July 24, 2006

 

ASA weekly: Soyoil share rises; biofuel competition for crops

 

 

Oil share rises as soyoil stocks continue to build

 

After a considerable drop in April, soy crush has rebounded above year-ago levels in May and June. The National Oilseed Processors Association's (NOPA) June crush of 3.57 million tonnes equates to a Census crush of roughly 3.76 million tonnes.

 

NOPA's oil stocks at the end of June were 21,800 tonnes larger than the previous month compared with expectations for stocks to decline by an even larger amount. Despite a burdensome soyoil balance sheet and soyoil prices that are more than high enough to discourage burning of soyoil directly as a source of energy, the oil share is growing amid surging energy prices.

 

The market is quite enamoured with soyoil futures as the large speculator had a net long futures position of a whopping 77,300 contracts as of July 11. This attraction to soybean oil apparently is based on the expanding biodiesel industry that is anticipated to appreciably tighten the soyoil situation in the United States. This tightening, however, is not seen occurring until after the 2006-07 marketing year.

 

Freight demand index rebounds to new record

 

The Bureau of Transportation Statistics freight Transportation Services Index was 113.2 for May, up nearly 2% from April and up about four-tenths of one percent year-over-year. The freight index had been slumping since November last year but has since slowly rebounded before surging higher in May.

 

This rise in the freight index should not be a surprise since the American Association of Railways continue to report stronger car-loadings week after week while barge loadings have been strong on some of the key river segments. Moreover, coastal trade continues to be quite strong. And trucking is keeping a strong pace as well.

 

Earth policy institute warns of food vs. fuel battle for crops

 

Lester Brown, president of the Earth Policy Institute, has been concerned for years about the adequacy of the world's food supply and the effects that economic changes can have on that supply.

 

Among other issues Brown has been tracking are the economic ascendance of China and what that could mean for world trade in grains, oilseeds and other agricultural commodities. Brown also has focused his attention on water supplies in key agriculture nations and, more recently, on what he sees as the coming competition that will be waged for farm products.

 

Brown notes that as the price of oil climbs, it becomes increasingly profitable to convert farm commodities into automotive fuel, either ethanol or biodiesel. "In effect," said Brown, "the price of oil becomes the support price for food commodities." With a US ethanol subsidy of 51 cents per gallon in effect until 2010, and oil priced at just US$70 per barrel, "distilling fuel alcohol from corn promises huge profits for years to come," Brown said. Oil prices yesterday closed at US$75.30 per barrel.

 

Brown says that with the amount of farm products being used for fuel "the stage is being set for a head-on collision between the world's 800 million affluent automobile owners and food consumers." A broader risk, he said, is that rising food prices resulting from this competition for grain "could spread hunger and generate political instability in low-income countries that import grain, such as Indonesia, Egypt, Nigeria and Mexico."

 

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	3,059	6,960	15,502	1,657	810	673	3,400	1,535	1,147
Production	85,013	83,999	83,824	39,000	40,500	41,300	53,000	55,700	56,000
Imports	152	108	109	779	800	860	408	428	450
Crush	46,160	46,675	47,627	29,010	29,551	30,700	29,730	28,200	28,500
Exports	30,011	24,494	29,665	10,000	10,250	9,800	22,798	25,700	25,500
Other	5,093	4,396	4,326	1,616	1,636	1,652	2,745	2,616	2,324
Usage	81,264	75,565	81,618	40,626	41,437	42,152	55,273	56,516	56,324
Carryout	6,960	15,502	17,817	810	673	681	1,535	1,147	1,273
Soymeal	thousand tonnes
Carryin	191	155	227	1,350	877	594	753	896	546
Production	36,938	36,708	37,816	22,907	23,340	24,330	22,917	22,071	22,565
Domestic use	30,448	30,300	30,935	537	573	602	8,735	9,350	9,550
Net Exports	6,526	6,336	6,881	22,843	23,050	23,796	14,039	13,071	12,970
Usage	36,974	36,636	37,816	23,380	23,623	24,398	22,774	22,421	22,520
Carryout	155	227	227	877	594	526	896	546	591
Soybean oil	thousand tonnes
Carryin	488	771	1,265	660	542	431	293	128	126
Production	8,781	9,101	8,970	5,404	5,496	5,850	5,588	5,400	5,415
Domestic use	7,910	8,142	8,618	408	433	488	3,059	3,136	3,210
Net exports	588	465	519	5,114	5,174	5,400	2,694	2,266	2,200
Usage	8,498	8,607	9,137	5,522	5,607	5,888	5,753	5,402	5,410
Carryout	771	1,265	1,098	542	431	393	128	126	131

 

USDA Export Sales (tmt) - Week of 13 July 2006
Country	Commodity	New Sales	Accum. Exports		Country	Commodity	New Sales	Accum. Exports
Colombia	Soybeans	3.00	173.50		Hong Kong	Soymeal	0.50	15.00
Costa Rica	Soybeans	3.00	212.00		Honduras	Soymeal	13.20	107.30
Denmark	Soybeans	22.70	97.00		Indonesia	Soymeal	2.10	23.00
Indonesia	Soybeans	33.00	1098.20		Japan	Soymeal	29.10	319.10
Israel	Soybeans	21.30	208.50		Jordan	Soymeal	9.20	9.20
Japan	Soybeans	82.90	2541.10		Mexico	Soymeal	34.50	1123.00
Korea, Rep.	Soybeans	24.70	461.80		Philippines	Soymeal	2.20	398.60
Malaysia	Soybeans	34.00	189.30		Taiwan	Soyoil	2.50	17.50
Mexico	Soybeans	2.90	3154.60		Canada	Soyoil	0.20	25.50
Netherlands	Soybeans	66.00	1030.90		Hong Kong	Soyoil	0.10	8.30
Philippines	Soybeans	7.50	101.00		Saudi Arabia	Soyoil	0.10	1.40
Taiwan	Soybeans	8.90	1561.50		Trinidad	Soyoil	0.10	1.80
Turkey	Soybeans	28.00	533.20
Vietnam	Soybeans	0.20	0.30		Export Sales Totals (tmt)
Canada	Soymeal	23.50	907.40		Commodity	Outstanding Sales	Accum. Exports	New Sales
Colombia	Soymeal	12.60	289.60		Soybeans	1,999.80	23,330.40	236.00
Egypt	Soymeal	16.00	65.80		Soymeal	1,025.70	4,938.40	152.10
FW IND	Soymeal	1.20	10.70		Soyoil	24.90	277.10	0.50

 

Thursday Spot and Futures Prices, 20 July 2006
Item	Location	Aug	Sep	Nov
Soybeans ($/mt)	Central Ill./Chicago	214.67	217.43	222.48
	FOB Gulf (Basis)	236.72	239.47	222.48
	CIF Gulf Coast (Basis Chicago)	234.88	237.64	222.48
Board Crush Margin	$/mt	27.63	26.82	23.3
		Aug	Sep	Oct
Soybean Meal 48%, HiPro ($/mt)	Central Ill./Chicago	184.86	186.29	187.17
	FOB Gulf (Basis)	210.21	211.64	209.22
	West Coast (Basis)	234.46	233.69	234.57
Soybean Meal 44% ($/mt)	Central Ill./Chicago	184.86	186.29	187.17
	FOB Gulf (Basis)	199.19	200.62	198.19
	West Coast (Basis)	223.44	222.66	223.55
Soybean Oil, Crude ($/mt)	Central Ill./Chicago	582.23	587.08	591.94
	FOB Gulf (Basis)	560.19	565.04	569.89
		Beans	Meal	Oil
1 year ago prices	Chicago, $/mt	246	234.35	535.94