Soybean meal domestic disappearance continued to reflect strong growth into the 2007 October-November-December (OND) quarter despite the December crush coming in 70,800 tonnes below expectations and soybean meal stocks coming in above expectations. The Census Bureau revised lower the November crush by 27,200 tonnes to 4.24 million tonnes, which put it more in line with the NOPA-reported crush. Even though December’s crush of 4.42 million tonnes was record large for that month by 136,000 tonnes and reflected a contra-seasonal increase in the crush rate from November, the December crush was unusually low compared with the NOPA crush. Soybean meal stocks at the end of December in excess of 363,000 tonnes.

Soybean meal domestic disappearance was up from the previous year by nearly 4 percent during OND, on the heels of a 6-percent gain during July-August-September (JAS) and 5 percent during April-May-June (AMJ). The rally in soybean meal futures of more than $100 from AMJ to the end of 2008 has done little to slow the growth in U.S. soybean meal demand. As much as soybean meal has rallied in absolute terms and relative to corn, it still is at a moderate level in comparison to corn and may continue to have increased feed inclusion rates. Also supportive for soybean meal use was that protein consuming animal units were up more than 2 percent from the previous year during JAS and OND.

The Census Bureau has been reporting an unusually high soybean meal yield thus far in the 2007-08 marketing year, averaging 47.8 pounds per bushel. At the same time, the Census Bureau reported a soybean oil yield during OND of 11.47 pounds per bushel that was exceeded only by that of 2 years ago. The combined extraction rate of soybean meal and oil was unprecedented for November and December.

While soybean meal domestic offtake continues to be strong, per capita domestic disappearance of soybean and vegetable oils in general has been declining when biodiesel’s consumption of oil is excluded. Traditional uses of soybean oil have been sliding since they peaked during 2004-05 as food manufacturers are reformulating away from partially hydrogenated soybean oil to palm and canola oil as a means of reducing trans-fat content below 0.5 grams per serving. Per capita non-biodiesel domestic usage of all vegetable oils has declined for 5 consecutive quarters. There may have been some soybean oil used in place of heating oil from August 2005 to August 2006 when soybean oil prices were in close proximity to heating oil on a Btu-equivalent basis, which boosted 2005-06 non-biodiesel consumption of soybean oil. It also could be that vegetable oil prices have reached levels that have curtailed consumption, perhaps through more careful or judicious use of oil in frying applications.

The United States last week restated its right to retaliate against the European Union in a row over an EU ban on biotech crops. The dispute has pitted the EU against the United States, Argentina and Canada. The World Trade Organization (WTO) has ordered the EU to end the ban. Brussels has found it difficult to implement the WTO ruling because some of the 27 EU member states operate their own bans. The WTO said it would hold an extraordinary meeting of its dispute settlement body on February 8 to discuss a U.S. request for compensation in the dispute. The item probably would be withdrawn from the agenda following a likely EU objection as part of an agreement between Washington and Brussels to pursue a negotiated solution. But if they do not succeed, the issue will return to the dispute settlement body’s agenda.

The extended deadline for Brussels to comply expired on January 11. The following week the United States decided to give the EU more time to do so. Washington reserved its right to push later for a WTO decision on whether the EU had done enough to end the ban and, if Brussels was found wanting, to retaliate. A document that the United States filed recently at the WTO said the United States reserved the right to retaliate against the EU to compensate for the annual value of lost U.S. exports, royalties and licensing fees to the EU from biotech crops. These would be levied by imposing extra tariffs on EU goods or lifting other WTO agreements regulating agriculture or health and safety, the document said.

With tight crop supplies and increasing demand for grains and oilseeds, the Alliance for Agricultural Growth and Competitiveness (AAGC) urged USDA Secretary Ed Schafer to permit penalty-free early releases from the Conservation Reserve Program (CRP) for non-environmentally sensitive land. Among the core messages conveyed in a statement delivered to Schafer on January 31 (his first day in office), AAGC said that failing to take action on the CRP will place even greater economic pressure on major sectors of U.S. agriculture that are heavily dependent upon competitive supplies of grains and oilseeds, including animal agriculture producers, particularly given the ever-greater demand on available stocks being created by such legislative mandates as agricultural-based renewable fuels. (AAGC is an organization of national and state organizations representing a broad cross-section of meat, livestock and poultry production; agricultural input; and grain marketing, handling, processing and exporting interests.) AAGC also pointed out that competition for acreage between corn, oilseeds, wheat, cotton, and other crops continues to intensify in the current market.

The Alliance recommended that USDA offer penalty-free early releases for CRP contract-holders to allow non-environmentally sensitive acres to return to production. “We acknowledge that removing the penalties for early opt-out of non-environmentally sensitive acres from CRP will not provide all the additional cropland needed to meet these needs, but it will significantly help alleviate the current situation.”

The soy complex closed mixed on January 24 reflecting disappointing soybean export sales and lower petroleum prices as new-crop soybean futures posted double-digit gains. The soybean fundamentals are dramatically tightening from a record large 2006-07 carryout to a 2007-08 carryout that could be nearly as small as 2003/04’s 3.05 million tonnes. The 2008-09 situation looks to be even tighter assuming good South American crops and the reluctance of corn to relinquish the bulk of acres it took from soybeans in 2007. South American soybean production prospects are promising with Argentina’s weather improving in recent weeks. But excessive moisture in Brazil’s Center West region threatens early maturing soybeans that are ready to harvest and could make Asian soybean rust more prevalent and more difficult to control. March bean futures closed down $0.46, finishing at $468.29; May lost $0.55, closing at $479.91; and July was up $0.09, ending at $480.42. March meal decreased $1.32 closing at $376.44; May was $1.54 lower, finishing at $381.73; and July meal closed down $1.32 ending at $385.25. March oil increased $5.73 to finish at $1184.31; May was up $6.83, closing at $1198.42; and July was $4.85 higher, closing at $1208.56.

Back to index