November 20, 2006
***The Soy Export Weekly Update will not be published next week as the staff observes the U.S. Thanksgiving Holiday. Publication will resume on December 4, 2006.***
Positive U.S. Soybean Export Prospects For 2007-08
For 2007-08, U.S soybean exports should be strong as South American soybean stocks are likely to be little changed from the last 2 years. Declining Brazilian soybean plantings the last 2 years have stopped the ongoing growth in the quantity of South American soybeans that were carried over into the start of the U.S. marketing year.
U.S. exports were seriously undermined during the first half of 2005-06 because of unprecedented South American competition and disappointing world import demand. U.S. exports thus far in 2006-07 have been record large thanks to a rebound in world import demand and South American competition that is no stronger than a year ago. Consequently, all of the increase in world import demand is being satisfied by U.S. soybeans. That looks to be the case again in 2007-08 since September 1, 2007, South American soybean stocks are projected to be no larger than the previous year given assuming industry estimates that Brazil’s planted area will be 7 percent lower than last year.
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Biodiesel Likely To Have Major Impact On U.S. Economy
The National Biodiesel Board has released a new economic study that shows how biodiesel plants are a boon to the U.S. economy as they sprout up across the nation. According to the economic analysis funded by the United Soybean Board, the aggregate economic benefits of biodiesel include: America’s biodiesel industry will add $24 billion to the U.S. economy between 2005 and 2015, assuming biodiesel growth reaches 650 million gallons of annual production by 2015; and biodiesel production will create a projected 39,102 new jobs in all sectors of the economy. Additional tax revenues from biodiesel production will more than pay for the federal tax incentives provided to the industry. It will keep $13.6 billion in America that would otherwise be spent on foreign oil
The study finds that if 498 of the 650 million gallons of estimated biodiesel demand in 2015 is produced from soybean oil, farmer-level soybean prices will increase by nearly 10%. Using USDA’s 2006 Long-Term Baseline forecast for soybean prices as a starting point, farmers can expect increased biodiesel demand to increase average soybean prices $0.58 per bushel by 2015.
Brazil Planting Estimates Continue Decline
Recently, there has been a wave of new and updated estimates for Brazilian soybean plantings that all continue to show a reduction in area ranging from 4 to 10 percent. The average decline of soybean area is 6.5 percent (or 1.5 million hectares). The estimates range from a low of 20.2 million hectares (a 9.6 percent reduction) to 21.3 million hectares (a decline of 4 percent), with the average being area at 20.7 million hectares. A few of the reports stated that price adjustments came too late in the planting-decision window to have an influence as well as emphasizing farmers’ unfavorable debt situation.
On November 10, the Brazilian Ministry of Agriculture supply department (CONAB) estimated this season’s soybean area would range from 20.7 million to 21.1 million hectares (versus its October range of 20.5 million to 21.1 million hectares). The mid-point comparison of these ranges shows an 85,000-hectare increase. Another government agency, Brazil’s Institute for Geography and Statistics (IBGE), issued planting estimates early last week of 20.5 million hectares, down 7 percent from last season. However, the data compiled for the information IBGE released in its report was likely late September to early October, missing much of the price increase. Also last week, the U.S. agricultural attaché estimated Brazil’s soybean area at 20.5 million hectares, which would be 6.8 percent below last year’s area. USDA, in its November World Agriculture Supply and Demand report, continued to assume an area of 21 million hectares, 4.5 percent below last season.
Private agencies in Brazil recently have issued area estimates ranging from down 4 to almost 10 percent. In area terms, these estimates range from 20.2 million to 21.3 million hectares. The lower estimate was from Celeres, which the report stated the main reason it kept its estimate low and unchanged from its previous report was due to lack of producer credit (especially in the center-west region) and that the recent rise in soybean prices was not sufficient to alter planting plans.
Weather has favored Brazil’s soybean planting, which is currently about one week ahead of average. By state, the planting intentions vary from last year, depending on location. Rio Grande do Sul and Parana, for example, are expected to have a slight increase in this season’s soybean plantings. Plantings in the Center West region are expected to decline about 15 percent with Mato Grosso’s area expected to decline by roughly 15 percent.
U.S.-Russia WTO Accession Agreement Seen Benefiting U.S. Farm Exports
Russia and the United States have agreed in principle on the terms for Russian entry into the WTO, giving a significant boost to Moscow’s hopes of joining the 149-nation body after 13 years of talks. The two countries are set to sign the deal in Hanoi at the Asia-Pacific Economic Cooperation summit.
The bilateral understanding is important because Russia is the largest overseas market for U.S. poultry and the overall Russian market for U.S. agricultural products is valued at nearly $1 billion. Russian tariff reductions included in the bilateral agreement “will benefit U.S. farmers, ranchers, and food processors of wheat, corn, barley, apples, pears, grapes, raisins, almonds, walnuts, pistachio nuts, dairy, soybeans, soybean meal, soybean oil, pet food, pork, beef and poultry, among others, once Russia joins the WTO and the agreement goes into force,” according to the USTR statement.
Soy Complex Lower As Soybean Market Continues To Follow Corn Prices
The soy complex closed lower on November 16 as the market started the day higher but sold off going into the close. The soybean market may have reached a high for the time being after not being able to make new highs the past two weeks. However, soybean price direction largely has been determined by the corn market as soybean prices try to keep pace with corn in order to not lose too much acreage to corn. Expectations for increased bio-diesel consumption over the near-term continue to support buying in soyoil while record soybean stocks helps to limit upside action.January bean futures closed down $2.66, finishing at $241.22; March was $2.66 lower, closing at $245.72; and May lost $2.39 ending at $249.03. December meal was down $2.76, closing at $209.44; January was $1.65 lower, finishing at $211.53; and March was down $1.76 to finish at $214.40. December oil closed $1.32 lower to finish at $624.56; January was down $3.09, closing at $632.28; and March lost $2.20, ending at $639.77.
