Senior government officials in China are becoming vocal about the country’s need for soybeans. Wei Jianguo, China’s vice commerce minister, said the government will encourage the import of soyoil in a bid to meet domestic demand. Jianguo told the Chinese People’s Political Consultative Conference meeting: “We will encourage the import of agricultural products that are in great need, including soyoil.” He added that China will import goods with “proper policies”, without elaborating further.

Meanwhile, in an effort to curb rising inflation China’s Ministry of Finance has decided to keep the import tax on soybeans and soybean products entering the country at 1% until the end of September, 2008. The tax was originally reduced from the usual 3% in October, 2007. Meanwhile, the import tax on rapeseed and rapeseed oil into China remains at 9%, putting rapeseed sales at a disadvantage to soybeans.

China’s demand is also influencing the domestic market. Soybean oil futures have continued to charge higher lately amid talk of large ongoing Chinese soybean and soybean oil purchases. Having risen well above their breakeven level for biodiesel production, soybean oil prices largely have separated themselves from the petroleum markets. China’s soybean oil and rapeseed oil cash prices also have risen sharply in recent weeks. Based on the timing of price increases, China’s vegetable oil prices appear to have been led higher by CBOT soybean futures prior to 2008, at least to some degree. However, it looks like China’s cash prices have been more of a leader for the escalation in soybean futures since the beginning of this year.

The Census Bureau last week revised lower January soyoil stocks from 1.4034 million tonnes to 1.393 million tonnes and slightly increased December soyoil stocks from 1.3957 million tonnes to 1.3966 million tonnes. Soyoil used in methyl esters (dominantly biodiesel) production was 92,079 tonnes during January and December usage was increased from 97,522 tonnes to 91,626 tonnes. Implied soyoil non-biodiesel domestic disappearance was quite large during January, likely reflecting the pipelining of supplies for February’s large soyoil export program.

The importance of GM-free soybeans to members of the GMFree Regions European Network was highlighted by Renaud Layadi, international network manager at the Brittany Regional Council in France in a speech last week. He told delegates of the network that the continuation of GM-free feed and food products was vital to food producers, and that a major role was played by soy products.

Layadi said that soybeans are the most important import in the EU, with 30% of the globally traded soybeans, equivalent to 100 million tonnes, coming into the EU each year. Most of that (85%) is from the United States, Brazil and Argentina. Of that 100 million tonnes only 4 million tonnes is for food use - the rest goes to feed use in one form or another. Soybeans and soy products are needed by all farming systems and choice and availability of non-GM soybeans will be major challenges for the future, he said.

House Agriculture Committee Chairman Collin Peterson (D-Minn.) says legislators are making progress on nailing down details on both the changes in policy and the spending levels that will be included in the next farm bill.  Peterson is optimistic that the final bill will include: 1) implementation of mandatory country-of-origin labeling for meat and meat product; 2) a provision allowing for the interstate shipment of state-inspected meat; 3) a permanent agricultural disaster program; and 4) payment limit reforms that would include a means test that would eliminate eligibility for individuals whose three-year average adjusted gross income is greater than $500,000.

However, and in spite of the progress that has been made in recent days, Peterson still predicts that it will be necessary for Congress to extend the 2002 farm bill once again, to April 15 from its currently scheduled March 15 expiration.

Last week, the administration issued a statement outlining the farm program reforms that it said it would insist upon. Peterson said that Congress will not agree with all of the proposals put forward by the White House. However, Peterson added that despite a lack of support in Congress for a number of the administration’s farm reform ideas, “they are still the administration and we want GOP support for the farm bill if we need a veto override.”

“We need to work with the White House and we need to show the Republicans in Congress that we are trying to work with the administration,” said Peterson, noting pointedly that “the administration will not dictate what we have in the farm bill.”

The soy complex closed lower on March 6 reflecting a collapse in the Malaysian palm oil and Chinese soybean oil futures markets. The collapse occurred amid talk that China was selling large quantities of soybean oil from its reserves into its domestic market and amid rumors that previous purchases of South American soybean oil are being sold back into the overseas market. Collapsing soybean oil futures are moving contrary to surging petroleum futures, but soybean oil futures had far outrun levels that could be justified by the energy markets.  March bean futures closed down $17.45, finishing at $530.21; May lost $18.28, closing at $535.99; and July was down $17.82, ending at $540.49. March meal decreased $9.70 closing at $404.54; May was $12.90 lower, finishing at $408.18; and July meal closed down $11.13 ending at $412.04. March oil decreased $62.83 to finish at $1404.33; May was down $44.09, closing at $1440.27; and July was $44.09 higher, closing at $1456.14.

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