September 11, 2006
Large New-Crop Export Sales Bode Well for 2006-07 Exports
U.S. soybean exports appear as though they will get off to a considerably better start in 2006-07 than they did last year. New crop soybean export sales of 5.1 million tonnes as of August 24 are well above last year’s 2.9 million because of record-large sales to China. New-crop soybean export sales to unknown destinations, many of which likely are sales to China, also are above year-ago levels, but no bigger than 2 or 3 years ago. Sales to Asian destinations other than China are about even with the trend of the last 2 years. There are virtually no USDA-reported sales to the EU, which suggests that there could be further erosion in U.S. soybean exports to that market. Fewer soybeans and more soybean meal are being exported to the EU as it boosts the rapeseed crush in order to produce more vegetable oil for an expanding biodiesel industry and a food sector that would rather use rapeseed oil that is produced from a GMO-free crop.
China is expected to account for nearly one-half of 2006-07 U.S. soybean exports. The vast majority of new-crop export sales to China were announced last April when a Chinese delegation signed deals in Chicago. While these sales may be viewed largely as ceremonial since they could be shipped anytime during the 2006-07 marketing year, a similar announcement was made in December 2003 ahead of the 2004-05 marketing year in which soybean exports to China got off to a record fast start.
Argentine shipments to China this fall are not expected to be as strong, which should bolster U.S. export prospects. The United States likely will face less overall South American competition this fall because September 1 Brazil stocks are nearly 1.7 million tonnes smaller than a year ago and Argentine soybean exports will fall well short of last year despite larger September 1 stocks because of a large increase in the crush.
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Biodiesel Use of Soybean Oil Surprisingly Low
The Census Bureau reported a surprising drop in methyl esters (biodiesel) usage of refined soybean oil as July usage dropped to 106 million pounds from June usage of 141 million that was revised lower by 9 million pounds. This likely reflects a slow down in biodiesel production in existing facilities.
However, the drop in use could be a result of the Bureau missing production from new facilities that have not been added to their survey list or from plants that responded too late to be included in the July report. In the past, refined soybean oil usage in biodiesel production has been revised higher to make up for reporting errors in previous months surveys.
Trade Groups Review Farm Bill Option
A coalition of ag trade associations recently reviewed a revenue-based 2007 farm bill option. Reviewing the draft plan and providing input were American Soybean Association (ASA) Farm Bill Task Force chairman; Ron Heck, ASA Farm Bill Task Force member; Dale Schuler, National Association of Wheat Growers (NAWG) president; Bart Ruth; National Corn Growers Association (NCGA) Public Policy Action Team Chairman Steve Pigg; Dale Thorenson, U.S. Canola Association director and Craig Hill, Iowa Farm Bureau vice president.
The multi-tiered revenue-based program concept is designed to provide a broader safety net for farmers and cover both price and yield, Pigg said, adding the concept protects farmers with greater variability in their yields. The current farm bill offers a producer protection against adverse markets and crop losses through a combination of price-based support programs and federal crop insurance.
Additionally, the coalition has commissioned a study to show the option’s impact on other commodities besides corn. “We are very interested in continuing our discussion with farm groups about this proposal and other farm bill proposals that may come along,” Schuler said.
Senators Introduce $6-Billion Agriculture Disaster Bill
Senators Kent Conrad (D-N.D.) and Tim Johnson (D-S.D.) have introduced emergency agricultural disaster assistance legislation that would provide about $6 billion to producers that suffered weather-related crop and livestock loss in 2005 and 2006.
The bill includes language from an earlier Conrad bill (S. 2438) that would have provided $3.5 billion for producers harmed during 2005. The new agriculture disaster package combines that bill, which supported ranchers and farmers impacted by frost, flood and disease during the 2005 growing season, with emergency legislation to aid producers suffering from the 2006 drought devastating the Great Plains. The measure has 11 other co-sponsors.
Brazil Prepares $470 Million Soybean Aid Package
Brazil plans to advance about $470 million to the nation’s soybean farmers in an attempt to avoid a sharp decline in soybean planting for next year’s crop, a senior agriculture ministry official told Reuters last week. “It’s a crisis and the soybean area will be smaller, but we want to reduce the fall,” said Edilson Guimaraes, the ministry’s new secretary of agriculture policy. Guimaraes added that the government plans to start the soybean support program when the new crop is planted in October so as to ensure that funds reach farmers in time.
Meanwhile, the central bank’s dollar purchases and new rules that allow international trading companies to keep dollars overseas for longer periods of time do not appear to have helped in the way most in the soy market have hoped. International investors like Brazil’s economic outlook and are pouring money into its fixed-income investments. Meanwhile, export revenue keeps bringing in more dollars to the country, helping the real gain strength.
Soy Complex Mostly Higher As Soybean Prices Follow Corn
The soy complex closed mostly higher on September 7 as higher corn prices helped pull the market up late in the session and short-covering emerged to boost prices into the close. Soybean futures are under pressure from improving crop prospects and farmer marketing of large remaining old-crop supplies. Meanwhile, soyoil continues to be under pressure from weak energy markets. September bean futures closed up $1.65 finishing at $197.86; November was $1.19 higher, closing at $202.09; and January gained $1.29 ending at $206.96. September meal was up $1.10, closing at $176.92; October was $1.43 higher, finishing at $176.92; and December was up $1.76 to finish at $179.90. September oil closed $0.44 lower to finish at $534.84; October was down $0.66, closing at $538.36; and December decreased $1.32, ending at $547.40.
