China has said the government will not interfere in the import of the oilseed and tougher inspection standards will have no long-term impact on the volume of purchases, according to statements made to the publication The Public Ledger. “There may be some short-term effect, but after the exporters adjust to the tougher quality standards, I expect the trade to return to normal,’’ Huang Hai, assistant minister of commerce, said last week.

On August 22 China said that it found “substantial” quality-related problems with imports of U.S. soybeans and urged the United States to investigate and improve its export procedures. The comments followed U.S. reports of unsafe Chinese products, including toys, fish and vegetables, which helped stoke trade friction between the two countries.

Demand for livestock feed, as rising incomes boost meat consumption, has made China’s need for soybeans soar in recent years. China’s soybean imports have almost doubled since 2003-04. Imports from January to July rose by 2.6 percent to 16.9 million tonnes, with 7.8 million tonnes from the United States, according to China’s customs data.

Closer monitoring is a reaction to increased global attention to food quality and that trend would probably continue, Huang told the Public Ledger. Still, increased inspections would not lead to “greater restrictions on the soybean trade given the large quantities China imports”. The government will not get involved in decisions about where soybean imports come from, Huang added. “The majority of China’s soybean imports are handled by Sino-foreign joint ventures,” he said. “The processors will choose where to source their imports, which I think will be decided on quality.”

Last week, the Census Bureau reported a surprisingly large surge in biodiesel’s consumption of soybean oil to 346 million pounds in July from 257 million in June and 164 million a year ago. The July disappearance of soyoil was 82 million pounds more than industry observers expected, prompting a 300-million-pound increase in 2006-07 soyoil used in biodiesel production to 2,900 million pounds. It appears that nearly all of the new biodiesel production facilities that have been completed in recent months have been running at nearly full capacity. Nearly 250 million gallons of annual biodiesel production capacity has come on line from April 1 to July 1 and the amount of unused capacity has increased very little.

Exports of grains and oilseeds for the first quarter of 2007-08 are well situated to have the highest shipments since 1995. For September-November, total grain and soybean exports are forecast at 35 million tonnes, 7 percent greater than last year’s exports for the quarter. This will be a strong export campaign, testing the infrastructure and the transportation modes to move to market position. By port range, the Gulf is expected to handle 54 percent of this volume, the Pacific Northwest (PNW) 20 percent, and the TexasGulf 13 percent.

Capacity at the Gulf will be pressured, but not as much in previous years when there was a greater commodity mix. Exports through the Gulf are forecast at 18.9 million tonnes, a volume that was nearly put through the Gulf for this quarter in 2003. But, the commodity mix during 2004 is quite different than this year. During 2003 the mix through the Gulf was 50 percent corn, 35 percent soybeans and 11 percent wheat. For 2007 the mix is expected to be 62 percent corn, 25 percent soybeans and 10 percent wheat.

Receipts from the sale of crops and livestock are rising more rapidly than are farmers’ production expenses, thus increasing USDA’s forecast for net farm income this year. In its most recent update, USDA forecast net farm income in 2007 at $87.1 billion, up $28.1 billion from 2006, and nearly $30 billion above its 10-year average of $57.4 billion. The previous record of $85.9 billion was set in 2004. Cash receipts from this year’s farm production are forecast to rise to $276.4 billion, up from $239.3 billion in 2006, due to large increases in the value of both crop and livestock. Sales of crops are forecast to hit $136.2 billion (up from $120.0 billion in 2006), while sales of livestock are seen rising to $140.2 billion, from $119.3 billion last year.

USDA forecasts that for most field crops, 2007 cash receipts likely will be a record high. Receipts from corn and soybeans –– the top two crops in receipts –– are both expected to be up, with corn receipts exceeding $31 billion and soybeans exceeding $19 billion.

The report says that so far this year, market prices for corn, wheat and soybeans have remained above 2006 levels “and should do so throughout the year.” In its latest supply and demand report, USDA forecast a range of per-bushel season average prices for wheat at $5.10 to $5.50 (versus $4.36 in 2006); corn at $2.80 to 3.40 ($3.00); and soybeans at $7.25 to $8.25 ($6.40).

On the other side of the ledger, USDA forecasts total farm production expenses will rise $17.4 billion (7.5 percent) to a record-high $249.9 billion in 2007, the fifth straight annual increase of more than 4 percent. If realized, the 2007 increase would be the second greatest on record, exceeded only by the $20 billion jump in 1979. Fertilizer and miscellaneous expenses each are forecast to rise more than $2.0 billion (16 percent and 8 percent, respectively). Total labor is expected to be up $1.7 billion (7 percent), while seed expenses are forecast up $1.6 billion (14 percent). The principal crop-related expenses — seed, fertilizers, and pesticides — are forecast to be $37.3 billion, up $4.1 billion (12 percent) from 2006 and the fifth straight increase of $1.0 billion or more. All three expenses are expected to rise to their highest levels ever, says USDA.

The soy complex was lower on September 6 reflecting an increase in USDA’s good and excellent ratings for the crop – contrary to market expectations. Meanwhile, private forecasts for the U.S. soybean crop to exceed USDA’s August forecast also weighed on the market. September bean futures closed down $4.04, finishing at $322.61; November lost $3.86, closing at $327.93; and January was down $3.86, ending at $333.63. September meal decreased $2.87 closing at $267.64; October was $3.42 lower, finishing at $269.29; and December meal lost $3.75 to close at $274.69. September oil closed $5.07 lower to finish at $817.47; October was down $5.29, closing at $820.99; and October lost $5.73, closing at $832.02.

Back to index