January 8, 2007
ASA weekly: Soy prices poised for major increase; Biodiesel could impact US economy; Demand for low linolenic soybeans exceeds supply
Soybean prices may be headed for the biggest jump in three decades as farmers plant more fields with corn, according to Bloomberg News reports.
US farmers are preparing to sow the fewest acres of soybeans in 10 years. Incidentally, as demand is rising, traders say they may double this year's average price of US$ 5.98 a bushel and allow soybeans to replace corn. Higher prices in the US will boost costs globally because soybean futures on the CBOT are the benchmark from Sao Paulo to Tokyo.
Global soybean supplies grew faster than consumption as new drought-resistant seeds boosted production in the Midwest, and farmers in Brazil and Argentina expanded cultivation into wild grasslands.
The US' biodiesel industry will add US$ 24 billion to the domestic economy between 2005 and 2015, according to a study by the National Biodiesel Board (NBB). The figure foresees biodiesel growth reaching 650 million gallons of annual production by 2015.
Additional tax revenues from biodiesel production will more than pay for the federal tax incentives provided to the industry, according to the report. Roughly US$ 13.6 billion in revenue that would otherwise be spent on foreign oil likely will stay in the US, the report said.
This total impact of biodiesel on the economy includes the temporary impacts of construction, the permanent impacts of annual production and the direct value of biodiesel and co-products (glycerin).
The study finds that if 498 of the 650 million gallons of estimated biodiesel demand in 2015 is produced from soybean oil, farmer-level soybean prices will increase nearly 10 percent.
Meanwhile, seed companies are persuading farmers to grow the low linolenic soybean that offers an alternative to frying oil laden with trans fat.
These soybeans contain lesser fatty linolenic acid. Currently their demand is far exceeding the availability. That has created a tricky situation for major fast-food chains and manufacturers who want to stop using partially hydrogenated vegetable oil, a food industry workhorse that is the source of artificial trans fat.
In the weeks since New York City announced it would ban trans fat from its restaurants, several major cities and some states, including California, have begun considering similar measures.
Possible increase in Farm Bill budget
Incoming congressional Budget committee chairman reportedly have indicated providing several billion additional dollars when the 2007 farm bill is written. The money would be in addition to the funding level projected last March by the Congressional Budget Office, according to sources.
In March, CBO projected the outlays for USDA's Commodity Credit Corporation to carry out price support and related programmes at US$ 14.097 billion in fiscal 2008, US$ 13.261 billion in FY 2009 and US$ 11.868 billion in FY 2010.
Details regarding a possible increase in the farm bill budget baseline are not known at this time, but one source said it could be several billion dollars, "but nothing like the increase the Budget panels provided the House and Senate Ag Committees in the writing of the 2002 farm bill".
House and Senate Agriculture panel leaders have already indicated seeking additional funding for a number of initiatives including ad hoc disaster funding; energy programmes, including a possible 5-million-acre cellulosic-based renewable fuel pilot programme; the conservation security programme; extension of the milk income loss contract programme; and additional funding for the fruit and vegetable industry.
In spite of the tight budget, wheat and soybean groups are trying to convince Congress to increase the target prices for their commodities, a development which would result in at least some increased budget cost, even with the higher commodity prices that CBO has incorporated into its budget assumptions.
US & South America Soybean/Products Balance
|
United States |
Argentina |
Brazil | |||||||
|
Actual |
Estimate |
Proj. |
Actual |
Estimate |
Proj. |
Actual |
Estimate |
Proj. | |
|
May-04 |
Jun-05 |
Jul-06 |
May-04 |
Jun-05 |
Jul-06 |
May-04 |
Jun-05 |
Jul-06 | |
|
Soybeans |
thousand tonnes | ||||||||
|
Carryin |
3,059 |
6,960 |
12,214 |
2,434 |
514 |
379 |
3,400 |
1,440 |
640 |
|
Production |
85,013 |
83,368 |
87,196 |
39,000 |
40,500 |
41,300 |
53,000 |
55,000 |
56,000 |
|
Imports |
152 |
92 |
109 |
708 |
900 |
950 |
353 |
86 |
100 |
|
Crush |
46,160 |
47,320 |
48,444 |
29,560 |
32,600 |
33,700 |
29,730 |
28,000 |
27,300 |
|
Exports |
30,011 |
25,778 |
31,161 |
10,548 |
7,400 |
7,000 |
22,798 |
25,550 |
26,700 |
|
Other |
5,093 |
5,108 |
4,531 |
1,520 |
1,535 |
1,536 |
2,785 |
2,336 |
2,024 |
|
Usage |
81,264 |
78,206 |
84,136 |
41,628 |
41,535 |
42,236 |
55,313 |
55,886 |
56,024 |
|
Carryout |
6,960 |
12,214 |
15,383 |
514 |
379 |
393 |
1,440 |
640 |
716 |
|
Soymeal |
thousand tonnes | ||||||||
|
Carryin |
191 |
156 |
290 |
1,350 |
1,187 |
2,165 |
870 |
640 |
856 |
|
Production |
36,936 |
37,413 |
38,478 |
23,347 |
26,101 |
26,548 |
22,928 |
21,874 |
21,435 |
|
Domestic use |
30,446 |
30,194 |
30,935 |
537 |
573 |
602 |
9,162 |
9,556 |
9,511 |
|
Net Exports |
6,525 |
7,085 |
7,561 |
22,973 |
24,550 |
25,800 |
13,996 |
12,102 |
12,220 |
|
Usage |
36,971 |
37,279 |
38,496 |
23,510 |
25,123 |
26,402 |
23,158 |
21,658 |
21,731 |
|
Carryout |
156 |
290 |
272 |
1,187 |
2,165 |
2,311 |
640 |
856 |
560 |
|
Soybean oil |
thousand tonnes | ||||||||
|
Carryin |
488 |
771 |
1,346 |
660 |
542 |
712 |
293 |
248 |
450 |
|
Production |
8,781 |
9,250 |
9,124 |
5,404 |
6,228 |
6,397 |
5,708 |
5,352 |
5,233 |
|
Domestic use |
7,910 |
8,169 |
8,709 |
408 |
433 |
563 |
3,059 |
3,168 |
3,205 |
|
Net exports |
588 |
506 |
542 |
5,114 |
5,625 |
5,950 |
2,694 |
1,982 |
2,180 |
|
Usage |
8,498 |
8,675 |
9,251 |
5,522 |
6,058 |
6,513 |
5,753 |
5,150 |
5,385 |
|
Carryout |
771 |
1,346 |
1,219 |
542 |
712 |
596 |
248 |
450 |
298 |
|
USDA Export Sales (tmt) - Week of 28 December 2006 | ||||||||
|
New |
Accum. |
|
New |
Accum. | ||||
|
Country |
Commodity |
Sales |
Exports |
|
Country |
Commodity |
Sales |
Exports |
|
China |
Soybeans |
230.5 |
5509.7 |
|
OPAC Is. |
Soymeal |
0.6 |
0.9 |
|
Cuba |
Soybeans |
2.9 |
74.9 |
|
Philippines |
Soymeal |
1.8 |
105 |
|
Germany |
Soybeans |
157.1 |
568.8 |
|
Salvador |
Soymeal |
5.9 |
22.2 |
|
Japan |
Soybeans |
15.6 |
996.8 |
|
Saudi Arabia |
Soymeal |
33 |
18.9 |
|
Korea, Rep. |
Soybeans |
4 |
279.2 |
|
Turkey |
Soymeal |
7 |
23.2 |
|
Mexico |
Soybeans |
19.5 |
1241.9 |
|
Bahamas |
Soyoil |
0.1 |
0.1 |
|
Netherlands |
Soybeans |
113.9 |
766.1 |
|
Canada |
Soyoil |
0.1 |
6.1 |
|
Philippines |
Soybeans |
0.4 |
26.1 |
|
Colombia |
Soyoil |
5 |
1.5 |
|
Portugal |
Soybeans |
57.5 |
124.4 |
|
Italy |
Soyoil |
0.2 |
3.2 |
|
Taiwan |
Soybeans |
29.1 |
692.6 |
|
Kuwait |
Soyoil |
0.1 |
0.4 |
|
Canada |
Soymeal |
9.5 |
347.5 |
|
Spain |
Soyoil |
0.1 |
0.1 |
|
Hong Kong |
Soymeal |
0.2 |
7 |
|
Export Sales Totals (tmt) | |||
|
Indonesia |
Soymeal |
0.5 |
14.6 |
|
Outstanding |
Accum. |
New | |
|
Jamaica |
Soymeal |
2.8 |
30.7 |
|
Commodity |
Sales |
Exports |
Sales |
|
Japan |
Soymeal |
4.6 |
89 |
|
Soybeans |
6,886.30 |
13,046.00 |
338.8 |
|
Mexico |
Soymeal |
55 |
292.7 |
|
Soymeal |
1,492.20 |
1,573.20 |
71.8 |
|
New Guinea |
Soymeal |
0.2 |
0.2 |
|
Soyoil |
113.3 |
185.5 |
4.6 |
