March 27, 2006
GAO Report Finds Strong Government Response to Soy Rust
A GAO report prepared at the request of Sen. Tom Harkin (D-Iowa) concludes that USDA turned in a solid performance last year with its surveillance program to detect Asian soybean rust (ASR). If there is a concern, say government auditors, it is with the design of the program going forward.
Following the first small discoveries of ASR in the United States in 2004, USDA predicted that U.S. economic losses from the disease could reach as high as $2 billion annually. However, GAO notes, growers experienced few losses from ASR in 2005 because weather conditions and other factors were not favorable to the spread of the disease. And in some cases, says the report, “it appears that growers experienced higher yields than expected because the threat of ASR caused them to be more attentive to their crop.”
GAO found that the program that USDA developed and implemented last year was effective in focusing national attention on ASR and enabling growers to make informed decisions about fungicide applications. USDA’s framework ASR program includes a surveillance and monitoring network; a Web-based information management system; criteria for deciding when to apply fungicides; predictive modeling; and outreach.
The report concludes that USDA’s most effective in efforts were its sentinel plot program under which plots planted a few weeks before the beginning of the growing season served as an advance warning system. This allowed researchers to identify and report on the incidence and severity of the disease immediately or within a few days on USDA’s ASR Web site, thereby alerting officials and growers to the spread of the disease.
However, going forward, says GAO, differences in how researchers monitor, test and report on the disease “could lead to incomplete or inaccurate data and detract from the value of future prediction models.” Auditors also worry that a shift in program management responsibilities this year from USDA to North CarolinaStateUniversity could diminish the effectiveness of the program. “Changes to the successful management approach employed by USDA in 2005 raise questions about how the program will perform in 2006,” the report cautions.
Sen. Harkin noted that while the report reveals that USDA has done a solid job of monitoring ASR and preparing America’s farmers to handle the disease, it also outlines potential problems in the planned transfer of management responsibilities for nationwide ASR monitoring and tracking from USDA’s headquarters to NCSU research scientists. “This monitoring and tracking effort received priority attention and resources from USDA in 2005, and GAO expresses concern about whether the current degree of national coordination can be maintained once the planned transfer of authority occurs,” said Harkin.
“USDA anticipated the problems soybean rust would present to our farmers and has taken appropriate steps to fight it. I commend the department for its work on this matter,” said Harkin. “We need to have a consistent standard for monitoring and informing producers of where the disease is so they can take appropriate action to protect their crops while avoiding unnecessary application of fungicides.”
American Soybean Association President Bob Metz called USDA’s surveillance system “invaluable to soybean growers in 2005,” and pledged that his organization would work closely with USDA to build on last year’s successful program. Metz also pointed out that it is critical that Congress provide the ASR surveillance program with a continued, predictable funding level. President Bush has requested $2.77 million for the ASR surveillance and reporting effort in his FY07 budget proposal.
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February Crush Exceeds Expectations
The U.S. Census Bureau last week reported U.S. February soybean crush at 372,000 tonnes, slightly above analysts’ average estimate of 370,000 tonnes. Census also reported U.S. February soymeal stocks 274,000 tonnes and U.S. February soyoil stocks at 1.22 million tonnes, just below the average analyst estimate of 1.24 million tonnes.
Weather Problems Continue To Damage Brazil’s Crop
Last week, Brazil’s Crop Supply Agency (CONAB), which is under the country’s Ministry of Agriculture, forecast soybean production at 57.2 million tonnes, down 975,000 from its February forecast. CONAB forecast Mato Grosso production at 17.5 million tonnes, down less than 1 percent from its previous forecast. Soybean production in Mato Grosso do Sul and Goias were each reduced 1 percent and Rio Grande do Sul production was unchanged at 8.25 million tonnes.
CONAB made its largest change in Parana, forecast to produce 10 million tonnes, 465,000 less than its February forecast. Soybean growers in Parana have reported losses due to weather-related problems could be the worst in 30 years in the north western-part of the state’s productive region. Producers and agronomists said temperatures in the region reached 40 degrees celcius for several days during the dry spell and this damaged plants as much as lack of water.
CONAB adjusted its area estimate up slightly, about 10,000 hectares larger than its previous estimate, which is down 5 percent from last year. CONAB added about 50,000 hectares to its Mato Grosso area estimate with reductions in other states mostly offsetting that increase.
CONAB’s current forecast is about equal to the early March forecast issued by Brazil’s Institute of Geography and Statistics (IBGE) of 57.1 million tonnes.
Soy Complex Mostly Lower On Bird Flu Hoax And Slow Export Sales
The soy complex closed mostly lower on March 23 on rumors of bird flu in Mexico and slow export sales. Although USDA announced that the Mexico bird flu rumor was a hoax, the market continued to push lower into the mid-session as the increased supply of soybeans in Brazil and Argentina has moved new export business to the southern hemisphere. Meanwhile, traders are already talking about a possible jump in planted acreage for soybeans in the March 31acreage report. May bean futures closed down $0.83 finishing at $211.18; July was $0.83 lower, closing at $215.87; and August lost $0.73 ending at $217.52. May meal was down $1.54, closing at $191.69; July was $1.43 lower, finishing at $195.11; and August decreased $1.76 to finish at $196.54. May oil closed $3.31 higher to finish at $507.72; July was up $3.09, closing at $516.54; and August gained $2.43, ending at $519.62.
