In last week’s supply and demand report, USDA increased its 2007-08 US soybean carryout by 544,000 tonnes to 4.35 million tonnes. USDA did increase its 2007-08 export forecast by 1.36 million tonnes to 29.3 million tonnes and also nudged higher the crush by 136,000 tonnes and raised seed use by 163,000 tonnes to account for larger 2008 planted area. However, these usage increases were more than offset by a 7.1 million tonne reduction in 2007-08 residual usage and a 109,000 tonne increase in imports. The residual use reduction was warranted by larger-than-expected March 1 stocks that strongly suggest that USDA understated the 2007 US soybean crop, which USDA will not revise until the September Grain Stocks report. USDA’s 2007-08 soybean carryout is a bit larger than the market was anticipating, but market observers expect that USDA will have to increase its 2007-08 export forecast further in the coming months given record large outstanding export sales and various strikes in Brazil and Argentina that are hampering their exports.

The Census Bureau has revised February soybean oil stocks to 1.4 million tonnes, which is down 11,300 tonnes from the crush report’s stocks figure. A larger revision was made in January soybean oil usage in methyl ester (dominantly biodiesel) production that was revised up by 29,500 tonnes to 122,000 tonnes. Contrary to analysts’ expectations for a decline from January, usage of soybean oil in biodiesel production increased further in February to 132,000 tonnes, which only trails last July and August. Total use of fats and oils in biodiesel production rose to 185,000 tonnes in February from 153,000 tonnes in December and a revised 176,000 tonnes in January.

With the biodiesel industry’s usage of soybean oil revised sharply higher for January and shown to have grown further in February, some industry analysts have boosted 2007-08 projections by roughly 340,000 tonnes to about 1.77 million tonnes. October-February soybean oil use in biodiesel is up 50 percent from a year ago, but rather than drawing down soybean oil stocks, the increased biodiesel production has been replacing the consumption of partially hydrogenated soybean oil in food as the industry moves away from trans-fats.

The Ministry of Agriculture’s supply department (CONAB) and Brazil’s Institute for Geography and Statistics (IBGE) issued their April soybean production updates. The forecasts from both agencies round to 60 million tonnes with CONAB’s estimate being about 45,000 tonnes above the IBGE estimate. CONAB’s soybean area estimate is 21.16 million hectares, 2.3 percent above last year. This estimate is up about 140,000 hectares from its previous estimate.

Argentine President Cristina Fernandez met April 11 with farm leaders to discuss the conflict over increased soy export taxes. Dow Jones Newswires reports that the head of Coninagro, one of four main farm groups engaged in the negotiations, told reporters that he and the respective leaders of the Argentine Rural Society, the Argentine Agrarian Federation and the Argentine Rural Confederation, would meet Fernandez.

Farmers went on strike for 21 days last month, blocking roads across the country to prevent the transport of agricultural goods. Last week, they called a 30-day truce, lifting roadblocks to facilitate negotiations with the government, but officials have so far failed to start talks.

Farmers have said they will resume striking on May 1 if talks with the government break down. They are protesting the sweeping overhaul of the export tax structure on grains and derivative products announced last month. A sliding scale was implemented with rates increasing as export values rise. At current prices, the export tax on soybeans rose to about 39 percent, compared with the 35 percent levy previously.

However, Argentina’s economy minister, Martin Lousteau, may not be ready to offer concessions to protesting farmers and currently he has no plans to reverse the soy tax increase that prompted a destructive three-week strike last month. Lousteau is “disposed to negotiate,” an associate of the minister, who asked not to be named, told FO Licht’s Ethanol and Biofuels Report.

Although new concessions under consideration may go beyond rebates and other incentives already rejected by small-scale producers, the Minister has “no plans at all” to change the new soy export tax regime, the associate said. Lousteau is “convinced that the measure is the correct one,” he added, in reference to the new system that pegs the export tax rate to world prices for the crop.

In related news, Lousteau did not join President Fernandez in the critical meeting with farm leaders. Instead, an official at the Economy Ministry told Dow Jones Newswires that Lousteau was in the United States, where he met with Treasury Secretary Henry Paulson to discuss, among other matters, Argentina’s long-defaulted debt to Paris Club official creditors.

The soy complex closed up on April 10 with the biggest rally occurring in the old-crop months as the old-crop-new-crop inverse widens back out amid a strong export sales report and concerns about timely execution of South American shipments. Soyoil futures also posted strong gains despite modest gains in the petroleum markets as soybean oil appeared to be catching up with the rally in crude oil above $110 and also seemed to garner support from the rally in Malaysian palm oil. Soybean futures outperformed the products as the board crush dropped toward more normal levels and outperformed a lower corn market as soybeans let the net revenue advantage of corn over soybean become too large. May bean futures closed up $15.80, finishing at $498.24; July gained $15.71, closing at $504.39; and August was up $14.70, ending at $499.71. May meal increased $2.87 closing at $388.23; July was $3.31 higher, finishing at $391.32; and August meal closed up $3.31, ending at $384.70. May soyoil increased $46.30 to finish at $1326.51; July was up $46.74, closing at $1342.60; and August was $46.74 higher, closing at $1349.88.

Back to index