November 13, 2006
U.S. Soybean Crop Record Large
USDA expects U.S. soybean production to be a record 87.2 million tonnes, based on a yield of 2.63 tonnes per hectare, according to the latest USDA Supply and Demand report. With a 136,000 tonne increase in estimated crushings the only use adjustment; implied ending stocks were increased 272,000 tonnes to 15.4 million tonnes. The larger crushings were attributed to soybean meal export prospects (estimated annual exports were raised 150 thousand tonnes) with the additional oil added to season ending stocks.
Global oilseed production for 2006-07 is projected at a record 392.5 million tonnes. USDA expects increased global oilseed stocks reflecting higher stocks in the United States that will likely more than offset a small reduction in foreign stocks, including lower rapeseed stocks for Canada and reduced soybean stocks for Argentina.
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Biodiesel Production Could Triple In 2006; Profitability Questioned
The U.S. National Biodiesel Board (NBB) estimates production of biodiesel could reach 250 million gallons in 2006, triple the amount produced in 2005. The NBB credits state and federal incentives, grants, and tax credits for the industry’s rapid growth. The NBB notes a particularly high amount of activity in state legislatures, with more than 275 biodiesel-related bills introduced this year, 53 of which passed. According to Joe Jobe, Chief Executive Officer of NBB, “With this flurry of activity at the state level, production increases could be even more dramatic in 2007.”
Some signs of how dramatic the growth could be in 2007 are presented by several recent announcements of new biodiesel production plants. WashingtonState will soon feature the nation’s largest biodiesel facility, since Imperium Renewables recently broke ground on a facility that will produce 100 million gallons per year (mgpy). The Grays Harbor plant will begin producing biodiesel from soybean and canola oil in mid-2007. Meanwhile, Nova Biosource Fuels, Inc. is planning two 60 mgpy biodiesel facilities, one in Oklahoma and one in Illinois. In fact, as of mid-September the NBB had tallied 86 operating biodiesel plants with a total capacity of 580 mgpy. An additional 65 plants are under construction and 13 plants are being expanded, enough to add another 1,400 mgpy in production capacity.
Although the industry remains on track to expand, falling energy prices and rising soybean oil prices may hurt the profitability of making biodiesel from soybean oil next year. When comparing soybean oil prices with the Btu-equivalent prices of heating oil and natural gas the breakeven price that biodiesel producers can afford to pay for crude soybean oil is driven by heating oil futures, which takes into account variable costs of production and the $1.00 excise tax credit. The breakeven price has dropped from nearly 38 cents per pound this summer to just under 30 cents recently.
The possible erosion of raises questions on how well the industry will perform as it is poised to likely double and perhaps triple its output in the next few years. However, traditional users of soyoil believe the industry is quite sensitive to price changes and that they expect biodiesel production to adjust quickly as the price rises.
Crop Scientists Work To Improve Organic Yields
Researchers at the University of Nebraska, Lincoln are examining ideas to help organic farmers improve yields on crops like soybeans, corn and wheat. Rotating crops is key, but the best patterns for rotation on an organic farm without use of chemical fertilizers and insecticides aren’t known, said Liz Sarno, an extension educator in organic production.
Other challenges include keeping enough nitrogen in fields to naturally fertilize crops. Researchers are experimenting with field covers of such nitrogen-rich plants as Berseem clover, said Jim Brandle, a university professor in shelterbelt ecology.
Another hurdle is finding the right kind of equipment to cultivate ground for mechanical weed control. Many large-scale, chemical-intensive farms have discarded cultivators, said Chuck Francis, an extension specialist in agronomy and horticulture.
Demand is growing for organic foods as people become more concerned about the use of pesticides, herbicides and fertilizers in conventional farming. But organic farmers have not received the kind of attention conventional farmers have, and the need for research is great, Sarno said.
Brazil’s Census Bureau Expects Smaller Soybean Crop In 2006-07
Brazil’s Census Bureau (IBGE) said last week that the 2006-07 soy planted area will be 7% less than the previous season’s crop, or 20.5 million hectares. IBGE pegged the yield at 2.695 tonnes per hectare, 13.3% larger than the 2005-06 crop. However, OBGE expects farmers to spend less this year on fungicides to fight Asian soybean rust in the center-west, so yields could fall under adverse conditions. IBGE put the total season’s output at 55.2 million tonnes. Brazil harvested 52.3 million tonnes in the 2005-06 season, IBGE said.
U.S. Seeks Formal Adoption Of WTO Ruling On EU Biotech Restrictions
The Bureau of National Affairs reports that the United States has asked WTO members to formally adopt a dispute panel ruling in its complaint against the EU’s restriction on the market authorization of biotech products. According to the news service, the U.S. request signals that the United States will not appeal the panel’s findings, which upheld several key claims against the EU’s alleged moratorium on the authorization of genetically engineered foods.
Soy Complex Lower As Corn Sell-Off Led To Soybean Liquidation
The soy complex closed lower on November 9 as a sell-off in corn sparked aggressive long liquidation in soybean and drove the market moderately lower at the close. Soybean deliveries increased to 1,736 contracts and the 2006-07 soybean carryout looks to be record large, which suggests that prices should be well below current level but corn futures are at 10-year highs. November bean futures closed down $3.22, finishing at $241.59; January was $3.12 lower, closing at $246.00; and March lost $2.76 ending at $250.31. December meal was down $2.98, closing at $218.59; January was $2.87 higher, finishing at $219.80; and March was down $2.76 to finish at $222.55. December oil closed $0.22 lower to finish at $610.89; January was down $0.66, closing at $619.27; and March was unchanged, ending at $626.99.
