August 27, 2007

 

ASA weekly: Louis Dreyfus opens US$150 million soybean processing and bio-fuel plant in US's Indiana; Economist Intelligence Unit expects two-year spike in oilseed prices

 

 

Louis Dreyfus opens US$150 million soybean processing and bio-fuel plant in US's Indiana
 

Louis Dreyfus has officially opened a US$150 million soybean processing and bio-fuel plant in Claypool, Indiana. The company claims the new unit is the largest integrated soybean-based production facility in the world.

 

"Claypool is a strategic centerpiece for our company's future," said Robert Louis-Dreyfus, chairman of Louis Dreyfus Commodities.

 

The facility includes an 88-million gallon a year biodiesel plant, which will also produce one million tonnes of soymeal each year, utilising 50 million bushels of soybeans, more than 17 percent of the soybeans grown in Indiana. Kip Tom, a board member of the Indiana Economic Development Corporation, said that in a single year, the plant would buy more than US$450 million worth of soybeans produced by Indiana farmers.

 

This is the first entry into the biodiesel field for Louis Dreyfus, a French company that has been trading in grains internationally for 150 years and has been operating in the United States for almost a century. The plant, located in north central Indiana, is planning to start crushing soybeans in late September and begin biodiesel operations in early October.

 

Soyatech's Bio-fuels Index shows expected strong growth in bio-fuel sector
 

Growth in planned projects and those currently under construction in the United States remains strong for both ethanol and biodiesel plants, according to Soyatech's Bio-fuels Index, newly updated for the second quarter (Q2) of 2007.

 

However, the data also shows signs that the corn-based ethanol construction boom may be leveling off somewhat. Soyatech's Bio-fuels Index, which tracks planned and actual build-out of bio-fuels production capacity, points to a slight leveling off in construction of ethanol plants during Q2 2007 - the first time since the Index began tracking these numbers. According to the Index, capacity under construction decreased slightly by 1.7 percent.

 

"While the percent change is too small and the time frame too short to identify this as a definitive trend, we understand from industry sources that it is more difficult to secure debt financing for new refineries due largely to increased equity requirements on the part of banks providing this funding. We suspect that an additional cause may be constraints on the amount of corn available as a feedstock to produce ethanol," said Jacob Golbitz, director of research for Soyatech.

 

Total online capacity for biodiesel production increased sharply - 41 percent from the first quarter to Q2 2007, from 890 million gallons/year to 1.255 billion gallons/year.

 

"While it is easier to produce impressive growth when starting from a smaller base, a 41 percent growth rate nevertheless means that industry capacity for biodiesel nearly doubled over the last three months. That is certainly a significant development," said Golbitz. Biodiesel capacity under construction for the same period grew by 19 percent, from 1.613 billion gallons/year to 1.927 billion gallons/year, and planned capacity rose even further by 24 percent, from 2.331 billion gallons/year to 2.898 billion gallons/year.

 

Golbitz noted that one factor contributing to the strong showing for biodiesel is optimism that the US$1/gallon federal subsidy for biodiesel will be extended with the passage of the 2007 Farm Bill later this year.

 

The Index summary also discusses issues surrounding feedstock availability, noting a movement away from reliance only on soybean oil and towards the use of alternative feedstocks in the capacity build-out of biodiesel plants.

 

According to the Index, only 39 percent of capacity currently under construction, and just 16 percent of planned capacity, indicates soybean oil as the sole feedstock. "Given the development of trends that we have observed over the last six months, we expect convergence in the price of all commodity fats and oils over the next six to 12 months that will leave little to no additional margin for biodiesel producers that use alternative sources," Golbitz noted.

 

Economist Intelligence Unit expects two-year spike in oilseed prices
 

Oilseed and grain prices are in for a two-year price spike on the back of tight markets, the Economist Intelligence Unit (EIU) is predicting.

 

The EIU food, feedstuffs and beverages index is on course for a 16 percent rise this year, echoing its performance in 2006, according to the latest forecast. The outlook is for further annual growth of 2 percent in 2008 and 2009, suggesting that the commodities boom has some way to run.

 

"Surging demand for food, feed and fuels is combining with low stock levels to create extremely tight markets," the EIU writes. EIU added that unfavourable weather conditions, combined with competition for acreage, imply that it will still take some time before supply manages to catch up with demand.

 

Leading the way are grain and oilseeds, with expected price rises of 16 percent and 20 percent respectively this year, and 5 percent in both cases next year. Senior commodities editor Kona Haque argues that the ethanol and biodiesel industries are pushing up demand for corn, soybeans and palm oil, with lack of available land and poor weather preventing output from rising.

 

U.S. & South America Soybean/Products Balance

	United States			Argentina			Brazil
	Actual	Estimate	Proj.	Actual	Estimate	Proj.	Actual	Estimate	Proj.
	2004/05	2005/06	2006/07	2004/05	2005/06	2006/07	2004/05	2005/06	2006/07
Soybeans	thousand tonnes
Carryin	6,960	12,229	15,660	514	672	2,816	1,638	2,252	2,578
Production	83,368	86,770	71,448	40,500	47,200	47,000	57,000	59,000	61,000
Imports	92	109	109	1,013	1,800	1,800	40	100	50
Crush	47,324	48,852	48,988	32,740	35,600	38,750	28,756	29,300	29,300
Exports	25,579	29,937	27,760	7,130	9,700	10,300	24,770	26,500	29,200
Other	5,288	4,659	4,477	1,485	1,556	1,600	2,900	2,974	3,000
Usage	78,191	83,448	81,225	41,355	46,856	50,650	56,426	58,774	61,500
Carryout	12,229	15,660	5,992	672	2,816	966	2,252	2,578	2,128
Soymeal	thousand tonnes
Carryin	156	285	272	671	1,132	1,132	640	694	744
Production	37,416	38,575	38,859	25,737	28,035	30,519	22,300	23,175	22,735
Domestic use	30,114	30,981	31,525	584	600	640	10,173	10,745	11,100
Net Exports	7,173	7,607	7,334	24,692	27,435	29,564	12,073	12,380	11,770
Usage	37,287	38,588	38,859	25,276	28,035	30,204	22,246	23,125	22,870
Carryout	285	272	272	1,132	1,132	1,447	694	744	609
Soybean oil	thousand tonnes
Carryin	771	1,365	1,388	95	92	121	248	250	331
Production	9,248	9,217	9,267	6,085	6,622	7,220	5,521	5,740	5,625
Domestic use	8,147	8,460	9,027	424	656	775	3,222	3,421	3,510
Net exports	507	734	619	5,664	5,937	6,470	2,297	2,238	2,187
Usage	8,654	9,194	9,646	6,088	6,593	7,245	5,519	5,659	5,697
Carryout	1,365	1,388	1,009	92	121	96	250	331	259

 

USDA Export Sales (tmt) - Week of 16 August 2007

Country	Commodity	New	Accum.		Country	Commodity	New	Accum.
		Sales	Exports				Sales	Exports
Canada	Soybeans	5	128.5		Russia	Soymeal	4.8	16.8
Indonesia	Soybeans	30.7	1437.7		Saudi Arabia	Soymeal	17.9	83.5
Malaysia	Soybeans	11	286		Canada	Soyoil	0.7	31.7
Taiwan	Soybeans	21.5	1875.1		Jamaica	Soyoil	4.2	18.9
Vietnam	Soybeans	9.9	11.5		Korea, Rep.	Soyoil	0.2	56.2
Canada	Soymeal	17.4	1180.9		Mexico	Soyoil	7.7	81.6
Dom. Rep.	Soymeal	8.4	363.1		Morocco	Soyoil	14.9	34.8
Egypt	Soymeal	8.6	55.5		Salvador	Soyoil	1.5	12.8
FW IND	Soymeal	0.7	15		Export Sales Totals (tmt)
Honduras	Soymeal	1.8	121.5		Commodity	Outstanding	Accum.	New
Hong Kong	Soymeal	2	5.1			Sales	Exports	Sales
Mexico	Soymeal	25	1255.1		Soybeans	1,649.70	29,549.50	5.7
Panama	Soymeal	8.7	133.6		Soymeal	1,152.10	5,945.60	145
Philippines	Soymeal	82.5	363.7		Soyoil	125	505.4	19.6