August 13, 2007

 

ASA weekly: USDA report recap; Brazil continues environmental review of "soy highway"; Drought leads to cut in China's 2007 soybean production estimate

 

 

USDA report recap
 

USDA issued its August crop report and World Board supply and demand estimates on Aug 10. This crop report is USDA's initial NASS look at row crop yield prospects through survey and objective measurement.

 

The relatively early stage of 2007/08 crop development assures that subsequent estimates in September and beyond will add to accuracy as important crop filling weather lies ahead into October. 

 

US oilseed production for 2007/08 is projected at 80.2 million tonnes, down fractionally from last month as lower cottonseed production is nearly offset by higher peanut production. Soybean yields are forecast at 41.5 bushels/acre, 1.2 bushels/acre below last year. USDA forecasts US soybean production to be 71.6 million tonnes, 15.3 million tonnes below last year's crop. Soybean stocks are projected at 5.99 million tonnes.

 

Global oilseed production for 2007/08 is projected at 391.3 million tonnes, down 13.7 million tonnes from 2006/07. USDA also noted that soybean production for China is projected at 15.2 million tonnes, due to dry weather in the north-eastern producing area.

 

USDA also made changes in the 2006/07 crop estimates. These changes include a higher crush, reflecting stronger-than-expected domestic soymeal disappearance and exports. With higher use, carryover for 2006/07 is now estimated to be 15.6 million tonnes.

 

Biodiesel production slips; US export market remains strong
 

Soyoil used in biodiesel during June dropped to 115,000 tonnes from May consumption of 123,000 tonnes that was revised higher by 12,700 tonnes.

 

Poor biodiesel margins are limiting production to less than 50 percent of capacity that now tops 1 billion gallons. There is at least that much more capacity in various stages of construction. With soyoil stocks estimated at a record 1.54 million tonnes at the end of June, the US could afford to allow more biodiesel production to occur in the near term. Instead, soyoil prices have mirrored the petroleum market in order to narrow biodiesel margins and thereby rein in the expansion in biodiesel production.

 

The best market for biodiesel has been the export market, namely to the EU. Biodiesel exports were more than 50 percent of April and May biodiesel production. Soyoil prices have not been so high as to discourage soyoil exports that are now forecast to reach 805,000 tonnes in 2006/07, the largest since 2002/03.

 

On the business side of bio-fuels, after two years of waiting, Soy Energy L-L-C has finally broken ground on its new 30 million gallons a year biodiesel plant near Marcus, Iowa. The US$58 million plant is scheduled to start production in early-2008, with over 900 local investors. It will create at least 24 new jobs. Soy Energy also plans to add a crushing plant in phase two.

 

USDA secretary may be close to decision on CRP opt-out
 

USDA Secretary Mike Johanns earlier this year said he needed "fresh information" to make a decision on whether he would allow eligible Conservation Reserve Program (CRP) contract holders the opportunity to exit the programme early without penalty - the so-called opt-out decision.

 

Last week's USDA Crop Production report, along with the prior June Acreage estimates, are some of the "fresh information" Johanns mentioned for the CRP decision. However, Johanns may still wait until after the September Crop Production report before making a final CRP decision. Many analysts believe it is Johanns' inclination not to offer an early out-without-penalty option.

 

This is not just a corn acreage decision for 2008 plantings, because soybean and wheat markets are currently indicating the need for more planted acres for the 2008 season.

 

Also, political and farm policy considerations may impact Johanns' decision. For example, some observers said Johanns would not likely want to allow CRP contract holders an early out-without-penalty option just ahead of coming new farm bill conservation programme negotiations via the House-Senate conference.

 

Brazil continues environmental review of "soy highway"
 

Brazil's environmental protection agency, Ibama, said that it intends to complete its environmental impact study on a controversial Amazon highway by Aug 21. Dow Jones Newswires noted that BR-163 -- a mostly decrepit two-lane highway that connects north Mato Grosso state to the massive Amazon region of Para -- is seen as a cheap transport route for soybeans out of the Amazon River port of Santarem.

 

The road, nicknamed the "soy highway", is over 800 kilometres (500 miles) long and is awaiting Ibama's green light before it gets paved. A paved road would cut transport costs by roughly US$2 a 60-kilogram bag of soybeans for soybean farmers in northern Mato Grosso, Brazil's largest soybean producing state, making it easier for them to invest in soybean expansion.

 

Farmers and some industry leaders have urged the government to improve road conditions for the past 10 years in that part of the country, but environmental permits have stalled the BR-163 project in particular due to its location in the heart of the Amazon rainforest.

 

Drought leads to cut in China's 2007 soybean production estimate
 

The China National Grain and Oils Information Centre has cut its 2007 soybean output forecast to 14.8 million tonnes because of an ongoing drought, according to its monthly report.

 

The government think tank previously expected soybean output to be 15 million tonnes in 2007. A drought that began in July has hit China's north-east -- a major soybean and corn growing region -- but only about 10 percent of corn acreage in Heilongjiang province is affected by a rare drought in the west of the province, it said.

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	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 02 August 2007

Country	Commodity	New	Accum.		Country	Commodity	New	Accum.
		Sales	Exports				Sales	Exports
Canada	Soybeans	1.5	122.2		Mexico	Soymeal	27.3	1190.1
China	Soybeans	115.7	1139.6		Nicaragua	Soymeal	2.8	59.4
Japan	Soybeans	1.2	2927.4		Panama	Soymeal	0.5	120.9
Malaysia	Soybeans	2.6	286		Philippines	Soymeal	9.9	353.4
Mexico	Soybeans	20.2	3582.1		Salvador	Soymeal	2	20.6
Taiwan	Soybeans	14.2	1776.9		Canada	Soyoil	5	135.2
Vietnam	Soybeans	9.7	10.3		China	Soyoil	5	135.2
Canada	Soymeal	14.7	1135.6		Mexico	Soyoil	4	79.9
Colombia	Soymeal	6.1	252.2
Cuba	Soymeal	2	127.2		Export Sales Totals (tmt)
Honduras	Soymeal	1.8	113.8		Commodity	Outstanding	Accum.	New
Indonesia	Soymeal	4.8	57.2			Sales	Exports	Sales
Israel	Soymeal	6.4	76.1		Soybeans	1,852.60	29,104.60	153.3
Japan	Soymeal	12.5	314.2		Soymeal	1,139.30	5,725.00	116.4
Malaysia	Soymeal	2.7	9.4		Soyoil	123.3	472.3	29.6