produces a valuable alternative to frying oil laden with trans fat. The special soybeans contain less of the fatty linolenic acid than other soybeans. Currently demand for the low linolenic beans is far exceeding the availability. That has created a tricky situation for major fast-food chains and manufacturers who want to stop using partially hydrogenated vegetable oil, a food industry workhorse that is the source of artificial trans fat.

Seed companies have not been able to create new varieties of trans-fat-free soybeans fast enough to meet the demand for more varied uses. And, demand is likely to keep increasing. In the weeks since New York City announced it would ban trans fat from its restaurants, several major cities and some states, including California, have begun considering similar measures.

Incoming congressional Budget committee chairman reportedly have indicated to farm-state legislators that several billion additional dollars could be made available when the 2007 farm bill is written. Sources say the money reportedly would be in addition to the funding level projected last March by the Congressional Budget Office.

In March, CBO projected the outlays for USDA’s Commodity Credit Corporation to carry out price support and related programs at $14.097 billion in fiscal 2008, $13.261 billion in FY09 and $11.868 billion in FY10.

Details regarding a possible increase in the farm bill budget baseline are not known at this time, but one source said it could be several billion dollars, “but nothing like the increase the Budget panels provided the House and Senate Ag Committees in the writing of the 2002 farm bill.”

House and Senate Agriculture panel leaders already have indicated they will seek additional funding for a number of initiatives including: ad hoc disaster funding; energy programs, including a possible 5-million-acre cellulosic-based renewable fuel pilot program; the conservation security program; extension of the milk income loss contract program; and additional funding for the fruit and vegetable industry. Funding for those programs would take billions of dollars and could consume virtually all additional farm bill baseline funding that Budget committees might make available.

In spite of the tight budget, wheat and soybean groups are continuing efforts to convince Congress to increase the target prices for their commodities, a development which would result in at least some increased budget cost, even with the higher commodity prices that CBO has incorporated into its budget assumptions.

The soy complex closed mostly lower on January 4. The slide in energy prices weighed on soybean oil prices and the oil share as soybean meal futures posted gains in the front months and relatively small losses in deferred months. While South American weather provides a fundamental justification for the weakness in soybean complex futures, declines in corn and wheat futures were more pronounced last week as the funds were more active sellers of those markets. January bean futures closed down $2.39, finishing at $243.52; March was $2.39 lower, closing at $248.20; and May lost $2.30 ending at $253.35. January meal was up $0.88, closing at $207.89; March was $0.99 higher, finishing at $213.07; and May decreased $0.22 to finish at $216.71. January oil closed $7.72 lower to finish at $623.90; March was down $9.48, closing at $631.62; and May lost $7.50, ending at $643.08.

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