August 7, 2006
Soybean Exports Relatively Strong Late In Marketing Year
After a poor start, U.S. soybean export sales have been relatively strong during the last half of the 2005-06 marketing year. While the recent improvement in U.S. soybean exports will not make up the 2005-06 export program’s rough start, it looks to result in 2005-06 exports being above analysts’ previous expectations.
During the first half of 2005-06, export sales fell far short of recent trends as South American competition was strong to the EU and China. Prospects improved during the last half of 2005-06 when Argentina’s expanding crush industry attracted of soybeans and strong Brazilian prices opened the door for the U.S. to ship cargoes to the EU. They also implemented a July/August export sales program off the Pacific Northwest to China.
Outstanding U.S. export sales staged an abnormal increase starting in late April, and outstanding levels are now well above levels of the past 5 years. The growth of outstanding export sales appears to reflect unusually strong sales levels, rather than poor movement as monthly exports have exceeded year-ago levels since May.
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Grassley Says Farm Bill Likely To Be “Budget-Driven”
Senate Finance Committee Chairman Chuck Grassley (R-Iowa) last week said the Doha Round of WTO talks is dead, despite recent comments by President Bush and administration officials that they will seek to revive the round in the next six months or so. He added that the collapse of the Doha Round means that the next farm bill is likely to be “budget-driven” rather than “WTO-driven.” Grassley also said that if in 12 months the budget deficit is $250 billion or so and showing no sign of declining, “we’re going to be spending less money on farm programs.” But if the deficit is going down, he added, then Congress would likely write “a pretty good farm bill” next year.
Too Early For Drought Relief, Johann’s Says
It is too soon to tell whether a disaster aid package is needed for Plains and Midwest farmers, according to USDA Secretary Mike Johanns. Asked last week about the Bush administration’s plans regarding disaster assistance for farmers and ranchers, Johanns counseled patience. “We certainly have to see what we’re dealing with,” he said. “Oftentimes you can’t even tell what a drought package has to look like until you see harvest. That’s the way it was in 2005 and actually 2005 surprised us…We ended up with better crops even in dry areas than one would have predicted at this time last year.” Johanns said USDA would do everything it can to help farmers get through the summer and into the fall while the department monitors yields to determine whether an assistance package was necessary and what it might look like.
In recent years, Congress has looked to emergency spending to assist farmers hit by drought. But the Bush administration repeatedly has said there should be corresponding cuts in other farm programs to offset the cost. “I would anticipate that as we approach this heading into the fall, that offset would continue to” receive significant attention, Johanns said. He also said the administration believes the current farm bill was developed and funded taking into consideration the ad hoc disaster relief packages preceding 2002. Therefore, Johanns said, “if there’s a desire to find disaster relief, you have to go within the confines of [the farm] bill to find that relief.”
Johanns said USDA officials will continue to monitor the situation for crops over the next couple of months, “And then we’ll see what Congress has in mind in terms of any drought assistance package.”
Meanwhile, seventeen members of the Western Governors’ Association last week sent a letter to Congress urging lawmakers to pass drought aid legislation. The letter says current forecasts in some areas are predicting more dry weather, with little promise of relief. The letter says such weather conditions in combination with increased production costs are taking a terrible toll on farmers and ranchers. Governors who signed the letter were from Arizona, California, Colorado, Hawaii, Idaho, Kansas, Montana, Nebraska, New Mexico, Nevada, North Dakota, Oklahoma, Oregon, South Dakota, Utah, Washington and Wyoming.
Farm commodity groups, governors, and farmstate lawmakers likely will focus on USDA’s August Crop Production report to see if they have confirmation of major regional weather-related impacts to crops. If the impact is severe, that would likely increase the pressure on Congress and the Bush administration for some type of agricultural assistance, especially in an election-year.
Abiove And Private Industry Agree Not To Trade Amazonian Soybeans
Illegal Amazonian soybeans from newly deforested land will not be used for at least the next two years as leading players in the industry have pledged to stop buying soybeans grown in the Amazon basin, according to a report from The Public Ledger. The Brazilian Association of Vegetable Oil Industries (Abiove) and its members, which include Cargill, Archer Daniels Midland and Bunge, have agreed not to trade in illegal soybeans beginning this October following a series of protests by environmentalists.
“This initiative, which will last for two years, seeks to reconcile environmental conservation with economic development, through the responsible and sustainable use of Brazil’s natural resources,” said Abiove. The group hopes by planning strategies to move farmers who are growing soybeans on newly deforested land to comply with the Brazilian Forestry Code and, with the government’s help, developing new rules to regulate soybeans growing.
Soy Complex Lower As Rain Helps Heat-Stressed Crop
The soy complex closed lower on August 3 as after rains moved across the Midwest and helped ease concerns about crop stress from a heat wave that hit the region last week. The 10 day forecast calls for mostly above normal temperatures and below normal precipitation, but another extreme heat wave is not expected. With soybeans in the pod setting growth stage, high temperatures and/or dry topsoil conditions could negatively impact yield. The market got modest support from last week’s export sales reports that were mostly in line with expectations. August bean futures closed down $2.11 finishing at $211.64; September was $2.11 lower, closing at $213.66; and November lost $2.11 ending at $218.81. August meal was down $0.11, closing at $179.01; September was $0.44 lower, finishing at $180.67; and October was down $0.55 to finish at $182.21. August oil closed $5.95 lower to finish at $585.32; September was down $6.17, closing at $589.07; and October decreased $4.19, ending at $594.14.
