December 27, 2005

 

ASA Weekly: No major deal for WTO in Hong Kong; Challenges for Argentine soy in 2006

 

 

Little progress at Hong Kong ministerial

 

As expected, the negotiations at the Doha Round ministerial in Hong Kong last week made little progress, and are unlikely to do so in the future without substantially improved offers on agricultural market access (from the EU and other import sensitive countries) and on non-agricultural tariffs and services (mainly from India and Brazil), which did not materialise. WTO members now will try to establish the main parameters of the agreement by the end of April 2006. Most of the agricultural discussions focused on two topics: whether to set an end-date for export subsidies, and how to provide a down payment of concessions for least developed countries.

 

The final ministerial declaration includes an agreement to eliminate agricultural export subsidies by the end of 2013. "Parallel" disciplines on export credits, food aid, and state trading enterprises also will be imposed by that date. Many of the restrictions on export credit programs and STEs have been agreed on already. For example, export credit programs must be self-financing, and STE losses must not be underwritten by the government. The disciplines on in-kind food aid will require more negotiation, although members have already agreed that a special exemption will be created for emergency aid.

 

Developed countries will offer a qualified package of "duty-free/quota-free" market access concessions to the least-developed countries. The original idea was proposed by the EU, which already has such a package in place (called the "Everything But Arms" initiative). However, critics claim the EU program has rules of origin that are too stringent for least-developed countries. To counter this argument, there is a provision in the Hong Kong agreement that the rules will be "transparent and simple." Another criticism is that many least-developed countries do not have the necessary infrastructure in place to expand exports, so the EU and the United States have proposed to more than double their funding of ¡¡ãtrade capacity building¡¡À grants.

 

Argentina's soybean producers face many obstacles in 2006

 

Argentine farmers are on track to produce a record 40 million tonnes of soybeans in 2006. USDA sees Argentina's 2005-06 soybean production at 40.5 million tonnes for soy, up from 39 million tonnes. However, inflation, dry weather, export taxes and other government policies could keep output and profit down.

 

According to the Buenos Aires Cereals Exchange, dry weather, low grain prices and high export taxes have led farmers to lower plantings than a year ago, when Argentina produced a record grain and oilseed harvest. Moreover, those planting decisions were made before the government eliminated food export tax rebates and raised export taxes to 15 percent from 5 percent on the beef industry.

 

Even if Argentina has good weather in the months ahead, next year will not be as productive as 2005. Additionally, farmers face a host of economic factors that will influence planting decisions throughout 2006.

 

Perhaps the biggest increase in Argentine production will come from the crushing industry because of higher soybean output and the roughly $800 million of investment in new processing facilities and ports. However, Asian rust, a fungal disease that can radically reduce soybean yields, could also be a problem next year. So could dry weather, inflation and rising input costs.

 

Change in soyoil futures delivery day awaits CFTC approval

 

The Chicago Board of Trade Board (CBOT) is seeking the approval of the Commodity Futures Trading Commission (CFTC) to revise the last delivery day in its soybean oil futures contract. The CBOT Board of Directors already approved a change to make the last delivery day for the expiring contract month to the seventh business day following the last trading day from the last business day of the month.

 

In addition, the CBOT also decided to reduce the maximum allowable deliverable capacity at regular soybean oil warehouses from 30 to 20 times a warehouse's registered daily rate of loading. The CFTC will take comments on the proposed change until January 6, 2006. Subject to CFTC approval, the revisions would be effective for all soybean oil futures contracts from January 2007 forward.

 

Biodiesel trials begin in Tennessee and Oregon

 

Tennessee Department of Transport (TDOT) has announced that a biodiesel fuel Pilot Fleet Program is in use at its maintenance facilities in east Tennessee. During the pilot program, more than 130 "on-road" vehicles, including dump trucks, snow ploughs and HELP trucks will use the B20 biodiesel mix, a blend of 20 percent soybean oil and 80 percent diesel fuel. TDOT also plans to include "off-road" construction equipment in the study early in 2006. TDOT will use an estimated 13,500 gallons of biodiesel per month during the study.

 

Meanwhile, Oregon plans to test biodiesel in 75 of its LIFT buses, which provide door-to-door service for the elderly and people with disabilities.

 

November crush 151.5 million bushels

 

The Census crush report confirmed a drop in November crush to 4.12 million tonnes from 4.31 million tonnes in October, and compares with 4.11 million tonnes last season. Oil stocks were less than expected at 862,000 tonnes versus 829,000 tonnes last month and 540,000 tonnes last year.

 

There are sizable quantities of soybean oil being used for energy either as straight refined oil or in biodiesel production. However, the use of soybean oil for food uses is not very good. Food manufacturers may begin implementing ingredient reformulations that move away from hydrogenated soybean oil ahead of the January 1, 2006 trans-fat labelling requirement.

 

U.S. & South America Soybean/Products Balance
	United States			Argentina			Brazil
	Actual	Estimate	Proj.	Actual	Estimate	Proj.	Actual	Estimate	Proj.
	2003/04	2004/05	2005/06	2003/04	2004/05	2005/06	2003/04	2004/05	2005/06
Soybeans	thousand tonnes
Carryin	4,853	3,059	6,954	1,630	2,046	2,181	3,231	2,321	903
Production	66,778	85,013	82,820	33,000	39,000	40,500	50,500	51,000	58,500
Imports	151	126	108	540	530	485	364	470	494
Crush	41,631	46,160	46,810	25,072	27,800	29,100	29,172	28,200	31,026
Exports	23,946	30,011	29,257	6,500	9,800	10,000	19,571	21,830	24,750
Other	3,146	5,073	4,296	1,552	1,795	1,810	3,031	2,858	3,021
Usage	68,723	81,244	80,363	33,124	39,395	40,910	51,774	52,888	58,797
Carryout	3,059	6,954	9,519	2,046	2,181	2,256	2,321	903	1,100
Soymeal	thousand tonnes
Carryin	200	191	155	347	354	560	763	532	200
Production	32,953	36,938	37,116	19,807	21,806	22,900	22,920	22,306	24,465
Domestic use	28,590	30,483	31,116	700	850	950	8,784	8,950	9,450
Net Exports	4,372	6,491	5,928	19,100	20,750	22,050	14,367	13,688	14,673
Usage	32,962	36,974	37,044	19,800	21,600	23,000	23,151	22,638	24,123
Carryout	191	155	227	354	560	460	532	200	542
Soybean oil	thousand tonnes
Carryin	676	488	767	99	74	100	150	93	95
Production	7,748	8,781	8,816	4,513	5,115	5,354	5,258	5,220	5,625
Domestic use	7,651	7,900	8,142	140	145	155	2,710	2,948	3,020
Net exports	285	602	583	4,398	4,944	5,224	2,605	2,270	2,600
Usage	7,936	8,502	8,725	4,538	5,089	5,379	5,315	5,218	5,620
Carryout	488	767	858	74	100	75	93	95	100

 

USDA Export Sales (tmt) - Week of 15 December 2005
Country	Commodity	New Sales	Accum. Exports		Country	Commodity	New Sales	Accum. Exports
Canada	Soybeans	3.30	106.60		Indonesia	Soymeal	0.10	10.00
China	Soybeans	295.00	4507.20		Jamaica	Soymeal	0.10	23.50
Colombia	Soybeans	5.40	50.00		Japan	Soymeal	0.20	89.90
Germany	Soybeans	68.30	69.20		Mexico	Soymeal	3.20	18.20
Guatemala	Soybeans	2.00	5.00		Salvador	Soymeal	0.30	28.60
Japan	Soybeans	71.80	802.60		Trinidad	Soymeal	3.70	10.00
Korea, Rep.	Soybeans	5.30	197.40		Turkey	Soymeal	0.80	37.80
Mexico	Soybeans	53.30	106.10		China	Soyoil	0.10	0.10
Morocco	Soybeans	31.70	111.60		Hong Kong	Soyoil	0.10	0.50
Portugal	Soybeans	47.00	72.70		Kuwait	Soyoil	0.10	0.60
Taiwan	Soybeans	171.70	579.70		Mexico	Soyoil	0.50	38.90
UAE	Soybeans	2.50	67.50		Trinidad	Soyoil	0.10	0.30
Canada	Soymeal	13.50	250.70		UAE	Soyoil	0.20	0.60
Colombia	Soymeal	0.80	69.70
Cuba	Soymeal	10.00	16.50
Dom. Rep.	Soymeal	10.50	58.90		Commodity	Outstanding Sales	Accum. Exports	New Sales
Guatemala	Soymeal	33.80	45.80		Soybeans	4,003.60	9,642.20	738.50
Honduras	Soymeal	3.80	37.20		Soymeal	1,379.40	1,331.40	84.10
Hong Kong	Soymeal	0.60	5.10		Soyoil	90.90	74.50	0.50
Note: New marketing year for soybeans began September 1, 2005