May 14, 2007

 

ASA weekly: USDA expects stocks to tighten; Major emphasis on bio-fuels in new farm bill; Biodiesel's usage of soybean oil increases sharply in March; US barge freight rates low, but in line with expectations

 

USDA: Stocks expected to tighten

 

USDA released its important May commodity supply and demand update on May 11, including its first update of the 2007/08 season prospects since the early March Outlook Conference. The updated estimates for 2007/08 are the first to incorporate USDA's March US acreage planting intentions survey estimates for 2007. Ongoing world trade and crop changes were incorporated as well.

 

For soybeans, the burdensome old crop stocks level of 16.6 million tonnes is forecast to tighten to 8.71 million tonnes by the end of 2007/08 due to the smaller crop.

 

USDA chose to project a lower 2007 soybean yield as well at 2.79 tonnes/hectare versus 2.87 tonnes/hectare in 2006. Lower plantings and continuing strong demand with exports of 29.4 million tonnes and crush of 48.7 million tonnes could absorb much of the reduced crop, in USDA's view.

 

Soyoil use in biodiesel soars to 1.72 million tonnes from 1.16 million tonnes and oil stocks drop to 988,000 tonnes. These are historically adequate soybean and oil stocks levels, but reflect shrinking stocks to use coverage.

 

Global oilseed production for 2007/08 is projected at 399 million tonnes, down 3.8 million tonnes from 2006/07, according to USDA. If realised, this will be the first year-to-year decline in global oilseed production since 1995/96.

 

Global oilseed ending stocks for 2006/07 are projected at 68.3 million tonnes, with most of the increase due to higher projected soybean stocks in South America resulting from reduced export prospects for Brazil and Argentina.

 

Soybean stocks for Brazil and Argentina are projected at a record 38.4 million tonnes, up 4.2 million tonnes from 2005/06. China soybean imports for 2006/07 are projected at 30 million tonnes, USDA said.

                                                                                             

Senator Harkin wants major emphasis on bio-fuels in new farm bill
                          

Ethanol, biodiesel and other renewable fuels will be a "big part" of the new farm bill to help ensure those industries take root, said Senate Agriculture Committee Chairman Tom Harkin.

 

"I don't think we're moving fast enough on renewables," Harkin said following a hearing on May 9 regarding bio-fuels and rural economic development. Harkin said he did not have a funding target for renewable fuels, partly because Congress has yet to agree on a budget blueprint.

 

Issues addressed at the hearing included the need to lower the cost of ethanol from cellulosic materials and the need for a shipping network to handle the huge growth in ethanol.

 

Robert Grabarski of the National Council of Farmer Cooperatives said that without a transport web, there could be an ethanol glut in the central states and large ethanol imports to coastal states.

 

Biodiesel maker Neil Rich, CEO of Riksch BioFuels of Crawfordsville, Iowa, said a new incentive was needed to offset the impact of imports on the industry. The National Biodiesel Board and the American Soybean Association support the proposal, worth 43 cents/gallon of imported biodiesel. The payments would be based on the price of soybean oil and the difference in Argentina's tariffs for biodiesel exports and soyoil exports.

 

American Soybean Association First Vice President John Hoffman said the new farm bill should contain "specific pro-biodiesel measures, including a Biodiesel Incentive Program." He said this programme would operate similarly to the Commodity Credit Corporation (CCC) Bioenergy Program, which he said worked well in encouraging expanded biodiesel production in recent years. USDA would use CCC commodities to reimburse US biodiesel producers on all biodiesel production.

 

In related news, Senator Chuck Grassley is one of the lawmakers in support of trying to find an offset to biodiesel imports getting the benefit of the current tax incentive programme. This issue could become part of the emerging omnibus energy bill rather than part of the new farm bill, due largely to jurisdictional problems.

 

Biodiesel's usage of soybean oil increases sharply in March
                                                             

The consumption of soybean oil in methyl esters (dominantly biodiesel) jumped to a record 99,800 tonnes during March, surpassing the August 2006 record of 94,300 tonnes.

 

After last August, biodiesel production was undermined by an erosion in profit margins. While margins have steadily improved since bottoming out in November, March is the first month that biodiesel production has posted a significant rebound, which could very well be due to the end of winter and the attendant problems of using biodiesel during those months.

 

US barge freight rates low, but in line with expectations
 

US barge freight rates have been unimpressive during the past two months, trending lower from 285 percent of tariff off the Illinois River in early March to 214 percent on May 1 ¡§C a drop of about 25 percent during this time.

 

But this type of downward trend is not uncommon, and in fact, is right in line with normal expectations. Last year, the rate dropped 25 percent. Two years ago, the drop was 40 percent, while over the past 5-years, the average decrease has been 24 percent.

 

Rates off the Illinois River trend lower as the Upper Mississippi River re-opens to navigation and the surge of traffic following the opening settles down. This year, there has been no surge in traffic, but nonetheless, the pattern in rates is in line with history.

 

Historically, rates in June will increase 2 percent. Rates are expected to increase 45 percent to 311 percent of tariff during August. Last year, the rate increased 55 percent from May to August, while historically it increased 36 percent.

 

U.S. & 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	12,229	2,434	514	579	3,598	1,638	2,252
Production	85,013	83,368	86,770	39,000	40,500	45,500	53,000	57,000	58,800
Imports	152	92	109	708	900	725	352	40	100
Crush	46,160	47,320	48,036	29,560	32,600	37,150	29,728	28,756	29,400
Exports	30,011	25,778	29,393	10,548	7,200	7,550	22,799	24,770	26,700
Other	5,093	5,093	4,951	1,520	1,535	1,516	2,785	2,900	2,974
Usage	81,264	78,191	82,380	41,628	41,335	46,216	55,312	56,426	59,074
Carryout	6,960	12,229	16,728	514	579	588	1,638	2,252	2,078
Soymeal	thousand tonnes
Carryin	191	156	285	564	671	564	841	640	894
Production	36,936	37,414	37,939	23,347	25,687	29,250	22,928	22,327	22,800
Domestic use	30,446	30,097	30,527	538	544	550	9,121	10,000	10,644
Net Exports	6,525	7,188	7,425	22,702	25,250	28,700	14,008	12,073	12,215
Usage	36,971	37,285	37,952	23,240	25,794	29,250	23,129	22,073	22,859
Carryout	156	285	272	671	564	564	640	894	835
Soybean oil	thousand tonnes
Carryin	488	771	1,370	91	35	32	293	248	250
Production	8,781	9,250	9,069	5,404	6,000	6,850	5,708	5,521	5,625
Domestic use	7,910	8,144	8,505	378	428	683	3,059	3,222	3,335
Net exports	588	507	667	5,082	5,575	6,166	2,694	2,297	2,292
Usage	8,498	8,651	9,172	5,460	6,003	6,849	5,753	5,519	5,627
Carryout	771	1,370	1,267	35	32	33	248	250	248

 

USDA Export Sales (tmt) - Week of 03 May 2007
Country	Commodity	New	Accum.		Country	Commodity	New	Accum.
		Sales	Exports				Sales	Exports
China	Soybeans	116.1	10640.2		FW IND	Soymeal	0.8	9.8
Colombia	Soybeans	12.4	207.4		Jamaica	Soymeal	2.8	62.6
Costa Rica	Soybeans	8.2	194.3		Mexico	Soymeal	12	833.9
Egypt	Soybeans	18	684		Morocco	Soymeal	1.1	74.6
Indonesia	Soybeans	21	1095.8		Philippines	Soymeal	2	256
Israel	Soybeans	16.6	257		Salvador	Soymeal	7.1	75.8
Korea, Rep.	Soybeans	26.9	523.5		Canada	Soyoil	0.7	21.7
Malaysia	Soybeans	5.3	189.3		Mexico	Soyoil	0.9	47.8
Mexico	Soybeans	18.3	2639.3		Nicaragua	Soyoil	1.2	8.1
Philippines	Soybeans	15	61.7		Peru	Soyoil	1.8	2
Taiwan	Soybeans	47.4	1406		Salvador	Soyoil	1	2
Turkey	Soybeans	9	481.8
Vietnam	Soybeans	1.1	5.9		Export Sales Totals (tmt)
Algeria	Soymeal	14	19.5		Commodity	Outstanding	Accum.	New
Canada	Soymeal	14.4	774			Sales	Exports	Sales
Colombia	Soymeal	9.1	175.9		Soybeans	2,474.70	25,666.40	204.2
Dom. Rep.	Soymeal	0.7	266.7		Soymeal	1,593.80	4,150.00	68.6
Egypt	Soymeal	16	46.9		Soyoil	40.7	354.4	0.6