Proposed RFS Legislation Gets Support Of ASA

Representatives Stephanie Herseth (D-SD), Tom Osborne (R-NE), Collin Peterson (D-MN), and Steve King (R-IA) last week introduced a renewable fuels standard (RFS) bill (the “Fuels Security Act of 2005”) that would require the use of 8 billion gallons of renewable fuels, such as ethanol and biodiesel, by 2012. The legislation mirrors S. 650, a Senate RFS bill. The American Soybean Association strongly supports the proposed bills.

Supporters of the legislation say it would enhance U.S. energy independence, protect air and water quality, provide increased flexibility for refiners and stimulate rural economies through the increased production of domestic renewable fuels.

Eight billion gallons of renewable fuel produced by 2012 could displace more than two billion barrels of crude oil and reduce the outflow of dollars largely to foreign oil producers by $64.1 billion between 2005 and 2012. As a result of the proposed RFS, America’s dependence on imported oil would be reduced from an estimated 68 percent to 62 percent, according to the American Soybean Association. Another effect of the RFS is that purchases of corn, grain sorghum, soybeans, corn stover and wheat straw to produce the fuel could total $43 billion between 2005 and 2012.

As for the economic impact of the legislation, ASA says it could add nearly $200 billion to the Gross Domestic Product between 2005 and 2012 while generating an additional $43 billion of household income for all Americans between 2005.

USDA Expects Record Old Crop Soybean Exports

The forecast for U.S. soybean exports for 2004-05 was increased 953,000 tonnes from the March estimate to a record 29.4 million tonnes, due to stronger than expected export sales throughout the month of March, according to USDA. During March U.S. export commitments rose 2.3 million tonnes, up 1.5 million tonnes from last year and 1.4 million tonnes from 2 years ago.

A large part of this increase came from improved sales prospects in China where commitments increased 859,000 tonnes and the EU where commitments rose 472,000 tonnes during March, USDA said. U.S. exports to China as of March 31 are already at a record 11.1 million tonnes with 456,000 tonnes of sales on the books. Export commitments to China are up 3.3 million tonnes from last year’s record exports of 8.2 million tonnes, according to USDA.

Along with strong exports to China, U.S. exports to the EU have rebounded significantly and are about 1 million tonnes higher than last year, but lag 2002 exports by almost 1 million tonnes. USDA says a drought-reduced crop in Brazil has caused the soybean prices there to remain strong thus minimizing the seasonal gap between U.S. and Brazilian prices. This along with freight advantages have allowed U.S. prices to remain more competitive than they normally would have been in both China and the EU, causing U.S. sales to these countries to remain strong.

Brazil’s Expects 54 Million Tonne Crop

The Brazilian soybean crop forecast is now expected to be 54 million tonnes, according to Brazil’s Institute of Geography and Statistics (IBGE). The most significant decline occurred in the Brazilian state of Rio Grande do Sul, where the crop is now estimated at only 3.1 million tonnes, IBGE said. This year the state of Rio Grande do Sul has reportedly suffered from the worst drought in 62 years.

Lack Of Seed Supplies Could Hinder Expansion Of Brazil’s GM Crop

The number of Brazilian producers who say they planted genetically engineered soybeans for the 2004-05 crop increased 35 percent from last season, according to the Brazilian Agriculture Ministry. However, lack of GM seed supplies could limit GM seed use. Reuters notes that Brazilian soybean farmers are required to officially register with the government if they plant black market modified soybeans and wish to be covered under a national measure that grants amnesty from prosecution for planting the illegal crop.

Black-market seed producers may increase production during the winter harvest, according to Ivo Carraro, president of the Coodetec cooperative in Parana. “Because of the lack of supply, many farmers will be forced to acquire seeds on the black market if they want to plant GM soy in the upcoming harvest,” Carraro added. However, many producers could be reluctant to buy seeds on the black market because there is no guarantee of the origin of the seeds.

Brazilian production of genetically modified seeds is expected to reach roughly 3.5 million 50-kilogram bags for the coming harvest, down from the original projection of five million bags, said Iwao Miyamoto, president of the Brazilian Seed Producers Association. The drought in southern Brazil this season prompted significant losses in GM soybean seeds, which could result in lower-than-expected expansion of GM soy in 2005-06. “There will not be enough legally produced GM soy seeds to meet all of the demand on the Brazilian market,” Miyamoto said.

Mercosur To Discuss Biotech Royalties

Brazil’s Agriculture Ministry will discuss with its Mercosur neighbors, Argentina and Paraguay, the system under which Monsanto will charge royalties on its bioengineered soybeans. The company wants to charge farmers for the use of its biotech technology when soybeans are delivered to crushers or exporters, just as it did last year. Argentina reportedly would prefer that the royalty be paid on the seeds and not on the harvested crop.

Soy Complex Lower On Strong Dollar And Fund Selling; Crush Supportive

The soy complex closed lower on April 14 reflecting a stronger dollar and aggressive fund selling. Export sales for the week were disappointing, but the National Oilseed Processors Association (NOPA) crush data was supportive. NOPA pegged March crush at 3.86 million tonnes as compared with trade estimates near 3.67-3.76 million tonnes. May bean futures closed down $2.30 finishing at $226.71; July was $2.57 lower, closing at $228.91 and August lost $2.57 ending at $228.18. May meal was down $1.10, closing at $207.56; July was $1.10 lower, finishing at $208.44 and August decreased $1.65 to finish at $208.33. May oil closed $2.87 lower to finish at $494.27; July decreased $4.85, closing at $498.24; and August lost $4.85, ending at $496.70.