ASA Concerned About Crop Insurance Policies

The American Soybean Association said last week in written testimony to the House Agriculture General Farm Commodities and Risk Management Subcommittee that farmers are worried their crop losses will not be covered by Risk Management Agency (RMA) policies because “the criteria for paying indemnities due to soybean rust seem terribly subjective to farmers.” The ASA added: “There is “no certainty with this disease as to when to spray, when it’s too late to spray, how many times to spray and the list goes on and on. It is imperative that soybean farmers have better and more clear information about the steps they must take in order to be confident that losses due to this disease will be fully covered.”

ASA also said crop insurance participation rates vary dramatically from region to region and reflect the general tendency of southern farmers not to participate as strongly in crop insurance as northern farmers.

Meanwhile, crop insurance companies testified to the subcommittee that they fear USDA’s RMA policies and proposed agriculture budget cuts could lead to discrimination against small farmers.

USDA Estimates Brazil’s Production At 54.5 Million Tonnes

USDA expects Brazil’s 2004-05 soybean production to be 54.5 million tonnes from 22.8 million hectares of plantings and an expected average yield of 2.5 tons/ha. USDA says factors influencing the crop are the drought that hit nearly half the soybean-producing states, high production costs and a strong Real relative to the dollar.

USDA did praise Brazil for its improved management of the Asian rust epidemic, as the disease did not affect yields to the degree previously expected. Most injury to the current crop in Brazil is limited to isolated areas; with the exception of Rio Grande do Sul, where irreversible damage appears to be widespread throughout the state.

Brazil must contend with a combination of high input costs, low prices and a strong Real, which decreased its agricultural export competitiveness and margins. As a result, the low returns made by Brazilian farmers are leading to increasing reports of fertilizer and seed sellers starting bankruptcy proceedings against soybean farmers in the southern states, where the crop was damaged severely by a prolonged drought. However, USDA said the potential impact of soybean rust in the U.S. is one of the few variables that could cause a market upswing in Brazil’s favor and trigger greater growth in area planted.

In related crop estimate news, Abiove estimates Brazil’s 2004-05 soybean crop to 50.8 tonnes in its May crop report. This is down from 51.7 million tonne estimate in April and is slightly higher than the 50.1 million tonnes harvested in 2003-04. Abiove estimates Brazil’s soybean exports to be 19.1 million tonne, lower than the 20 million tonnes exported last year.

On the products side, Abiove said soymeal production could reach 22.6 million tonnes, up from 22.45 million tonnes in 2004-05. Meal exports are estimated at 13.7 million tonnes, down from 14.1 million tonnes last year. Soyoil output of 5.55 million tonnes is expected to be slightly down from 5.58 million tons produced the previous year.

Brazil’s Supreme Court Repeals Parana Ban Of GMOs

Brazil Supreme Court Justice Gilmar Mendes ruled last week that a Parana state law banning the planting and sale of genetically modified organisms was illegal and the state had the obligation to allow GMOs through the port of Paranagua, a main trade point for soybeans in Brazil. The Parana government issued the ban last year claiming the port doesn’t have the facilities to segregate GMO and non-GMO produce. However, the Supreme Court said this argument isn’t valid.

Exporters hailed the decision, as it likely will lower the risk of having their product rejected at the port. The risk for rejection is very limited for soybeans, though; because the heat processing used to produce the meal makes it impossible to detect GMOs. The port administration said it would continue to test for GMOs, although the number of rejected trucks is expected to remain very low, according to the Paranagua port.

USDA Continues Review Of GM Plants Used In Industrial Compounds

USDA will continue to require formal permits for plants that are genetically modified to produce industrial compounds. The rule, published in the May 4 Federal Register, extends a permit process put in place in August 2003 under an interim rule published by USDA’s Animal and Plant Health Inspection Service. The rule extension will continue until APHIS concludes a review of whether genetically engineered organisms may pose a noxious weed risk or promote genetically engineered biological control agents.

The more formal permit procedure generally covers any plant engineered to produce industrial compounds that are new to the plant; are not commonly used in food or feed; and are modified to create industrial compounds, according to the May 4 notice. The permit procedures require growers of modified crops to confine them from other plants when they are moved and during field testing.

Soy Complex Higher On Lack Of Farmer Selling

The soy complex closed higher on May 5 reflecting a lack of producer selling in the cash markets and light deliveries. Although old-crop soybean supplies are abundant and futures appear to be significantly overpriced because of speculative ownership and concerns about risk, the cash markets are supportive as well. Farmer selling likely will pick up once spring planting is done and the crop starts to develop, but the market then will be getting closer to the time when Asian rust could be found in commercial soybean fields. It appears that the soybean market may continue to reflect an unusually large risk premium through most of the growing season with risk that prices could rally if rust is found in an important soybean growing state. The market also may garner support from Canadian canola stocks that are below trade expectations.

May bean futures closed up $1.29 finishing at $229.09; July was $1.56 higher, closing at $231.02 and August gained $1.10 ending at $230.47. May meal was up $2.20, closing at $213.07; July was $1.65 higher, finishing at $211.86 and August increased $1.43 to finish at $211.64. May oil closed $0.66 higher to finish at $500.89; July decreased $0.22, closing at $501.99; and August lost $0.66, ending at $502.21.