The U.S. government does not believe that subsidies for biofuels are responsible for global food shortages, says EPA Administrator Stephen Johnson.  As corn, soybean, and other crops are increasingly used to produce biofuels, many commentators in Europe and elsewhere have asserted that this phenomenon contributes both to soaring food prices in Europe and shortages in the developing world, as agricultural producers shift their production to higher-priced fuel crops. Johnson disagreed with this assessment in an interview with the Bureau of National Affairs at the end of a two-day meeting here of the environment policy committee of the Organization for Economic Cooperation & Development in Paris.

“I think that at this point it’s an overstatement to say that its biofuel production that’s causing food shortages,” Johnson said. Agricultural economists who have been evaluating the situation look at a variety of factors, “and at this point biofuels is very, very low on that list of major contributors [to food shortages].”

The 30-day suspension of the farmer strike in Argentina has ended and, although farmers and the government have reached partial agreements on beef and wheat exports, the soybean and product export tax situation reportedly has not been resolved. Wire services reported last week that farmers plan to protest on roadsides beginning May 3 and will not buy or sell agricultural goods, but they do not plan to block traffic as they did during their strike in March. Another delay in Argentina’s soybean and product export shipments would further bolster U.S. soybean exports during the second half of the marketing year

Last week, farm leaders met with Cabinet chief Alberto Fernandez and Agriculture Secretariat Javier de Urquiza. Dow Jones Newswires reports that after the preliminary meeting, Argentine Agrarian Federation technical advisor Jorge Solmi said that talks had moved up to the Cabinet level after progress was made regarding wheat but that the beef sector. However, he also said the grain export tax had not been discussed.

The Census Bureau On May 2 revised its end-of-March soybean oil stocks figure to 1.31 million tonnes, which is down 6,350 tonnes from that reported in the crush report. Census also made a sharp downward revision in its soybean oil usage in methyl ester (mostly biodiesel) production figure for February to 98,400 tonnes, which is 33,100 tonnes less than initially reported. Soybean oil usage in biodiesel during March was reported to be 106,000 tonnes, which is much lower than analysts had anticipated based on the original February figure. Total usage of fats and oils in biodiesel production increased to 172,000 tonnes in March from a revised 150,000 tonnes in February.

USDA reported that 2 percent of the U.S. soybean crop had been planted as of April 27 and that just 10 percent of the corn crop has been planted. The lack of corn planting progress and the wet conditions that will continue to impede planting in the heart of the Corn Belt increases the odds that soybean plantings will be as large as USDA’s March intentions of 30.3 million hectares.

However, one constraint to U.S. soybean planting this year could be the availability of quality seeds. “It’s been really tough to fill invoices for quality soybean seeds placed in the winter,” said Brent Floyd with Pioneer Hybrid. Germination rates on soybean seeds are usually 90 percent or better, but this year there will be seeds sold tagged with 75 percent germination, as adverse weather late last summer and in the fall affected seed coats and forced seed companies to use more soybeans to make quality seeds this year, he added.

The quality of soybean seed is measured by the germination percentage, or the number of seeds per 100 that are viable. Most years, soybeans have germination rates above 90 percent, with 80 percent being the standard.

India, the world’s second biggest importer of edible oils after China, may increase their imports by up to 16 percent this year following the government’s decision to scrap import taxes on crude edible oils in an effort to ease domestic prices and temper inflation. Dorab Mistry, director of Godrej International, made the claim in an interview with Bloomberg News and predicted India would purchase 6.5 million tonnes of vegetable oils in the year ending October 2008, up from 5.6 million tonnes last year.

“The availability of cheap imported oils in India will boost consumption and people will prefer imported oils to local oils, which are much more expensive,” Mistry said. “The oilseed availability in India is not all that encouraging either.” Godrej International, a unit of Mumbai-based Godrej Industries Ltd., is one of India's biggest buyers of vegetable oils.

India’s imports of edible oils, in particular soyoil and palm oil, in May and June could be as high 570,000 tonnes with 700,000 tonnes a month expected from July onwards, Mistry said. This compares with imports of 421,686 tonnes of vegetable oils in March, according to data from the Solvent Extractors’ Association of India (SEAI). Imports of edible oils in the first five months of the oil year have reached 2.26 million tonnes, an increase of 38 percent from the previous year, the SEAI said in its latest monthly report.

“You might see palm oil moving a little sideways in the next couple of weeks and as the high production cycle ends, prices could move up,” Mistry said. “Weather during the growth of soybeans in July and August in the U.S. will be key to prices for both soybean oil and palm oil.”

The soy complex closed lower on May 1 as strength in the U.S. dollar triggered a round of heavy speculative selling. Soybean complex futures could see additional pressure from speculative selling if the dollar continues to strengthen, especially if that leads to a further setback in the energy markets and lowers the breakeven soybean oil price for biodiesel producers.  May bean futures closed down $15.80, finishing at $462.51; July lost $15.80, closing at $467.01; and August was down $15.80, ending at $462.97. May meal decreased $14.55 closing at $356.48; July was $14.00 lower, finishing at $363.21; and August meal closed down $13.78, ending at $359.90. May soyoil decreased $20.06 to finish at $1251.33; July was down $43.65, closing at $1242.29; and August was $42.99 lower, closing at $1249.57.

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