Transportation Update

Ocean freight rates have been in a stagnant mode the past couple of weeks. However, the Pacific Northwest rate did drop slightly as more capacity was available in the Pacific while available capacity in the Atlantic was competing between the Center Gulf and South America for cargoes.

It is anticipated that ocean freight should weaken during the second half of the calendar year as new vessels enter service. Furthermore, China is considering an increase in interest rates to cool its fast expanding economy. When China cooled its economy last year, the Baltic Dry Index, a key ocean freight indicator, dropped more than 53 percent to 2634 by mid-June.

Meanwhile, grain barge movements off the Upper Mississippi River have picked up as navigation returns to normal after being stalled for the winter. Based on daily loadings for the week to end March 19, weekly grain barge movements are projected to total 712,000 tonnes, which would be 76 percent greater than one year ago for the same week, but 23 percent below the average of the previous 5-years. Grain barge movements on a year-to-date basis have totaled nearly 19 million tons, 27 percent below average volumes of the previous 5-years, and 12 percent below volumes one year ago.

Monsanto Threatens Lawsuits Against Argentine Farmers To Collect Royalties

Monsanto Co. notified Argentine exporters on March 15 that it will take them to court in Europe and other nations in a bid to collect unpaid GM soybean seed royalties. The threat led to accusations from the Argentine government that the firm was using “mob tactics.” Monsanto said in a letter to Argentine exporters that due to the widespread black market for the seed, it would litigate in every country where its GM soybean seed is protected by patents and demand $15 per tonne of Argentine soybean shipments.

The Argentine government had promised to create a special fund to compensate Monsanto, but the project has been stuck in Congress for nearly a year due to stiff resistance from Argentine farm lobbies. Unable to collect royalties at the source, Monsanto now says it will try to get them at the destination point.

“Unfortunately, despite all the meetings and talks we have had in order to seek solutions to create an adequate legal framework for the seeds trading, the Monsanto Company continues to have a mob attitude that is alien to normal trading practices,” the Agriculture Department said. The government also summoned an urgent meeting of agriculture ministers from the Southern Common Market (Mercosur) trading bloc comprising Argentina, Brazil, Paraguay, and Uruguay “to explore joint action in order to reject these assaults with which they are seeking to intimidate our producers.”

In a statement to the press, Monsanto said it will focus on shipments to European Union countries, where its seed has copyright protection. “We will go after exporters shipping soybean to nations where Monsanto has patent safeguards who have failed to pay for Roundup Ready technology,” according to Monsanto.

Attacks On U.S. Farm Support Programs Draw Criticism

The United States has reacted defiantly to the recent ruling by the WTO’s Appellate Body that some aspects of its cotton aid programs are in breach of WTO farm subsidy rules. The U.S. also is reacting strongly to threats from other nations of more cases against its domestic agriculture support programs. In particular, Brazil has recently threatened to bring a U.S. soybean support case to the WTO Dispute Settlement Body.

However, without commenting on how, in concrete terms, the U.S. would respond to the Appellate Body’s ruling, acting U.S. Trade Representative Peter Allgeier insisted that the U.S.’s stance in the ongoing Doha Round negotiations for a new multilateral agreement on agriculture would remain unaffected. “Our negotiating position remains the same: There needs to be a harmonizing cut in domestic support, and nothing that has happened ... changes that.” Allgeier said.

Meanwhile, the chairman of the Senate’s Finance Committee, Chuck Grassley, expressed annoyance at challenges U.S. support programs. “It’s important for developing nations to recognize that the most significant gains for the world’s agricultural producers will be made not by challenging subsidies through the WTO dispute settlement process, but in reaching a comprehensive agreement in multilateral negotiations at the WTO,” he declared. Grassley urged developing countries not to attempt to “litigate their way to prosperity by challenging agricultural subsidies.”

Drought Contributes To Lower Brazilian Crop Estimate

Brazil’s 2004-05 soybean crop (October-September) will total 53.1 million tonnes, the Agriculture Ministry said last week. This forecast is down significantly from the 57 million tonnes predicted two weeks ago.

A prolonged drought in southern states is cited as the main driver behind the decreased estimate. The government redid its estimate as the last survey did not fully reflect the devastation in the south of the country caused by one of the driest summers in the last 50 years. It said farmers have lost approximately 8.3 million tonnes of soybeans. Should the government’s current estimate be realized it would still be a record crop, topping last year’s output of 49.8 million tonnes.

Soy Complex Higher On Lack Of Commercial Selling

The soy complex closed higher on March 24 reflecting lack of commercial selling and a firm cash tone. The lack of speculative long liquidation selling and ideas that the market has already corrected the overbought condition helped to provide support. The Census Bureau crush report for February was reported at 3.747 tonnes. Oil stocks were pegged at 739,809 tonnes and meal stocks came in at 323,000 tonnes. May bean futures closed up $1.97 finishing at $230.97; July was $2.20 higher, closing at $232.95 and August gained $1.89 ending at $231.63. May meal was up $3.31, closing at $207.67; July was $2.54 higher, finishing at $209.11 and August increased $2.31 to finish at $209.66. May oil closed $7.50 higher to finish at $505.96; July increased $6.83, closing at $509.04; and August gained $7.05, ending at $505.29.