Senate Ag Committee members received farm bill discussion drafts from Ag Committee Chairman Tom Harkin (D-Iowa). While the drafts have not been made public, Sen. Chuck Grassley (R-Iowa) talked about them last week. The proposed language would increase conservation program spending and would place a tighter cap on farm program payments. Grassley said “There’s not a wide difference between what [Harkin] wants to accomplish in the way of commodity titles and what I want to accomplish.” Grassley said he would push for a tighter cap on subsidy payments than the $1 million income cap that the House-passed farm bill includes. Grassley also said he would not support any farm bill budget offset that included changing tax laws, as was done with the House farm bill measure. Harkin’s chairman’s mark will be released publicly when the Senate returns in early September.

Meanwhile, Sen. Norm Coleman (R-Minn.) talked about the farm bill last week in Minnesota. The Senate will pass a new farm bill by the end of the year, and farmers will be pleased with the legislation, Coleman said. He praised the work of Rep. Collin Peterson (D-Minn.), chairman of the House Agriculture Committee, in crafting the House legislation. Coleman said the Senate version will resemble the House version and that he will work to make sure the Senate version contains provisions for permanent disaster aid and crop insurance.

Soaring grain prices in the EU due to a disappointing wheat harvest and a drought-stressed corn crop have caused soymeal to become more competitive with grain in the EU. This is similar to the environment that existed prior to the CAP reform of the early 1990s. Given the potential for the EU to import more soybeans and/or soybean meal to displace grain feeding at current price relationships, soybean meal prices have little downside risk unless EU grain prices decline from their lofty levels.

The movement of freight by truck, rail, water and pipeline during June was down 3.4%. This was the largest monthly drop since November 2006 with demand dropped nearly 5%. July and August are traditionally slow months and will likely be reflected as such. The fall months usually rebound on peak movement of goods and supplies for back to school, fall holidays and Christmas. The slower movement is confirmed through lower barge and rail volumes.

Biofuel Industries Group’s NextDiesel plant has opened in an industrial area of Adrian, Michigan. Jason Eisenberg, the company’s director of business development, said that initially, the plant will produce 20 million gallons a year, almost exclusively from soyoil. The firm plans to double the capacity before the end of the year.

Eisenberg added that the facility is only the second active producer of biodiesel in Michigan. In addition to soyoil, the plant is designed to refine chicken and beef fat and recycled vegetable oil, making it able to take advantages of price fluctuations in raw materials, he explained. However, Dan Secord, general manager, said the product needs to meet quality standards and be priced competitively. “But, we stay strictly with soy-based products,” he added.

Other developments include the following:

• Imperium Renewables has officially celebrated the opening of its Imperium Grays Harbor biodiesel facility. With an annual capacity of 100 million gallons a year, it is the largest biodiesel production facility in the United States. The production facility has the capacity to produce up to 100 million gallons of biodiesel fuel, and is capable of storing up to 17 million gallons of biodiesel and feedstocks.

• Nova Biosource Fuels has entered into an asset purchase agreement to acquire the 10 million gallon a year biodiesel refinery that was designed and built by Nova for Clinton County Bio Energy in Clinton, Iowa. The plant was the first commercial scale biodiesel refinery to use Nova’s proprietary process technology. Nova commenced construction in March 2006 and the refinery has since produced more than 4 million gallons of biodiesel made from soyoil and other low free fatty acid feedstocks.

Chinese soybean imports in 2007-08 will reach some 31.5 million tonnes, up 11.3% year-on-year, according to latest figures from the China National Grain and Oils Information Centre (CNGOIC). Chinese soybean production has been hit by drought this year and is likely to fall some 7.3% to 14.8 million tonnes, prompting moves to import in order to ensure supplies.

Imports in the current year were seen at 28.3 million tonnes, about the same as the previous year, after a widespread pig disease hit soymeal demand, CNGOIC said. The center also estimated soyoil imports to rise to 2.9 million tonnes in 2007-2008, higher than 2.5 million tonnes estimated for the current year.

Feed demand in 2007-2008 likely will rise by 3% to 96 million tonnes, according to CNGOIC. The feed industry was likely to use 1.6% less corn in the current year at 93 million tonnes because high prices and blue ear pig diseases have curbed demand, CNGOIC said.

The soy complex was significantly lower on August 16 reflecting a general sell-off in commodities and the meltdown in financial markets. The collapse in the Brazilian real has improved prospects for Brazil to increase soybean plantings. This probably does not do much to undermine 2007-08 U.S. export prospects, but does greatly reduce the extent that 2008-09 soybean stocks are expected to decline. If the U.S. soybean yield does not exceed USDA’s yield of 41.5 bushels per acre, this still provides little if any cushion against a production shortfall or bullish demand surprise. Going into August, the soybean crop probably was on track to exceed USDA’s yield of 41.5 bushels per acre. And, despite recent excessive heat, a moderation in temperatures and rain across the northern part of the Corn Belt may have come soon enough for yields to exceed USDA’s August estimate. September bean futures closed down $14.61, finishing at $293.67; November lost $14.70, closing at $299.27; and January was down $14.79, ending at $305.06. September meal decreased $9.92 closing at $241.18; October was $11.24 lower, finishing at $243.39; and December meal lost $10.58 to close at $248.57. September oil closed $29.54 lower to finish at $760.59; October was down $28.66, closing at $756.66; and October lost $33.51, closing at $771.61.

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