Oil Crops Outlook OCS-0795 United States Department of Agriculture Economic Research Service ------------------------------------------------------------------------------ Approved by the World Agricultural Outlook Board July 13, 1995 ------------------------------------------------------------------------------ U.S. 1995 SOYBEAN ACREAGE CLIMBS ON DELAYED GRAINS PLANTING The June 30 Acreage report confirmed the upward revision in soybean plantings above March intentions, as U.S. farmers indicated they planted 63.1 million acres of soybeans. This is up from earlier intentions of 61.5 million. While this is far from the record of 71.4 million acres planted in 1979, it would be the largest soybean acreage planted since 1985. Of the top 10 States in soybean acreage (constituting 80 percent of the U.S. total), Illinois, Iowa, Minnesota, Indiana, Nebraska, and South Dakota each had record planted acreage, while Ohio and Kansas had slightly below record plantings. These States generally had the largest changes from March intentions, as well, although Kansas and Nebraska soybean plantings were smaller. Favorable cotton returns continued to depress Southern soybean acreage, although Delta soybean plantings were a bit higher than March intentions. The magnitude of the soybean acreage increase is surprising considering 1994/95's record production and large expected carryover, but can be explained by a number of factors. The ARP increase to 7.5 percent for corn in 1995 reduced the base acres that could be planted to corn, which should have lowered the normal flex acres (NFA) flexed to soybeans. However, USDA's preliminary compliance report on the 1995 farm program indicated that farmers intended to plant almost 6 million acres of soybeans on flex acreage, up from 2.8 million acres in 1994. Over two-thirds of soybeans flexed were on corn base acres. Flooding and wet soil conditions prevented farmers from planting corn on schedule, especially in the areas neighboring the Missouri, Illinois, and Ohio Rivers. Although prices this spring favored fewer soybeans flexed onto corn base acreage, farmers switched to soybeans as their next best alternative because of the delays. Farmers also may have planted fewer corn acres because of high fertilizer prices. The acreage report could be revised in August, however, as farmers will be resurveyed this month to determine how much of the late-seeded acreage was in fact planted to soybeans or other crops. Approximately 52 percent of soybeans had been planted prior to the June survey, well below the usual 74 percent by this time. With projected harvested area of 62.2 million acres, total 1995 soybean production is projected at 2.24 billion bushels. While this is almost 320 million bushels less than last year, it would still rank as the third-largest U.S. harvest. Total 1995/96 supplies would be just 5 percent less than this year. While the expansion in soybean acreage portends another large crop, the lateness of planting pushes crop development further back into a generally warmer, drier period. As of July 9, 8 percent of soybeans were blooming, compared to the previous 5-year average of 21 percent. This situation exposes the crop to additional yield risk, so that the Chicago Board of Trade may experience volatile price swings for soybean futures this summer with each new weather forecast. Even so, current crop conditions, while mediocre compared to last season's record-yielding crop, are much better than the similarly- delayed 1993 crop. Although the 1995/96 soybean production forecast is higher this month, it is offset by forecasts for lower beginning stocks and greater use. Projected ending stocks for 1995/96 at 325 million are down 30 million bushels from the June forecast. The tighter supply situation caused the range for soybean prices to be raised 25 cents to $5.50-$6.50 per bushel. Crushing margins will likely dip in 1995/96 (although still in a favorable range), marginally reducing U.S. crush from this year to 1,385 million bushels. Easing export demand for soybean oil and meal and slower growth in domestic meal consumption will subtract a little profitability from the crushing industry. While soybean meal prices will rise along with soybeans, soybean oil prices for 1995/96 should drop into the 24.5-29.0-cents-per-pound range, slipping from the 27.25-cents-per-pound average this season. Although expected crush for 1995/96 is 10 million bushels less than this year's crush, a slightly higher projected oil extraction rate of 11.2 pounds per bushel would produce 15.5 billion pounds of soybean oil, barely surpassing this year's expected record. Projected soybean meal production in 1995/96, at 32.9 million tons, would be just shy of 1994/95's all-time high. U.S. SOYBEAN AND SOYBEAN PRODUCT EXPORTS ARE PROJECTED DOWN IN 1995/96 U.S. soybean and soybean meal exports are projected at 800 million bushels and 5.9 million short tons in 1995/96, down 2 and 6 percent from a year earlier. Lower available U.S. supplies and a moderate decline in crush margins in the EU account for most of the expected decline in U.S. soybean exports. Although production was larger, South America exported fewer soybeans in 1994/95 than in 1993/94. The delays in this year's crush mean South America's exports of meal and oil likely will pick up early in 1995/96. India's soybean and soybean meal production is also expected to recover and boost its meal exports by 600,000 metric tons. U.S. soybean oil exports for 1995/96 are forecast at 2.2 billion pounds, moderately below 1994/95's second-ranked 2.6 billion pounds. Continued strong growth in the global vegetable oil market will allow U.S. soybean oil exports to remain brisk despite rising export competition from South American soybean oil and sunflowerseed oil, and Asian palm oil. U.S. carryout stocks of soybean oil for 1995/96 would exceed the tight 1994/95 expected carryout by 315 million pounds. 1995/96 WORLD OILSEED SUPPLIES NEARLY UNCHANGED FROM 1994/95 Despite a projected drop in global oilseed output in 1995/96, total oilseed supplies will remain relatively high. Large carryin stocks and production of 254 million metric tons will push world supplies to a record 281 million tons for 1995/96. Foreign production is projected up 1 percent to 170 million tons, while U.S. output is expected to fall 10 percent to 73 million tons. Rising vegetable oil prices in 1994/95 increased the contribution of oil as a percentage of the seed value. This factor will likely stimulate the production of high oil-content seeds such as rapeseed and sunflowers in 1995/96. Also, cottonseed output is projected up in response to higher global cotton prices. World soybean production is projected to fall 7 percent to 128 million metric tons with the United States, Brazil, and China accounting for nearly all of the decline. Extremely low soybean prices in Brazil and better expectations for cotton and corn will likely force farmers to switch area out of soybeans. A return to normal yields in Paraguay would drive production slightly below 1994/95 levels, while in Argentina, expansion in soybean area and production will be limited by strong competition from other crops, especially corn and sunflower. Likewise, China's soybean output is expected down as soybean area is shifted to other crops, primarily corn and cotton. India's soybean production is projected to recover to match the 1992/93 record of 4 million tons. Sporadic monsoon rains and a heat wave have contributed to a significant dry spell in India, and normal conditions for the remainder of the season would allow the projected production to be realized. CONTINUED STRONG GROWTH FOR PROTEIN MEAL DEMAND IN 1995/96 Global meal consumption in 1995/96 is projected up 3 percent to 142 million metric tons, with increases in all meals except peanut meal. For the sixth consecutive year, world consumption of soybean meal (87 million tons) is expected to be record high. Although keen demand in all regions support the rise in meal consumption, a vital component of this increase has been the European Union (EU). Soybean meal offtake in the EU has grown during the last 2 years as market prices for grains failed to reflect the substantial drop in the intervention price. Also, profitable crush margins, a price ratio favoring soybean meal rather than feed grains, and a depreciated dollar kept EU consumption and imports running above previous years. In 1995/96, EU soybean and soybean meal consumption is likely to remain strong but near 1994/95 levels in response to more moderate, but stable crush margins. Also, stronger European currencies will mean more imports as foreign soybean meal replaces domestic feed grains and pulses. WORLD TRADE PROSPECTS FOR OILSEEDS ARE MIXED In 1995/96, world oilseed trade is projected to fall, protein meal trade to expand, and vegetable and marine oils to remain unchanged. Reduced availability of soybean supplies (primarily in the United States, but also in South America and China), coupled with somewhat less attractive crush margins will trim world oilseed trade. In contrast, abundant soybean meal supplies from South America and India will prevent soybean meal prices from rising excessively, resulting in expansion in protein meal trade. China is projected to maintain the strong levels of consumption and imports observed in 1994/95, but show no further growth, thus limiting the expansion in global vegetable oil trade. Similarly, world soybean exports are projected down 2 percent to 31.6 million metric tons, while world exports of soybean meal are up 2 percent to 31.5 million tons. Global soybean oil exports remain roughly unchanged at 5.3 million tons. Import demand will remain weak in the Former Soviet Union as purchasing power continues to fall. In Japan and Korea, soybean imports show no significant growth as meat imports rise in response to lower tariffs. Taiwan's environmental concerns and Indonesian crushing capacity are expected to slow growth in soybean imports, while two consecutive large crops in Brazil will prevent substantial Brazilian soybean imports during 1995/96. In contrast, the EU is expected to maintain strong imports of soybeans and soybean meal at 14.9 and 16.8 million tons, respectively. Also, Mexico's soybean imports are expected to rebound to 2.3 million tons in response to improved economic conditions and an additional credit line for U.S. exports. SEASONALLY STRONG 1994/95 SOYBEAN AND PRODUCT EXPORTS CONTINUE TO FEED CRUSH U.S. exports of soybeans and soybean meal and oil normally plunge by May. The decline in product exports after the South American harvest typically results in a contraction in U.S. soybean crush. But this year that pattern has developed unusually late, especially considering the large Brazilian and Argentine crops. Estimated 1994/95 U.S. exports of soybeans were raised this month to 820 million bushels, due to unusually slow Brazilian marketings. Forecast U.S. crush for 1994/95 also went up this month, to 1,395 million bushels. The crush was boosted on the basis of continuing strength in meal and oil exports, which are also aided by slower South American shipments. U.S. soybean meal and soybean oil exports for 1994/95 are now forecast higher to 6.25 million short tons and 2.6 billion pounds, respectively. 1995/96 U.S. SUNFLOWERSEED ACREAGE RISES AGAIN USDA's June Acreage Report revised upward the 1995 estimate of sunflowerseed planted area to 3.608 million acres, 95,000 acres above the March Prospective Plantings report. Acres planted to oil-type sunflowers are estimated to total 3.1 million, up 2 percent from last year, while acreage of the non-oil type is estimated at 513,000 acres, down 2 percent. Planted acres in North Dakota are expected to decline slightly in 1995 by 40,000 acres. North Dakota continues to dominate the sunflower acreage in 1995 with 1.55 million acres seeded (43 percent of U.S. planted acreage). Minnesota is the only other sunflower producing State where planted area is expected to decrease, by 8 percent to 460,000 acres in 1995. All other States are expected to increase sunflower acreage in 1995 (see ERS Autofax Document #2305). Lateness in planting the spring wheat crop has meant even more sunflowerseed acreage in 1995. While the preliminary enrollment report shows farmers intended to reduce plantings of minor oilseeds on program base from 1.6 million to 1.3 million acres, subsequent weather conditions may have induced more spring grain farmers to take advantage of the 0-92 program. This option allows them to plant sunflowers and other minor oilseeds on wheat program acres and retain 92 percent of their deficiency payments. In 1994, about 1.4 million acres of sunflowers (38 percent of total acres) were planted under the 0-92 program. Sunflower planting and crop development is also well behind schedule this year. By June 11, 34 percent of the North Dakota acreage had emerged, compared with 73 percent on average. While sunflowers may be successfully planted through the end of June, the shorter season makes a repeat of 1994's sunflower yields remote this year. RECORD U.S. CRUSH FOR 1994/95 DUE TO STRONG OFFTAKE OF SUNFLOWER OIL AND MEAL Sunflowerseed crush for 1994/95 is expected to reach a record 1.25 million metric tons, according to this month's forecast. U.S. sunflowerseed exports for 1994/95 are expected to more than double from last year and reach 227,000 metric tons. Despite the remarkable expansion of total demand for sunflowerseed in 1994/95, ending stocks are expected to soar to 284,000 metric tons, a 300-percent increase from the previous season, due to the fact that the 1994 crop is the third-largest in history. Domestic disappearance of sunflowerseed oil is expected to climb to 130,000 metric tons, while 1994/95 exports are estimated at 355,000 metric tons. This year, domestic disappearance of sunflower meal is estimated to be 553,000 metric tons, 90 percent above last year's. Exports of meal in 1994/95 are expected to follow the same path and increase by 84 percent to 68,000 metric tons. The next release of the Oil Crops Outlook is scheduled for 4:00 p.m. ET Monday, August 14. Table 1--Soybeans: U.S. supply and disappearance ------------------------------------------------------------------------------ Supply Disappearance -------------------------------- ------------------------------------ Year Seed, begin. Beg. Im- Produc- Total Crush Ex- feed, Total End. Sept. 1 stocks ports tion ports & resid. stocks ------------------------------------------------------------------------------ -------------------------- Million bushels--------------------------- 1993/94 292 6 1,871 2,170 1,276 589 96 1,961 209 1994/95 1/ 209 8 2,558 2,775 1,395 820 173 2,388 385 1995/96 2/ 385 5 2,240 2,630 1,385 800 120 2,305 325 ------------------------------------------------------------------------------ 1/ Estimated. 2/ Forecast. Table 2--Soybean meal: U.S. supply and disappearance ------------------------------------------------------------------------------ Supply Disappearance ---------------------------- ------------------------------------ Year begin. Beg. Produc- Total Domestic Ex- Total End. Oct. 1 stocks tion ports stocks ------------------------------------------------------------------------------ ------------------------------1,000 tons----------------------------- 1993/94 204 30,514 30,788 25,283 5,356 30,638 150 1994/95 1/ 150 33,015 33,225 26,725 6,250 32,975 250 1995/96 2/ 250 32,920 33,235 27,100 5,885 32,985 250 ------------------------------------------------------------------------------ 1/ Estimated. 2/ Forecast. Table 3--Soybean oil: U.S. supply and disappearance ------------------------------------------------------------------------------ Supply Disappearance ---------------------------- ------------------------------------ Year begin. Beg. Produc- Total Domestic Ex- Total End. Oct. 1 stocks tion ports stocks ------------------------------------------------------------------------------ -------------------------- Million pounds--------------------------- 1993/94 1,555 13,951 15,574 12,941 1,529 14,471 1,103 1994/95 1/ 1,103 15,487 16,600 12,900 2,600 15,500 1,100 1995/96 2/ 1,100 15,510 16,620 13,000 2,205 15,205 1,415 ------------------------------------------------------------------------------ 1/ Estimated. 2/ Forecast. Table 4--Oilseeds prices received by farmers, U.S. -------------------------------------------------------- Marketing Soy- Cotton- Sun- year beans seed flowers Peanuts Flaxseed -------------------------------------------------------- $/bu. $/ton $/cwt Cents/lb $/bu. 1990/91 5.74 121.00 10.80 34.70 5.27 1991/92 5.58 71.00 8.69 28.30 3.52 1992/93 5.56 97.50 9.74 30.00 4.12 1993/94 6.40 113.00 12.90 30.40 4.25 1993/94: September 6.21 104.00 14.20 32.00 4.24 October 6.01 112.00 11.20 30.00 4.09 November 6.32 122.00 11.60 29.50 4.05 December 6.64 123.00 13.00 29.70 4.18 January 6.72 126.00 13.60 36.10 4.38 February 6.71 97.00 15.10 NA 4.61 March 6.73 NA 15.00 NA 4.64 April 6.57 NA 15.00 NA 4.60 May 6.77 NA 15.60 NA 4.43 June 6.72 NA 14.20 NA 4.25 July 5.92 NA 12.40 NA 4.28 August 5.58 89.00 12.60 NA 4.52 1994/95 September 5.47 101.00 10.70 30.30 4.54 October 5.30 96.00 10.80 28.80 4.49 November 5.36 107.00 10.60 25.60 4.51 December 5.41 104.00 10.30 25.40 4.71 January 5.47 101.00 10.60 25.70 4.75 February 5.40 97.00 10.80 NA 4.94 March 5.51 NA 10.40 NA 5.15 April 5.55 NA 10.70 NA 5.10 May 5.56 NA 10.50 NA 4.93 June1 5.62 NA 10.20 NA 4.86 -------------------------------------------------------- 1 Preliminary. Table 5--Vegetable oil prices --------------------------------------------------- Cotton- Sun- Marketing Soybean seed flower Peanut Corn year oil2 oil3 oil4 oil5 oil6 --------------------------------------------------- Cents/lb. 1990/91 21.00 22.30 23.60 45.50 27.50 1991/92 19.10 20.10 21.60 27.30 25.82 1992/93 21.40 25.00 25.30 27.40 20.90 1993/94 27.09 27.78 31.00 43.20 26.38 1993/94: October 22.96 24.79 26.33 40.20 22.25 November 25.43 26.69 28.20 43.33 23.06 December 28.27 30.39 32.11 43.17 26.93 January 29.91 33.16 35.08 46.10 28.00 February 28.85 29.96 33.68 46.12 29.89 March 29.03 29.60 33.48 44.50 30.30 April 27.90 29.06 33.00 43.40 29.63 May 29.10 29.66 33.50 44.25 29.48 June 27.60 27.55 31.34 43.75 29.43 July 24.53 24.20 28.89 44.00 27.20 August 25.38 23.71 28.13 45.00 25.02 September 26.12 24.51 29.28 43.10 24.87 1994/95 October 27.06 23.64 28.90 46.00 24.73 November 29.84 24.85 29.40 50.88 24.75 December 30.61 25.50 30.63 53.80 24.75 January 29.04 26.41 29.25 50.25 28.01 February 28.15 25.63 27.66 41.83 27.26 March 28.33 26.41 27.97 41.00 28.17 April 27.16 24.00 26.89 41.25 27.30 May 26.00 24.24 26.34 40.25 26.42 June1 26.78 26.72 27.00 39.00 26.61 ------------------------------------------------------------------------- 1 Preliminary 2 Decatur 3 Valley points 4 Minneapolis 5 Southeast mills 6 Chicago Table 6--Oilseed meal prices --------------------------------------------------- Soy- Cotton Sun- Marketing bean seed flower Peanut Linseed year meal2 meal3 meal4 meal5 meal4 --------------------------------------------------- $/Short ton 1990/91 181.40 130.75 88.00 193.00 130.10 1991/92 189.20 140.50 76.80 154.50 125.25 1992/93 193.75 161.78 89.00 172.90 133.60 1993/94 192.86 164.30 94.00 194.91 139.55 1993/94: October 194.50 173.10 90.00 196.00 147.50 November 209.40 181.00 90.00 197.00 161.80 December 206.00 180.00 89.40 200.00 155.25 January 198.30 170.30 97.00 209.00 140.25 February 198.40 173.10 98.75 207.50 136.25 March 195.40 174.00 N/Q 198.75 127.20 April 188.90 166.25 N/Q 191.00 125.50 May 193.75 157.75 105.00 187.50 125.00 June 195.50 154.10 102.50 163.75 111.90 July 181.10 152.50 97.50 164.00 114.90 August 178.60 144.50 90.75 153.75 111.60 September 174.50 145.00 85.00 114.80 NA 1994/95 October 168.50 134.40 75.00 151.25 122.50 November 161.00 120.50 69.50 147.50 110.00 December 156.90 114.20 52.50 127.00 95.60 January 156.40 106.75 50.00 105.00 82.40 February 151.30 97.50 46.88 107.50 85.25 March 156.90 100.30 52.50 119.00 90.00 April 161.90 98.10 62.50 125.00 94.40 May 159.10 92.75 60.90 123.75 85.00 June1 160.40 110.42 61.00 134.00 85.00 ---------------------------------------------------------------------------- 1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills ****************************************************************************** Information Contacts: Mark Ash Soybeans, Minor Oilseeds, Fats and Oils (202) 219-0838 Scott Sanford Peanuts, Cottonseed (202) 219-0835 Jaime Casteneda World Oilseeds (202) 219-0826 ******************************************************************************