U.S. And Brazil To Discuss Respective Subsidy Programs

Trade officials from the United States and Brazil will meet in Washington, D.C. on June 16-17 to review each country’s respective subsidy programs for its soybean producers. Reports indicate that U.S. officials hope the meeting will eliminate if not temper Brazil from filing a WTO case against U.S. soybean program subsidies.

While Brazilian soybean growers last February mounted a push on the Brazilian government to file a case with the WTO against the U.S. soybean subsidies, the Brazilian government has not indicated whether it would pursue a trade case.

Brazilian government officials want to monitor two things before making a final decision on a possible WTO case regarding U.S. soybeans: (1) how the U.S. deals with the decision on Step 2 and other cotton subsidies ruled illegal by the WTO, and (2) Doha Round trade negotiating developments. Some Brazilian officials believe these issues give them leverage on trade policy issues. If Brazilian officials are unhappy about developments in either of the “leverage” topics, a trade case could be filed against U.S. soybean subsidies and then potentially U.S. rice subsidies.

The United States accuses Brazilian of giving farmers subsidies in the form of low-interest loans, tax breaks on soybean exports, and other tax breaks and incentives for the purchase of land and equipment. The United States also is hoping that Brazil will back a U.S. sectoral initiative in the Doha farm trade negotiations, which would result in deeper tariff reductions, and subsidy cuts on certain select commodities. Last March the United States identified oilseeds (including soybeans), beef, pork, poultry, barley, fruits and vegetables, and distilled spirits as products it would like covered under the sectoral initiative.

April Census Crush Lower Than Expected

The Census crush for April was 3.79 million tonnes, a little below market expectations. The Census crush for March was revised lower by 32,700 tonnes to 4.04 million tonnes. For April, the amount by which the Census crush exceeded the NOPA crush narrowed to 142,000 tonnes, the smallest in a year and a half as the crush outside of the NOPA membership apparently declined.

The smaller crush for March and April makes the implied domestic disappearance of soybean meal not quite as robust as earlier thought. Soybean oil domestic disappearance, on the other hand, was larger than expected.

Binding Rules On Trade In GMOs Adopted

Representatives of 119 governments meeting last week in Montreal adopted binding rules on the documentation that has to accompany genetically modified agricultural commodities, such as wheat, corn and soybeans, when they are transported across borders. According to an EU statement, the rules will ensure that only approved GMOs enter the territory of the respective parties. The statement calls the documentation requirements “the most important point” on the agenda of the Second Meeting of the Parties to the Cartagena Protocol on Biosafety.

Decline In Brazil’s Soybean Exports

Brazilian soybean exports totaled 2.3 million tonnes in May, down 14% on the same month last year, according to preliminary figures released yesterday by the Foreign Trade Secretariat. Exports also fell from 2.7 million tonnes registered in April.

Analysts say many farmers are choosing to hold on to their crops rather than sell at current low prices. Prices paid to producers have been pushed down by a combination of low international soy prices and a weak U.S. dollar. The Brazilian real recently hit its highest level against the dollar for more than three years. Another factor limiting shipments is the drought in the southern state of Rio Grande do Sul, which slashed output in the state by around 70%.

Brazil is expected to export 19.1 million tonnes of soybeans in the 2005-06 season (February-January), slightly down from the 19.3 million tonnes shipped last year, according to the Brazilian Vegetable Oils Industry Association (Abiove).

In related news, the drought and a weak dollar sparked protests last week by thousands of Brazilian grain farmers who blocked highways with their tractors. Farmers parked their tractors across roads in the main cities leading to the agricultural states of Mato Grosso, Parana, Rio Grande do Sul, Goias and Sao Paulo, according to the National Agricultural Confederation (CNA).

“We want the government and the population to feel the problems affecting agriculture this year, problems that are driving the farmer to bankruptcy,” said Luiz Fernando Kalinowski, president of the Londrina Rural Union in Parana. The farmers say Brazilian agricultural exports are helping sustain growth in South America’s largest economy and the government owes them its support.

Cargill Suspends Operations At Brazilian Crushing Plant

Cargill announced last week it would suspend soybean crushing operations at its Mairinque plant in southeastern Brazil for one month due to tight crushing margins. According to Cargill, losses to drought in the south of the country, the farmer policy of delaying sales due to low prices and the strength of the local real have made producing soymeal and soyoil at the plant unviable. The suspension will cut Cargill’s Brazilian crushing capacity by 2,200 tonnes per day to 10,000 tonnes.

Soy Complex Lower On Rain Forecast