June NOPA Crush Fails To Meet Expectations

The NOPA crush for June was 3.41 million tonnes, which was significantly below market expectations. The crush for the previous 4 months was larger than expected as the soybean meal export program proved to be surprisingly robust perhaps because of the drought-reduced Brazilian crop or the reluctance of Brazilian farmers to market that crop.

Despite the lower crush, NOPA soybean oil stocks as of the end of June were only slightly below the previous month versus some expectations for them to decline by about 45,400 tonnes. Analysts anticipated that stocks rise by around 31,800 tonnes, but production was lower than expected and domestic usage was stronger. Soybean oil domestic usage from October through June was 1.7% above the previous year. Analysts expect that 2004-05 soybean oil domestic usage will increase by roughly 2%, which seems reasonable since last year’s July/September implied usage may have been constrained by tight supplies.

Transportation Costs Remain Firm

Transport costs had a mixed tone during June, but nonetheless remain quite firm. Rail costs overall were mostly unchanged from May, but were 11 percent higher year over year for the month of June. Farm products moved by rail retreated slightly during May, while being 15% higher year over year. The cost of moving grain food products was unchanged from May, but year over year are up 8%.

Agricultural commodities and products will face continued cost escalation in a tight capacity environment where these types of movements compete against intermodal and coal carloadings.

The cost of moving products and goods by truck during June increased 2% from a likely data anomaly during May. Compared to June last year, truck freight costs were up 8%. Truck costs continue to run higher for a shortage of drivers while demand continues to increase, and operating costs continue to escalate.

Inland river costs retreated for the second month, down 1% from May while 14% greater year over year for the month of June. River freight costs typically display a seasonal low during this time of year. Moreover, navigation conditions have been adequate. Inland river freight costs are historically high for a tight supply of barges, increased operating costs, and higher demand moving commodities upbound on the major rivers.

EU GM Policy Debated

The gap between the Commission’s pro-GMO policy and the attitude of many EU member states was highlighted earlier this month when environment ministers voted at the Environmental Council to maintain a ban on GMO strains in five EU countries. The European Commission, in line with its legal obligation to enforce existing rules relating to genetically modified organisms, had proposed that the bans currently imposed by Austria, France, Germany, Greece and Luxembourg on various strains of corn and rapeseed be lifted.

The Commission said there was no scientific justification for these bans on either health or environmental grounds. However, the UK was the only member state to vote in favor of lifting all eight GMO bans, while Finland and Sweden abstained. Moreover, Spain, a prolific grower of GM crops, was the only country to vote against the lifting of the ban in all eight cases. Some member states wanted more independence to decide which GMOs should enter their country, rather than a blanket decision being made by the EU.

A vote earlier last week on a GM corn ban in Greece failed to come to a conclusion in the European Commission’s Environmental Council. The Commission is particularly worried that negative votes on GM crops and seeds could further damage relations with pro-biotech third countries, particularly the U.S., Canada and Argentina, who claim that the EU’s policy on GMOs is based not on science, but on a desire to block trade and are currently challenging the EU’s biotech policy in the World Trade Organization.

Scientists Believe Rust Impact Will Be Limited

Slow spread of Asian Rust in the South, and drought in the Midwest likely will limit the impact of the plant disease, according to an outlook compiled by a coalition of plant pathologists at the Plant Health Initiative of the North Central Soybean Research Program run by Iowa State University. The outlook points out that high concentration of spores are “still limited to Florida, Georgia, Alabama, southern South Carolina and Mississippi.”

An analysis of monthly precipitation data and current environmental factors suggests that while conditions have been favorable for rust development along the Gulf coast, such has not been the case in more northern areas of the soybean belt, due to an ongoing drought in many sections of the Midwest. “Due to the limited rust activities in the South, there is a low chance that serious epidemics may develop at this stage,” said the pathologists. “For most of the North Central region (which includes the prime U.S. soybean-growing areas of the Midwest and central/northern Plains), considering the present scenario, it is unlikely we will find soybean rust in our fields before mid-August. If rust is found around mid-August, the disease is unlikely to cause any significant damage.”

Soy Complex Lower On Needed Rains And Forecast For Moderate Temperatures