May 8, 2006
Legislation And Mandates Spur Increase In Biodiesel Production
U.S. biodiesel production in 2005 was expected to reach 75 million gallons, three times the amount produced in 2004, according to the National Biodiesel Board (NBB). For 2006 NBB expects use to go up to 150 million gallons.
However, legislation and mandates are spurring the biodiesel market, especially following last year’s passage of the Energy Bill. Minnesota has become the first state to require that diesel contain at least 2% of biodiesel, although that program has got off to a difficult start. Illinois Governor Rod Blagojevich signed a law in July that requires state government, county and local authorities, school districts, universities and community colleges and mass transit agencies to blend their diesel with 2% biodiesel. New YorkState passed legislation in September that provides a refundable tax credit to producers of biodiesel and ethanol.
On the business side, Louis Dreyfus Agriculture Industries announced plans to build a plant in northern Indiana capable of producing more than 80 million gallons of biodiesel each year. This would be the largest biodiesel plant in the United States. According to Louis Dreyfus, the company will first build a 50 million bushel per year soybean processing plant, which will be followed by the biodiesel factory near Claypool, Indiana, about halfway between Fort Wayne and South Bend. Indiana is the nation’s fourth-largest soybean grower.
Meanwhile, Archer Daniels Midland (ADM) has announced that it plans to build its first wholly-owned 50 million gallons a year biodiesel plant in Velva, North Dakota, near an existing ADM crushing facility.
PAGE TOP
Senate Approves Farm Assistance Package
The Senate on May 4 approved an emergency supplemental spending bill that also would provide $4 billion in disaster assistance for farmers and ranchers, but the bill faces strong opposition, including a veto threat from President Bush. The money was added to a massive spending bill designed to pay for the Iraq war and Hurricane Katrina. The Bush administration last week said that many crops had record or near-record production last year and that the proposed level of assistance is “excessive.”
The bill would pay farmers and ranchers around the country for recent losses because of drought, flooding, disease and other disasters. It also would give many farmers an increase on their current federal subsidy check because of higher energy expenses.
Meanwhile, Senators Jim Talent (R-Mo.) and Blanche Lincoln (D-Ark.) last week introduced legislation (S 2696) that would extend provisions of the 2002 farm bill until the Doha Round of trade negotiations is complete. The senators, both members of the Senate Agriculture Committee, said they support extending current legislation and not writing the next farm bill until global trading rules are in place. Their proposal not only would allow the 2002 farm bill to remain in effect while the Doha negotiations continue, but also would keep provisions of the current farm bill in place for at least one crop year after Congress has approved legislation to implement any eventual Doha Round agreement.
According to Talent, “A farm bill extension, pending a fair agreement at the WTO, sends a signal to our trading partners” that “[w]e will not unilaterally disarm farmers and ranchers without assurances that we will get real and meaningful reforms from them in return.” Talent added that he hopes Congress would take up the extension proposal during the current session.
Lincoln said that “Until our trading partners in the WTO have at least matched our commitment to level disparities in global agriculture trade, our farmers will be operating at a severe disadvantage. It is in our country’s best interest –– both economically and from a national security standpoint –– that we extend our current agriculture policy until these trade laws can be finalized.”
Brazil Pegs 2005-06 Crop At 55.2 Million Tonnes
Brazil’s Ministry of Agriculture last week forecast that the country’s 2005-06 soybean production at 55.2 million tonnes, down from its previous forecast mainly due to a cut in the estimate for Mato Grosso, currently forecast at 16.5 million tonnes. Last year, the Ministry of Agriculture forecast Brazil’s soybean production in May at 50.2 million tones. The Ministry estimates the 2004-05 crop at 51.4 million tonnes. However, market estimates peg the 2004-05 crop at 53 million to 54 million tonnes, based on export and processing data.
In related news, Brazilian soybean farmers have been staging protests in an attempt to make the government aware of their need for financial aid. Reduced trading, high debts and record high world soybean stocks are plaguing Brazil’s soy sector.
Producers want the local currency to be weakened against the dollar to offset some the freight costs of getting the soybeans to ports. They also want debt payments extended to as much as 10 years. The government recently released a farm aid package, but it only extends producer debts for about a year.
USDA Details Reasons For Argentina’s Record Plantings
USDA estimates Argentina’s 2005-06 soybean production to be a record 40.5 million tonnes. Harvested area is estimated to be 15.2 million hectares – also a record. However, USDA says yield should be 2.66 tonnes per hectare, which is near the 5-year average.
USDA says three drivers are responsible for the increase in soybean planted area:biotechnology, no-till practices, and the current wetter phase of the climactic cycle.First, biotechnology is shortening soybean production cycles, which have allowed double-cropping in areas previously planted with one crop per growing season. No-till technology has allowed areas to be cropped which were previously unsuitable for agriculture, such as in the expansion areas of the north and west, according to USDA.The third driver is the general increase of precipitation in many areas due to an agriculturally-favorable, moister phase of the climactic cycle.
Meanwhile, seed technology, including shorter growing-season soybeans and Roundup Ready technology are seen a major reason soybeans make up such a large percentage of the total area. And the technology has led to soybeans having increased profitability over other crops, says USDA.
Soy Complex Mostly Lower As Prices Follow Corn, Wheat And Energy Markets
The soy complex closed mostly lower on May 4 as soybean prices fell along with the corn, wheat and energy markets. Soybean oil futures dropped the most in the complex on pressure from lower energy prices and growing oil/meal spreads. May bean futures closed down $0.73 finishing at $217.06; July was $0.64 lower, closing at $221.84; and August lost $0.92 ending at $223.77. May meal was up $1.43, closing at $194.67; July was $0.44 higher, finishing at $195.44; and August increased $0.77 to finish at $197.09. May oil closed $9.04 lower to finish at $549.83; July was down $9.04, closing at $557.98; and August lost $8.82, ending at $562.17.
