The Food and Agriculture Policy Research Institute (FAPRI) said last week that continuing high crude-oil prices and new bioenergy mandates, such as the Energy Independence and Security Act (EISA) of 2007, are expected to sustain prices at historic highs across all agricultural commodities over the next decade.  FAPRI said despite rising soyoil prices, biodiesel production increases to meet the mandate from the Energy Act and to satisfy demand from Europe. However, over the ten years projected returns were just enough to regenerate the required levels of supply, but left much capacity underutilized.

For the Asian importer the high cost in ocean freight is offset with the lower exchange rate. The U.S. dollar has weakened against the Japanese Yen, down 19 percent since last summer’s peak of 124 Yen to the U.S. dollar. The Yen closed the week to a 12 year low to 100.58 Yen.

Since the start of the year the Gulf to Japan rate is up 3 percent in USD per tonne, but down 6 percent in Yen per tonne. From the Pacific Northwest the rate is up 13.5 percent in U.S. dollars per tonne and 3.7 percent for the Yen. The spread between the two routes gives the Gulf an even better advantage with it down 8 percent for the U.S. dollar and 16 percent for the Yen. The change in currency gives the Asian buyer some relief from price inflation.

Soybean oil prices have risen well above their breakeven level for biodiesel production in the U.S. with the exception of some niche markets where biodiesel is priced at a premium to conventional diesel that is well in excess of the $1 excise tax credit. As a result, domestic usage of biodiesel has been rather modest in recent months. Nearly half of all U.S. biodiesel production from November through January was exported, with basically all of the shipments going to the EU-27.

Biodiesel prices in the EU are significantly higher than those in the United States, especially with the U.S. dollar extremely weak relative to the Euro. In addition, Europe is unable to meet its ambitious biofuel usage targets with domestic biodiesel production, partially because of the substantial rise in vegetable oil prices over the past 6 months that has significantly reduced biodiesel profitability around the world.

India last week instituted a ban on exports of all edible oils that will run for one year. Although no reasons were provided by the Directorate General of Foreign Trade, the ban is seen as a way to improve the domestic supply situation and curb higher prices, which have caused inflationary pressure in the country.

BV Mehta, executive director at Solvent Extractors Association of India, said: “This move is largely to increase the domestic availability in the market and to check spiraling prices but the export quantity is so meager that it will not have any impact on domestic prices.”

In the wake of data showing that consumer prices in South Korea rose 3.9 percent in January and 3.6 percent in February compared with a year earlier, their government announced last week that it will remove import duties on some 70 products as of Apr. 1 in a bid to quell inflation in the country.

Their currency dropped to a 26-month low early last week. The removal of tariffs will come on products that include soymeal, wheat, corn, syrup, and coffee cream. The country also is mulling a reduction of import duties on other products.

“As part of the anti-inflationary steps, the government will lower or eliminate import quota tariffs for a total of 82 items in the categories of grains, raw materials and agricultural and petrochemical goods. Notably, the government will eliminate import tariffs on 90 percent, or 70, of the concerned products, effective Apr. 1,” presidential spokesperson Lee Dong-kwan said, according to the Yonhap News Agency. He said the government also will monitor prices on some 50 products that are daily necessities that consumers in the bottom 40 percent income bracket will typically purchase.

The soy complex closed lower on March 20, the result of worldwide liquidation of commodities by funds. There were unconfirmed reports this morning that a Chinese buyer had defaulted on one cargo of soybeans and that there may have also been defaults on 1-2 cargoes of soyoil according to floor traders. Meanwhile, the Argentine agriculture secretary upped the estimate of this year’s soybean crop by 500,000 tonnes to 47 million tonnes. This is in line with the current USDA estimate. May bean futures closed down $18.37, finishing at $443.49; July lost $18.37, closing at $449.00; and August was down $18.37, ending at $446.80. May meal decreased $0.44 closing at $342.04; July was $1.32 lower, finishing at $346.67; and August meal closed down $4.08, ending at $343.37. May oil decreased $44.09 to finish at $1199.30; July was down $44.09, closing at $1215.62; and August was $44.09 lower, closing at $1220.91.

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