December 26, 2006
***The Soy Export Weekly Will Not Be Published January 1, 2007 In Observance Of The New Year Holiday. Publication Will Resume January 8, 2007.
Have A Safe And Happy New Year!***
Drop in Nov Soyoil Yield Implies Average Oil Yield for 2006 Crop
Last week’s NOPA report reflected a further decline in the soybean oil yield as high-oil content 2005-crop soybeans were used up and new-crop soybeans entered the pipeline. The NOPA oil yield dropped to a Census equivalent of 11.12 pounds per bushel in November from 11.33 pounds the previous month. This was well below the previous year’s 11.59 pounds per bushel, but slightly above the 2000-2004 average of 11.09 pounds. It appears that the oil yield of this year’s soybean crop was undermined by September temperatures that were the coolest since 1993 whereas the 2005 crop oil yield benefited from September temperatures that were the warmest in more than 25 years. The considerable drop in the oil content of exported soybeans since early October hinted that the decline in the oil yield for November might be larger than normal.
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Export Volumes Languish Near Historical Lows
Total grain and soybean export inspections since September 1 have trended at or below the 10-year average mark. Since September 1, exports have totaled 29.7 million tonnes through November 30, slightly behind the pace for the same time period last year. Exports are being held lower by weaker wheat, sorghum and barley exports, and a slowdown in soybean shipments during November. Corn exports are the only silver lining in this year’s program, up more than 9% year-over-year during the first quarter at more than 13.6 million tonnes. Total export volumes during November were 10.1 million tonnes, down 1% year-over-year. US grain and soybean exports for 2006-07 are forecast at 118 million tonnes, 4% higher than last year.
Exports through the CenterGulf are running 24% ahead of last year’s pace at 17 million tonnes and slightly ahead of the 10-year average. Exports are supported by corn and soybean programs that are off to a good start, and a landed price advantage into Asia over the PNW with freight spread that has been supportive. As long as the freight spread and the basis spread keep pace, the Gulf will continue to experience a stronger year. CenterGulf exports for 2006-07 are forecast at 65.3 million tonnes, 14% greater than last year.
The PNW export program has been beset by weakened wheat exports and slower corn exports as compared to last year. Since September 1, total grain and soybean exports have totaled about 7.24 million tonnes, 10% below last year’s pace, yet 15% ahead of the 10-year average pace. Loading delays due to weather in the PNW have slowed exports as well. Soybeans started off fast, up 30% year-over-year through October, then slowed to being up 3% through November. Exports through the PNW are forecast at 28 million tonnes , 3% below last year.
Meanwhile, there has been concern that barge rates are falling too fast and may be pointing to a significant weakness in demand. But this concern is largely associated with comparisons to last year’s spikes following hurricanes Katrina and Rita. Barge rates can jump on a variety of reasons due to weather, a problem at a lock and dam, for a demand response, etc. The key commodities (steel, coal, grains) moving through strategic locks show continued growth, or at least steady volumes as compared to last year. The fleet is not expected to grow and is expected to shrink. In fact, should rates find a more perceived weakness this would be prime time for barges long in the tooth to be removed from service. Such action would accelerate the retirement pace and pressure rates higher as the supply would shrink relative to the demand for barge capacity.
Chambliss Sees Bipartisanship Guiding Upcoming Farm Bill Debate
Former Senate Agriculture Committee Chairman Saxby Chambliss (R-Ga.) says he and incoming Chairman Tom Harkin (D-Iowa) see eye-to-eye on many aspects of federal farm policy and that farmers should not worry about a sudden shift of that policy when the next farm bill is written. Speaking to an audience in Georgia last week, Chambliss said he hopes 2007 will bring solutions to two difficult challenges: immigration and passing a workable farm bill.
Chambliss noted that Congress failed to pass immigration reform even though two bills did pass. A House bill focused strictly on border security, and a Senate bill concentrated on amnesty. “We were at loggerheads on that,” he said, but a compromise package was not ironed out. He said that while it is critically important for U.S. agriculture to have workers “to do the work that other folks simply aren’t going to do,” it is also incumbent on Congress to assure that farmers “find people here legally and who are here for the right reasons and that when the work is done that they came here to do that they go back to where they came from.”
Regarding a new farm bill, Chambliss said he does not support an extension of the current legislation. He said the current farm bill works well for most producers, and noted that if a farmer did not have a positive cash flow under this farm bill, he hasn’t been managing his operation properly. He said the 2002 farm bill was designed to be the most market-oriented bill ever in place, to provide assistance to producers only when times were tough. Nevertheless the legislation has been criticized by fiscal conservatives as being too expensive. “You’re going to see an entirely different [farm bill] document coming out, and … you can take comfort in knowing that at the end of the day, we are going to give [farmers] the opportunity to become more efficient, to do a better job of running your operation but the federal government still will be there,” he said.
Soy Complex Higher, Soybean Prices Tied To Corn In 2007
The soy complex closed higher on December 21. Soybean futures are well above levels that can be justified by the current marketing year fundamentals that reflect a record-large carryout. Prospects for large shift of acreage from soybeans to corn next year amid an expanding biodiesel industry points to large drop in stocks during the 2007-08 marketing year. This ties the fate of soybeans largely to corn as the soybean market will have to compete for 2007 acreage in the United States and provide an incentive for South America to expand its soybean production capabilities.January bean futures closed up $0.73, finishing at $238.92; March was $0.83 higher, closing at $244.62; and May gained $0.73 ending at $249.40. January meal was up $0.55, closing at $204.15; March was $0.55 higher, finishing at $208.78; and May increased $0.77 to finish at $211.97. January oil closed $2.20 higher to finish at $619.49; March was up $1.10, closing at $630.07; and May gained $0.88, ending at $639.77.
