May 15, 2006
ASA Calls For Extension To Biodiesel Tax Incentives
The American Soybean Association (ASA) has announced its key priorities for the next Energy Bill, which is expected to be tabled shortly by Republicans and Democrats looking for increased support for biofuels such as ethanol and biodiesel. The United States now has 65 operating biodiesel plants, with 50 more under construction. Annual production is now over 150 million gallons, up from just 2 million gallons in 2000.
ASA specifically is seeking more fiscal incentives to drive the industry forward. It wants the volumetric biodiesel tax incentive and small agri-biodiesel producer credit to be extended, which both expire at the end of 2008, as well as the CCC Biodiesel program, which terminates at the end of this fiscal year.
Both the biodiesel tax incentive and the small producer tax incentive expire at the end of 2008 and bioenergy program terminates at the end of the current fiscal year. “The industry needs these programs to succeed,” said ASA President Metz. The extension of the tax credits is extremely important to the industry, as it helps builders get financing for the plants, added Metz.
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Exports And Domestic Soyoil Use Driving Soybean Demand In 2006-07
U.S soybean production for 2006-07 is expected to be 83.8 million tonnes, almost identical with last year, according to the latest USDA S&D report.USDA also predicts a 2.74 tonnes per hectare yield for 2006-07. The implied 2.31 million tonne U.S. 2006-07 soybean stock increase, while modest as compared to 2005-06’s 8.16 million tonne increase, certainly portrays soybean abundance. Demand is driven by a strong export market (likely 29.7 million tonnes) and strong domestic growth in soybean oil use (biodiesel production). Soybean supplies are projected to reach a record 99.3 million tonnes, up 9 percent from 2005-06 due to sharply higher beginning stocks. USDA says soybean crush could increase to 47.6 million tonnes, reflecting sharply higher domestic soybean oil demand, a moderate increase in domestic soybean meal disappearance, and increased soybean meal export prospects. Although increased availability of corn by-products limits prospects for growth in domestic soybean meal use, USDA expects domestic soybean oil disappearance is projected to increase 6 percent primarily due to rapidly expanding biodiesel production.
Global oilseed production for 2006-07 is projected by USDA to be 390 million tonnes, down 0.7 million tonnes from 2005-06, the first year-to-year decline in global oilseed production since 1995-96. Lower oilseed production in the United States will be partly offset by a small increase in foreign production. Global oilseed output for 2005-06 is projected by USDA to be 391 million tonnes. Soybean production in Brazil could reach 56.5 million tonnes, reflecting lower-than-expected yields as harvest nears completion, said USDA.
Senators Press Efforts to Upgrade Mississippi River Locks, Dams
A group of Midwestern senators last week were joined by representatives of agricultural, shipping and labor organizations to discuss an overhaul of locks and dams on the upper Mississippi River and lower Illinois River. The effort is being led by Sen. Kit Bond (R-Mo.), and its goal is to urge the passage of bipartisan legislation to modernize what Bond characterizes as the nation’s outdated lock and dam system.
Specifically, supporters say they want the Senate to approve S 728 –– the Water Resources Development Act (WRDA) –– which would authorize almost $4 billion for improvements to the upper Mississippi and Illinois rivers. Of that amount, approximately $1.8 billion would be targeted at doubling the length of seven river locks from their current 600 feet to 1,200 feet. Supporters say longer locks would permit barges to more efficiently move along the rivers, and could lead to lower transportation costs. In addition, the measure would authorize dozens of other Army Corps of Engineers’ navigation, flood-control and environmental restoration projects.
The Senate Environment and Public Works Committee approved the bill more than a year ago, but it has yet to come to the floor. The House passed its version of the bill (HR 2864) last July by an overwhelming vote of 406-14.
Bond, who chairs the Senate Environment and Public Works’ Transportation & Infrastructure Subcommittee, earlier convinced 79 of his Senate colleagues to sign a letter asking Senate Majority Leader Bill Frist (R-Tenn.) to schedule the legislation for a vote on the floor. A spokeswoman for Frist said the bill has several problems, but “if they get resolved, the leader will discuss … how to proceed.”
The current water transportation system is nearly 70 years old. According to a statement from Bond’s office, despite the age of the system, traffic on the Upper Mississippi River over the past 35 years grew from 27 million tons to 84 million tons which is system capacity.
“If the cargo transported on our inland waterways each year had to be moved by another mode, it would take an additional 6.3 million rail cars or 25.2 million trucks to carry the load,” according to the statement. The Department of Transportation estimates that freight volume in tons will increase by 70 percent by 2020.
Bond pointed out that the United States has roughly the same highway miles and 40 percent fewer rail miles than 20 years ago. He also pointed out that since one single medium-sized barge tow can carry the freight of 870 trucks it makes sense to modernize the nation’s waterways in order to have another transportation option that will maintain efficiency, relieve congestion, conserve fuel and reduce air emissions.
Soy Complex Mostly Higher On Fund Buying And Support from Grain, Metal And Energy Markets
The soy complex closed mostly higher on May 11 ahead of USDA’s S&D report released the following morning. The rally also was driven by heavy fund buying of soybean oil and there also was support from higher grain, metal and energy markets. Census exports for March were not that far from industry expectations with soybean exports of 2.61 million tonnes, soybean meal exports of 603,000 tonnes, and soybean oil exports of 80,700 tonnes. May bean futures closed up $3.49 finishing at $221.47; July was $2.57 higher, closing at $225.24; and August gained $2.76 ending at $227.76. May meal was down $0.88, closing at $195.99; July was $0.11 lower, finishing at $196.98; and August decreased $0.22 to finish at $198.30. May oil closed $22.49 higher to finish at $572.33; July was up $22.93, closing at $580.25; and August gained $22.49, ending at $584.22.
