July 10, 2006
Soybean Plantings Up 4% In 2006
The 2006 U.S. soybean planted area is estimated at 30.3 million hectares, up 4 percent from last year and the second largest on record, according to USDA.Area for harvest in the United States is forecast at 29.9 million hectares, also up 4 percent from 2005. Area planted increased or was unchanged from last year in 20 of the 31 major soybean producing states, USDA said.Summer weather will be crucial to crop development and yields, but the increased plantings provide the potential for large supplies and lower prices next year.
Old crop soybean stocks continue to be dramatically above the 2005 level as of June 1. This will likely keep modest pressure on near-term prices.
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Developing Countries To Play Increasing Role In World Farm Trade
Emerging economic powerhouses including Brazil, China, and India are expected to play an increasingly important role in shaping the future of global agricultural trade, as rising incomes and urbanization lead to major changes in diet and eating habits, according to a joint report released by the Organization for Economic Cooperation and Development (OECD) and the UN’s Food and Agriculture Organization (FAO). The report suggests that the developing world will lead to massive shifts in farm trade over the coming decade.
Production and consumption of farm products is expanding faster in developing countries than in the industrialized world, according to the report. Rapid income growth in key emerging countries like Brazil, China, and India is sparking greater demand, and corresponding imports, for both meat and processed foods, but also for the animal feed needed for their production, according to the report. The U.S. is expected to remain the world’s largest wheat exporter over the coming decade, but the OECD-FAO study suggested that its current market share is likely to fall.
The OECD-FAO report suggests that rising energy prices and growing supply concerns will boost interest in biofuels, as a substitute for oil-based fossil fuels, adding further pressure to commodity markets. Governments can be expected to increase subsidies for the production of biofuels from coarse grains and other cereals, as well as from oilseeds and sugar, creating additional demand for these commodities, according to the report. Much of the projected growth in demand for coarse grains will be linked to biofuel production, according to the report.
However, very few countries have enough raw materials available at present to produce biofuels that could compete on price with fossil fuels without government subsidies, according to OECD-FAO. The report said: “In only a very few countries is the required feedstock available at prices that would presently allow ethanol and biodiesel production to be competitive with transport fuels from crude oil without government support. But such support can also create market distortions, the nature and level of which need to be well understood before policies are put into place.”
OECD-FAO warned governments that the global trade in livestock and meat remains vulnerable to animal disease outbreaks in key supplying countries. Future outbreaks of BSE, foot and mouth disease, and avian influenza may challenge markets and affect trading patterns, requiring greater international attention and cooperation, according to the report.
Brazilian Agriculture Minister To Resign
Brazilian Agriculture Minister Roberto Rodrigues says he is resigning, although the exact date of his departure remains to be negotiated with President Luiz Inacio Lula da Silva. Reuters notes that Rodrigues oversaw record Brazilian farm exports since taking the helm of the Agriculture Ministry in early 2003.
On several occasions in the past year or so, Brazil’s local media have reported that Rodrigues was on the verge of resigning over frustration with the government’s lack of funding for the agricultural sector.
Army Corps Says Protecting Farmland Along The Upper Mississippi Not Worth The Expense
Beefing up levees along the upper Mississippi and Illinois rivers to protect large tracts of agricultural land from rare but severe floods would be an unjustifiable expense of billions of dollars, according to a newly released U.S. Army Corps of Engineers study. The Corps found that the existing flood-protection system along nearly 1,100 river miles north of Cairo, Ill., generally holds its own most of the time. Building up levees to protect against a so-called 500-year flood would cost more than $8 billion, according to the study. Even upgrades to survive less-severe 100-year floods would cost roughly $3.7 billion, according to the Corps’ 109-page report, completed last month.
The Upper Mississippi, Illinois and Missouri Rivers Association –– focusing on agriculture, economic development and flood-control issues –– favors providing 500-year flood protection on significant stretches of the two rivers as “the greatest level of protection to the greatest number of people,” said Dave McMurray, the group’s vice chairman.
Grassley Urges Retention Of Export Trading Company Act
Senate Finance Committee Chairman Chuck Grassley (R-Iowa) has urged the Antitrust Modernization Commission not to recommend repealing the Export Trading Company Act, which provides a limited antitrust exemption for exporter associations. Among the other reasons Grassley cited for his position is that the Act allows industry groups to manage export quotas without fear of antitrust liability.
Soy Complex Up On Forecast For Dry Weather
The soy complex closed up on July 6 reflecting the outlook for dry weather forecast in U.S. soybean growing regions. The U.S. has ample old-crop soybean supplies and new-crop acreage. If yield prospects are not in serious jeopardy, soybean futures are vulnerable to a sharp decline as unprecedented remaining farmer-held supplies are marketed and 2005-crop loans are redeemed. July bean futures closed up $5.14 finishing at $223.58; August was $4.78 higher, closing at $225.42; and September gained $4.96 ending at $2227.99. July meal was up $1.98, closing at $193.12; August was $2.31 higher, finishing at $194.56; and September was up $2.54 to finish at $196.10. July oil closed $17.64 higher to finish at $597.89; August was up $16.98, closing at $600.09; and September increased $16.53, ending at $605.38.
