The slowdown in Argentina’s soybean exports since late March due to the farmer strike in protest of the government’s new export tax regime is giving both United States and Brazil exports a boost. The strike has been temporarily suspended since early April, but negotiations between farmers and the government are not making much progress. Based on recent data, Argentina’s soybean exports look to be about 1.5 million tonnes during April and that could be lower once the final numbers are released. However, that monthly total would be above last year’s, when the seasonal decline in U.S. exports was less pronounced than normal because of record large U.S. supplies, but down from the previous 4 years.

Argentina’s slower shipping pace has shifted additional export business to the United States and Brazil. The accumulation of U.S. export commitments to China normally begin slowing down by March, but have risen by 1.14 million tonnes (42 million bushels) over the past 4 weeks (through April 18) after totaling just 165,000 tonnes (6 million bushels) during the 3 weeks prior.

The expected boost to this year’s U.S. export program likely will eliminate any cushion in 2007-08 soybean supplies that was gained when USDA’s March 1 stocks report indicated that last year’s crop was understated.

Brazil’s soybean exports of 3.2 million tonnes in March were record large for that month and look to be about 4.0 million in April, which would trail only April 2006 as the largest level for any month. This is occurring despite reports of workers at a major shipping port (Paranagua) threatening to slow down and some customs officials going on strike.

Argentine President Cristina Fernandez yesterday called for calm as talks with farm leaders grew increasingly tense, raising expectations in financial markets that farmers might go back on strike.  Reuters reports that farmers have complained of a lack of progress in the negotiations, but Fernandez said discussions should continue.

Meanwhile, Argentina’s government also carried through with its threat to apply the harsh Supply Law to farmers, summoning leaders of the country’s farm groups to testify in a complaint filed by Interior Commerce Secretary Guillermo Moreno.

The Supply Law would allow fines, imprisonment and confiscation of property if providers fail to supply the domestic market with essential goods. Dow Jones Newswires reports that the move marks a sharp downturn in already tense negotiations to avoid a repeat of last month’s crippling farm strike.

Expanding global biodiesel production will support soybean prices but palm oil demand for biodiesel output is likely to be less than anticipated, according to a report from commodities analyst FO Licht.  Vegetable oil and oilseed demand in China and India is rising. “These developments will coincide with growing soyoil consumption for biodiesel in South America and limited feedstock supply in Europe,” the company said. “The result may well be firmer prices,” it added.

Rising palm prices have made palm oil less attractive as a biodiesel feedstock, FO Licht observed. “Given the planned expansion of the south east Asian biodiesel industry and its current overcapacities, the outlook for palm oil-based biodiesel does not look very promising, unless a domestic (Asian) market emerges and prices fall,” it said.

In Europe, strong opposition is already visible to using palm oil for biodiesel because of concerns that tropical rain forests are being cut down to expand palm tree plantations. “There are already biodiesel overcapacities in Europe which are reducing export prospects for Southeast Asian producers,” the report said. “The expectation is therefore that palm oil consumption for fuel will remain far less than anticipated.”

Congress has approved another one-week extension to the 2002 farm bill, which would extend its authority through May 2. The White House confirmed President Bush signed the extension into law.

Negotiators agreed to offset the entire $10 billion in additional farm bill spending above the budget baseline via Customs user fees. USDA Deputy Secretary Chuck Conner said the Bush administration would accept the definition of Customs user fees as a “negative outlay.”

Tax benefits have become basically a leadership issue, as farm bill negotiators have agreed on at least $1.4 billion and possibly $1.6 billion –– or more –– in tax benefits or more, to be offset by changes in current agricultural taxes.

The tax benefits package includes tax breaks to encourage cellulosic ethanol production, an extension of conservation easements, and language to exempt Social Security and disability payment recipients from paying self-employment taxes on conservation reserve program payments. One of the offsets will be a reduction in the ethanol blender credit, from the current 51-cent payment, perhaps a six-cent cut.

House and Senate conferees have struck a deal on the new farm bill. The measure (HR 2419) will be worth about $570 billion over 10 years, with new funding for farm-related tax credits, a disaster aid program, and new funding for food stamps.

Those programs will in part be paid for by a $400 million cut to direct payments — a subsidy farmers get based on their acreage and the type of crop they grow — and a $250 million cut to a $4 billion disaster-aid fund.

But most of the offsets for the extra spending will come from extending customs user fees, a revenue-raiser favored by the Bush administration.

Nutrition programs would get a significant boost. Food stamps and food aid would top out at about $10.2 billion, up from an initial proposal of $9.5 billion.

Lawmakers will continue their discussions about preventing very wealthy farmers from collecting government subsidies. The conferees say they will have a conference report ready for House and Senate floor action by April 29.

President Bush on April 25 signed the latest short-term extension of current farm law , which Congress cleared April 24.

The soy complex closed lower on April 24 reflecting strength in the U.S. dollar triggered a round of speculative selling across commodities. The setback in soybean futures was evenly split between the products as the oil share was unchanged. Soybean complex futures remain at risk to periods of weakness associated with the influence of outside markets and speculative traders, but often rebound rather quickly. This likely will continue to be the case as long as the fundamentals remain supportive, and they should until the uncertainty about the Argentine situation is resolved and the market has a better handle on what the final corn/soybean acreage mix will be in the United States. May bean futures closed down $8.54, finishing at $495.58; July lost $9.00, closing at $500.08; and August was down $9.37, ending at $492.73. May meal decreased $5.95 closing at $381.62; July was $6.83 lower, finishing at $385.58; and August meal closed down $7.39, ending at $376.77. May soyoil decreased $23.37 to finish at $1326.51; July was down $24.03, closing at $1341.94; and August was $24.25 lower, closing at $1348.11.

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