The American Soybean Association last week called on the Senate Agriculture Committee to improve the farm safety net, and biodiesel and healthy oils incentives in the 2007 farm bill. Testifying before the committee on April 25, ASA First Vice President John Hoffman said ASA is proposing the following:

• Adjust target prices for all program crops to a minimum of 130 percent of the Olympic average of season average prices in 2000-2004. At 130 percent, the soybean target price would increase from $5.80 to $6.85/bushel. Subtracting the $0.44 direct payment, the effective target price will be $6.41.
• Adjust marketing loan rates to a minimum of 95 percent of the same five-year Olympic price average. These adjustments would only marginally affect soybeans – the increase would only be one cent, from $5.00 to $5.01/bushel.
• Extend the biodiesel tax incentive which has spurred growth in the U.S. biodiesel industry.
• Authorize a Biodiesel Incentive Program under which U.S. biodiesel producers would receive a commodity reimbursement from the Commodity Credit Corporation equal to subsidies paid to foreign biodiesel exporters.
• Authorize a Healthy Oils Incentive under which CCC would cover up to one-third of the total premium paid to farmers by oilseed marketers for up to five years of commercialization.

In other farm bill news, Agriculture Secretary Mike Johanns last week sent Congress the administration’s proposed legislative language covering the conservation and credit titles of the 2007 farm bill. “The conservation title calls for $7.8 billion in additional funding and a restructuring of our programs to make them easier to access and easier to administer,” Johanns told reporters said during a briefing.

Under the administration’s plan, USDA would consolidate several existing programs into a newly designed and expanded environmental quality incentives program (EQIP) and increase funding for the consolidated program by $4.25 billion. The programs that would be included in the proposed new EQIP include the old EQIP and the wildlife habitat incentives program, agricultural management assistance program, forestland enhancement program, ground and surface water conservation program and KlamathBasin program.

And, Johanns said: “We’re going to streamline it into a more understandable situation because for every program there’s regulations, for every program there’s applications, for every program therefore we burn up a lot of administrative cost just getting the program dollars out the door.”

Other proposals include a new regional water enhancement program and a stronger conservation security program that would receive an additional $500 million to expand the number of acres enrolled from 15 million acres to 96 million acres over the next 10 years.

The administration also is proposing to raise the cap on the wetlands reserve program from 2.3 million acres to 3.5 million acres, and to institute a “sod-saver” provision to discourage conversion of grassland into cropland.

NOPA’s March crush of 4.03 million tonnes was about 136,000 tonnes above expectations, reflecting a contra-seasonal rise in the crush rate from February. Cash margins are nothing to brag about, but crushers are thought to own a lot of soybeans. The surprisingly large crush caused soybean oil stocks to build further into record territory during March. NOPA’s March soybean oil stocks were 51,700 tonnes above the previous month, which was revised up by 21,800 tonnes. Analysts expect the Census Bureau to peg March soybean stocks at a record 1.53 million tonnes. Implied domestic usage during March was 9 percent above the 5-year average, compared with a 6 percent increase over the 5-year average from October through February.

It would appear that the biodiesel production rate is accelerating. Biodiesel production has accounted for essentially all of the increase in vegetable oil domestic usage during the first half of 2006-07.

The cost to ship grain and other dry bulk commodities by ocean continues to get more expensive. Jumping more than 4 percent through April 20, the rate on the PNW to Japan route is within 3 percent of an all time high, closing that week at $48.61 per tonne. The record high for the PNW was $49.89 on December 1, 2004. The Gulf to Japan rate closed the April 20 up a little more than 3 percent to $68.09. The Gulf rate is 8 percent below the record of $73.61 recorded on March 11, 2004. The spread between these two key grain routes finished the week up nearly one dime to $19.47. One year ago the spread was $9.62 per tonne.

With China’s economy chugging along at 11 percent GDP, it is no wonder freight rates are strong. China is consuming large quantities of iron ore to produce steel to support its economy. So far demand is keeping this extraordinary fleet of dry bulk vessels active. With China’s appetite for iron ore; the taking in supplies from Australia, Indonesia, and Brazil; soybeans and grain from the United States and South America and loading delays in Australia, this market has surprised many. There is talk that the market is being overbuilt and a collapse in rates is forthcoming. As long as China’s economy continues to grow and sail along, the dry bulk market will ride be continue to be strong.

The soy complex was mixed on April 26 with soybeans reflecting a lower corn market. However, the losses in soybeans lagged those of corn on a more favorable corn planting outlook that would lessen the prospects for acreage to shift to soybeans. Soybean meal futures posted gains after the April 24 sell off with July meal finding support near the lows made in January. Soybean oil suffered the biggest losses of the soy complex, under pressure from speculative selling and lower petroleum prices. May bean futures closed down $1.19 finishing at $263.91; July was $1.01 lower, closing at $270.06; and August lost $0.83 ending at $272.45. May meal was up $1.21 closing at $213.52; July was $1.87 higher, finishing at $220.46; and August gained $1.65 to close at $223.66. May oil closed $11.24 lower to finish at $709.66; July was down $11.24, closing at $722.01; and August lost $10.36, ending at $727.08.

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