March 20, 2006
Proposal Would Extend Biodiesel Tax Incentives Through 2010
Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Max Baucus (D-Mont.) introduced legislation to extend the biodiesel tax incentive through 2010, from the current 2008 expiration date. The Grassley/Baucus bill (S 2401) extends alternative energy tax incentives, such as the biodiesel excise and income tax incentive for biodiesel and biodiesel blends. It also gives a one-year extension until 2010 to a tax credit for the cost of installing pumps that offer a 20 percent blend of biodiesel (B20).
Highlights of the Grassley/Baucus bill include:
- Production Tax Credit: Extends the renewable electricity production credit for three years for the following qualified facilities: wind, hydropower, closed-loop biomass, open-loop biomass, geothermal, small irrigation power, landfill gas, and trash combustion. The Energy Policy Act of 2005 provided parity in duration of the credit (10 years) for all qualifying sources of energy. In addition, it allowed pass through of the credit to members of a cooperative. It expires after December 31, 2010.
- Clean Renewable Energy Bonds: Authorizes the issuance of an additional $800 million of tax-credit bonds per year following the termination of the initial 3-year $800 million allocation enacted in the Energy Policy Act of 2005 to support renewable investment by municipal power authorities, rural cooperatives and tribes.
- Biodiesel and Alternative Fuel Excise Tax Credit: Extends the biodiesel excise and income tax credit for biodiesel, biodiesel mixtures, and renewable diesel. The excise tax credit amounts to a penny per percentage point of biodiesel blended with petroleum diesel for “agri-biodiesel,” such as that made from soybean oil, and a half-penny per percentage for biodiesel made from other sources, like recycled cooking oil. It lowers the cost of biodiesel to consumers in taxable and tax exempt markets.
- Credit for Refueling Property: Extends for one-year a 30 percent tax credit, enacted in the Energy Policy Act of 2005, for the cost of installing clean-fuel vehicle refueling property. Clean fuels include ethanol, hydrogen, and mixtures of diesel fuel and 20 percent or more biodiesel. It expires after December 31, 2010.
The American Soybean Association (ASA) and the National Biodiesel Board (NBB) praised the legislative initiative. “We are pleased to again see bipartisan Congressional support for biodiesel,” said ASA President Bob Metz. “Senator Grassley and Baucus are building on the success of the biodiesel tax incentives to help soybean farmers and rural economies as well as America’s energy security and environment.”
Darryl Brinkmann, chairman of NBB, said that biodiesel and soybean leaders already have seen the results of the biodiesel tax incentive. Last year, U.S. biodiesel production tripled to 75 million gallons. “Passage of the tax incentive gave the biodiesel industry the confidence to grow as we work to keep up with the skyrocketing demand for biodiesel,” Brinkmann said. “Consumers across the nation have benefited because the biodiesel tax incentive has helped make biodiesel more cost competitive.”
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Argentine Secretariat: 2005-06 Soybean Production 39.5 Million Tonnes
Argentina is expected to produce 39.5 million tonnes of soybeans in 2005-06, the Agriculture Secretariat said last week. In 2004-05 Argentina produced a record 38.3 million tonnes of soybeans, according to the Secretariat. USDA forecast Argentina’s 2005-06 soybean output at 40.5 million tonnes.
Meanwhile, the Secretariat kept its estimate for the planted area of soybeans at 15.2 million hectares. This puts area up 5.6% from 14.4 million a year ago. Area is seen up in part because dry weather prevented many farmers from planting corn or wheat and those fields were planted with soybeans.
Decline In EU Soybean Crush Expected
Expanding EU rapeseed crush is forecast to result in a significant decline in the quantity of soybeans crushed in 2005-06, according to a report from USDA. Reported soybean crush for the 12 months ending in September 2005 shows total EU crush at 14.1 million tonnes, 100,000 tonnes below 2003-04. A further erosion of soybean crush volume is expected in 2005-06 with total soybean crush declining to 13.5 million tonnes, the lowest soybean crush volume in the EU since 1993-94, said USDA.
Expanded crush capacity encouraged by the tremendous growth in bio-diesel demand and subsequent increase in EU rapeseed production is expected to divert some soybean processing capacity to rapeseed where crush margins are higher.
Turkey Increases Duties On Soybeans And Soymeal
Last week, the Turkish government announced increases in the duties on soybeans and soybean meal. Soybean duties will immediately increase to 10% from zero, while soybean meal duties will increase from 8%-13.5%, according to USDA. This could significantly affect the Turkish poultry sector, which is already suffering from a drop in poultry sales due to avian influenza.
USDA expects that soybean meal will continue to be used in livestock rations because of its nutritional values, especially for poultry. Turkey imported 1.1 million tonnes of soybeans during 2004, nearly double 2003 import total of 600,000 tonnes. About forty-eight percent of the soybean and soybean meal imports in 2004 were from the United States.
Soy Complex Lower On Weakness In Soyoil Market
The soy complex closed lower on March 16 reflecting weakness in soyoil market that pushed soybean prices to their lowest levels since late January, in response to large U.S. soybean oil stocks. Some traders are concerned that global demand is slowing because of bird flu. However, slow imports may only be a factor before new-crop South American imports, which could boost March imports sharply. May bean futures closed down $2.94 finishing at $211.73; July was $2.76 lower, closing at $216.14; and August lost $2.39 ending at $218.26. May meal was down $2.09, closing at $190.81; July was $2.31 lower, finishing at $194.12; and August decreased $2.39 to finish at $195.77. May oil closed $2.65 lower to finish at $516.54; July was down $2.20, closing at $525.58; and August lost $2.65, ending at $528.00.
