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26. July 2004 Argentine Production Could Be Down 8% From 2002-03 Level Argentina’s Agriculture Secretariat on July 21 estimated 2003-04 soybean production at 32 million tonnes. The Secretariat’s forecast is still below the latest estimate by USDA, which forecast 2003-04 soybean production at 34 million tonnes. If the Secretariat’s estimate holds, it would put production down 8% from 2002-03, when Argentina produced 34.8 million tonnes. Production is seen down despite the fact that planted area is up 13% to a record 14.235 million hectares, compared with just 12.6 million a year ago. According to the Secretariat, planted area has expanded as farmers have dedicated more "marginal" land to soybean farming and many farmers used soybeans to fill land previously dedicated to corn and sunseed. However, while area is up, yields are down because the drought parched the soil of moisture in some of the country’s most important soy-producing regions. "In northern parts of Buenos Aires, center-south parts of Santa Fe and central Cordoba, yields are very inferior to what they were a year ago," the Secretariat said. "The summer drought had a serious impact on productivity, above all on second-crop soybeans." Meanwhile, in a separate report the Secretariat said Argentina exported 1,459,016 tonnes of soybeans in May, or 34% less than the 2,214,398 tonnes exported during the same month a year ago. Soybean shipments are down because China, which normally buys around two-thirds of total soybean shipments, bought less in May than it did a year earlier. China Denies Quarantine Rules Are Designed To Receive Better Import Prices China denied soybean accepting soybean cargoes with no more than one tainted seed per kilogram and reiterated its zero-tolerance rule for fungicide-tainted seeds in any soybean imports. "We have never said we are going to allow one fungicide-tainted seed per kilo in soybean imports," according to a statement from China’s General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ). Many suppliers have accused China and importers that AQSIQ’s new quarantine rules released June 23 are designed to help domestic crushers cancel expensive import orders. However, AQSIQ officials explained the rules are aimed at shunning only poor-quality products while ensuring smooth soybean trade in the long run. Cheney Pushes For Biodiesel Tax Incentive; Grassley Introduces Ethanol Legislation Last week Vice President Cheney stressed the Bush Administrations commitment to passing legislation through Congress that would implement a biodiesel tax incentive to help diversify America’s energy supply. Cheney expressed support for the biodiesel tax incentive while discussing the importance of the Energy Bill, which has stalled in Congress. "That bill includes within it significant incentives for biodiesel and ethanol," he said in the release. "It’s very important, we think, to go down that road because it will help us to diversify our supplies, but it also will reduce the extent to which we’re dependent on foreign sources of oil for our basic transportation. It’s a very good piece of legislation. We need to get it done." Meanwhile, Senate Finance Chairman Chuck Grassley (R-Iowa) on July 22 introduced legislation "to help ensure that the Caribbean Basin Initiative (CBI) trade preference program is used as a tool of economic development for the region, and not as a vehicle to transship large quantities of Brazilian ethanol duty-free to the United States." "Allowing the CBI preference program to be used as a vehicle to transship large quantities of Brazilian ethanol to the US duty-free is simply bad trade policy," Grassley said. "The current program provides Brazilian ethanol with an unintended competitive advantage in the U.S. At the same time, it does little to help countries in the Caribbean and Central America," Grassley said in a statement. Grassley recalled that the CBI was enacted during the Reagan Administration "to encourage meaningful economic development in the Caribbean region, not to facilitate pass-through operations that contribute little in the way of jobs and economic development. By limiting pass-through processing of Brazilian ethanol, this bill will encourage greater investment and economic development in the CBI region. That was what we intended when the program was adopted during the Reagan Administration." Soy Complex Mostly Lower On Weak Cash Market And Favorable Weather The soy complex closed lower on July 22 reflecting a weak cash market. New-crop futures fell on favorable weather for soybean development. Large speculators appear to have liquidated their entire net long position and now have began to build a net short position following heavy sales this week. This marks the first time since August 19, 2003 that large speculators held a net short soybean position. The oil share moved sharply higher as the meal basis weakened and on concerns of tightening U.S. oil stocks later this summer. Soybean oil stocks are expected to decline through September amid the prospective decline in the crush rate for the rest of the marketing year. This is seen supporting the oil share near 37 percent during Jul/Sep. Weekly export sales came in at 119,600 tonnes as compared with trade expectations of 0-50,000 tonnes. Old crop sales were 111,600 tonnes as compared with 21,100 tonnes necessary to reach the USDA projection. Cumulative sales have reached 99.4% of the USDA forecast for the season as compared with 102.2% on average for this time of the year. Weekly sales for meal were 48,100 tonnes vs. trade expectations of 0-25,000 tonnes. Old crop sales were 25,100 tonnes as compared with 10,900 tonnes necessary to reach the USDA projection. Cumulative sales have reached 96.8% of the USDA forecast for the season as compared with 91.8% on average for this time of the year. August bean futures closed down $18.37, finishing at $241.59; September was $9.65 lower, closing at $220.64 and November lost $6.71 ending at $218.16. August meal was down $20.72, closing at $241.40; September was $19.29 lower, finishing at $216.38 and October decreased $8.82 ending at $203.71. August oil closed $21.83 lower to finish at $537.92; September was down $15.65, closing at $523.59; and October lost $13.23, ending at $505.29.
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