August 1, 2005
ASA Weekly: Ocean freight rates decline; Argentine production to be 40 million tonnes in 2005-06
Ocean freight rates decline
While the summer months are typically a slow period for ocean freight and rates, the number of new vessels entering service is not slowing and is adding further pressure on rates.
Between now and the end of the year, a new dry bulk vessel will enter service daily, pushing this year's fleet up nearly 350 vessels (or about 7 percent) to 5,078 dry bulk vessels of all sizes.
Over the next two months, freight rates are anticipated to continue to freefall until about mid-September or early October as fall movement patterns ramp up in the Northern Hemisphere. But, even then, rates will find it hard to gain much traction given the large order book of vessels not just for 2005, but also for new vessels to be delivered in the next three years.
The prospects for next year point to continued rate weakness as supply and demand fall more into equilibrium. The key linchpin in this will be China demand.
According to some trade statistics, China's dry bulk demand is steady, although current inventories of iron ore, for example, are rather plentiful, unlike the demand for pig iron that is still steadily growing.
If China clears up its inventory and increases its steel output to yet another level, then the freight market will have some traction. But at present, China's steel market is in surplus, so much so that it equals all of Germany's annual output.
Argentine production to be 40 million tonnes in 2005-06
Argentine farmers are expected to produce a record 40 million tonnes of soybeans in 2005-06, the US Agriculture Secretariat said in the week of Jul 25.
The forecast is based on the assumption that planted areas will increase to 15 million hectares from 14.4 million currently. The Secretariat expects the average yield to fall slightly to 2.68 tonnes a hectare from 2.7 tonnes a hectare in 2004-05, when good weather helped lift the output of almost all local crops.
If the forecast holds, it would put soybean production up 1.7 million tonnes from the previous year, when output totalled 38.3 million tonnes, according to the Secretariat. USDA forecasts Argentine soybean output for 2005-06 to be 39 million tonnes.
The Secretariat also expects the 2005-06 Argentine crush to be 31.5 million tonnes, up from 28.5 million tonnes a year earlier. Because of increased crushing, the Secretariat expects soybean exports to decline to 7 million tonnes from 8.3 million tonnes in 2004-05.
Details of energy bill biomass tax incentives; other biomass provisions
The House and Senate last week approved US$14.55 billion energy tax incentive package, with a net cost of around US$11.5 billion after conferees filed the energy bill conference report.
The tax portion of the bill would have a net cost of US$11.5 billion over the next decade, including US$3 billion in revenue-raising offsets. The net cost between 2005 and 2010 would be US$6.9 billion.
Of particular interest to the soybean sector is the US$3.2 billion in renewable energy provisions, of which US$2.75 billion is a two-year extension of a tax credit for electricity produced through wind, closed-loop biomass, open-loop biomass, geothermal, small irrigation power, landfill gas facilities and trash combustion facilities.
Last week, USDA presented the Congress with the following background information on biomass: "A small but rapidly growing renewable fuel is bio-diesel. Production, at less than 1 million gallons in 1999, rose to about 25 million in 2004. There are 35 active plants producing bio-diesel with a production capacity of about 100 million gallons.
"The majority of bio-diesel is made from soybean oil, but some producers use other oilseed crops or recycled oils to make bio-diesel. Having similar properties to petroleum diesel fuel, bio-diesel can be blended in any ratio with petroleum diesel fuel and is most often blended at the 20 percent level (B20).
"Today, most B20 is used by government motor fleets, urban bus fleets, and school buses. It is also being used in farm equipment, marine engines, and furnaces as a replacement for heating oil. A market for bio-diesel as a lubricity additive is also emerging. Diesel fuel must have good lubricity properties, because the fuel lubricates the diesel engine.
"There has been an increasing need for lubricity additives, because diesel fuel lubricity levels have been declining, due to the need to desulfurise diesel fuel to meet tighter air quality standards."
The following are the details regarding the production credit for wind energy and biomass electricity: Under current law, a tax credit is allowed for a number of wind energy and biomass electricity initiatives, including the production of electricity from wind, closed-loop biomass produced from plants grown specifically to produce electricity, poultry-waste facilities, open-loop biomass (including agricultural livestock waste nutrients) facilities, geothermal energy facilities, solar energy facilities, small irrigation power facilities, landfill gas facilities and trash-combustion facilities.
This credit is part of the general business credit and generally may not exceed the taxpayer's tax liability over US$25,000, or the taxpayer's tax liability under the alternative minimum tax. Excess credits may be carried back one year and carried forward up to 20 years.
The credit is indexed for inflation and for 2005 is 0.9 cents-per-kilowatt-hour for open-loop biomass, small irrigation power facilities, landfill gas facilities and trash-combustion facilities.
For wind and closed-loop biomass facilities, the credit is available for a 10-year period for facilities placed in service by the end of 2005, and the amount of the credit that may be claimed is phased out as the market price of electricity tops certain threshold levels.
The agreement extends the placed-in-service date by two years, through 2007, for wind, closed loop, open loop, geothermal, small irrigation power, landfill gas and trash-combustion facilities. The agreement also permits agricultural cooperatives to pass any portion of the credit through to their members.
The energy bill also authorizes the Interior and Agriculture departments to provide grants to owners and operators of facilities that produce electricity, heat, or petroleum substitutes using trees, plants, brush and wood chips.
To be eligible, the biomass would need to be derived from efforts to thin national parks and forests as a means of preventing forest fires, or reducing disease or insect infestation. Such grants could not exceed US$500,000 each. The measure authorizes US$50 million in each of fiscal years 2006 through 2016 to carry out both of these biomass grant programs.
|
U.S. & South America Soybean/Products Balance | |||||||||
|
United States |
Argentina |
Brazil | |||||||
|
Actual |
Estimate |
Proj. |
Actual |
Estimate |
Proj. |
Actual |
Estimate |
Proj. | |
|
2002/03 |
2003/04 |
2004/05 |
2003/04 |
2004/05 |
2005/06 |
2003/04 |
2004/05 |
2005/06 | |
|
Soybeans |
thousand tonnes | ||||||||
|
Carryin |
5,663 |
4,853 |
3,059 |
896 |
1,630 |
2,820 |
681 |
3,129 |
4,186 |
|
Production |
75,010 |
66,778 |
85,484 |
35,500 |
33,000 |
39,000 |
52,000 |
52,600 |
53,000 |
|
Imports |
127 |
151 |
136 |
400 |
540 |
350 |
1,124 |
350 |
213 |
|
Crush |
43,966 |
41,631 |
44,906 |
24,723 |
24,298 |
26,842 |
27,796 |
29,172 |
30,215 |
|
Exports |
28,441 |
23,946 |
29,937 |
8,910 |
6,500 |
8,700 |
19,987 |
19,571 |
20,888 |
|
Other |
3,540 |
3,146 |
4,171 |
1,533 |
1,552 |
1,652 |
2,893 |
3,150 |
3,200 |
|
Usage |
75,947 |
68,723 |
79,014 |
35,166 |
32,350 |
37,194 |
50,676 |
51,893 |
54,303 |
|
Carryout |
4,853 |
3,059 |
9,665 |
1,630 |
2,820 |
4,976 |
3,129 |
4,186 |
3,096 |
|
Soymeal |
thousand tonnes | ||||||||
|
Carryin |
218 |
200 |
191 |
330 |
347 |
250 |
490 |
763 |
469 |
|
Production |
34,666 |
32,953 |
35,674 |
19,486 |
19,050 |
21,253 |
21,950 |
22,920 |
23,730 |
|
Domestic use |
29,380 |
29,257 |
30,345 |
250 |
260 |
270 |
8,750 |
8,784 |
9,400 |
|
Net Exports |
5,304 |
3,705 |
5,293 |
19,219 |
18,887 |
20,583 |
12,927 |
14,430 |
14,374 |
|
Usage |
34,684 |
32,962 |
35,638 |
19,469 |
19,147 |
20,853 |
21,677 |
23,214 |
23,774 |
|
Carryout |
200 |
191 |
227 |
347 |
250 |
650 |
763 |
469 |
425 |
|
Soybean oil |
thousand tonnes | ||||||||
|
Carryin |
1,070 |
676 |
488 |
105 |
99 |
74 |
150 |
150 |
93 |
|
Production |
8,363 |
7,748 |
8,509 |
4,554 |
4,435 |
4,947 |
5,031 |
5,258 |
5,448 |
|
Domestic use |
7,752 |
7,651 |
7,847 |
130 |
130 |
145 |
2,668 |
2,710 |
2,785 |
|
Net exports |
1,005 |
285 |
587 |
4,430 |
4,330 |
4,676 |
2,363 |
2,605 |
2,666 |
|
Usage |
8,757 |
7,936 |
8,434 |
4,560 |
4,460 |
4,821 |
5,031 |
5,315 |
5,451 |
|
Carryout |
676 |
488 |
563 |
99 |
74 |
200 |
150 |
93 |
90 |
|
USDA Export Sales (tmt) - Week of 21 July 2005 | ||||||||
|
Country |
Commodity |
New Sales |
Accum. Exports |
|
Country |
Commodity |
New Sales |
Accum. Exports |
|
Belgium |
Soybeans |
1.5 |
326.9 |
|
Hong Kong |
Soymeal |
0.2 |
9.2 |
|
Canada |
Soybeans |
2.3 |
361.7 |
|
Japan |
Soymeal |
3 |
320.91 |
|
China |
Soybeans |
24.7 |
11791.6 |
|
Mexico |
Soymeal |
38 |
900.2 |
|
Colombia |
Soybeans |
2.8 |
134.8 |
|
Panama |
Soymeal |
12.6 |
96.2 |
|
Cuba |
Soybeans |
0.1 |
77.9 |
|
Salvador |
Soymeal |
6.9 |
96.2 |
|
Denmark |
Soybeans |
18.7 |
858.8 |
|
Vietnam |
Soymeal |
0.9 |
4.6 |
|
Japan |
Soybeans |
45.4 |
2431.2 |
|
Canada |
Soyoil |
0.8 |
24.3 |
|
Mexico |
Soybeans |
93.6 |
2585.5 |
|
Mexico |
Soyoil |
0.1 |
150.9 |
|
Philippines |
Soybeans |
23.5 |
153.3 |
|
Oman |
Soyoil |
0.1 |
0.2 |
|
Syria |
Soybeans |
14.2 |
75.6 |
|
|
|
|
|
|
Taiwan |
Soybeans |
2.6 |
1378.1 |
|
|
|
|
|
|
Turkey |
Soybeans |
8.0 |
564.6 |
|
Export Sales Totals (tmt) | |||
|
Canada |
Soymeal |
4.9 |
810.5 |
|
Commodity |
Outstanding Sales |
Accum. Exports |
New Sales |
|
Colombia |
Soymeal |
3.0 |
157.9 |
|
Soybeans |
1,007.5 |
29,091.6 |
-70.8 |
|
Ecuador |
Soymeal |
5.1 |
29.4 |
|
Soymeal |
532.7 |
5,163.7 |
70.7 |
|
Guatemala |
Soymeal |
1.5 |
176.5 |
|
Soyoil |
33.6 |
380.6 |
0.9 |
