HDR1011800201401113951600 OIL CROPS OUTLOOK November 13, 1995 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- OIL CROPS OUTLOOK is published monthly (except January) by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. OCS--1195. ----------------------------------------------------------------------------- U.S. SOYBEAN YIELD STABILIZES In November, USDA lowered its 1995/96 forecast of U.S. soybean production to 2,183 million bushels, down from 2,191 million in October. With a small reduction in harvested acres, the national average yield declined only 0.1 bushel to 35.4 bushels per acre. Increases in area harvested and yield in Nebraska, South Dakota, and Kentucky were offset by declines in Indiana, Ohio, and Mississippi. Mostly dry conditions in September and October permitted the soybean harvest to advance on schedule throughout the Nation, a welcome event in a year beset with weather problems. By November 5, 91 percent had been harvested, with most of the unharvested acres in the South. In recent years, an impressive body of evidence has developed demonstrating the superiority of soybean yields from rows spaced 15 inches or less versus those from rows of 30 inches or more. The yield difference is estimated at 2- 6 bushels per acre. Drilled stands with higher plant populations tend to grow taller, crowding out weeds before they can get established. The stands also grow more quickly than wide-rowed soybeans, raising the height of pods and translating into more recoverable pods. Drilling soybeans also takes less time than planting in wide rows, which was a major factor this year when a wet spring delayed seeding. Farmers in the western Corn Belt have been generally slower to adopt this practice than their eastern counterparts. STEADY OILSEED DEMAND EXPECTED IN 1995/96 DESPITE PRICE INCREASES U.S. soybean exports began the 1995/96 crop year robustly, as shipments in September 1995 were nearly 65 million bushels, surpassing the previous high for the month of 59 million, set in September 1987. However, October export shipments slowed considerably. Forecast exports for 1995/96 (800 million bushels) were unchanged from the October projection. This month's reduction in 1995/96 soybean supplies was mostly balanced by reducing yearend stocks 5 million bushels to 215 million. The season average farm price for soybeans is forecast at $6.30-$7.30 per bushel, up 5 cents from last month. Soybean futures prices are currently near contract highs, helped by bullish soybean demand and price strength in other commodities, particularly corn and wheat. High barge rates and strong foreign demand lifted the soybean price at the Gulf to $6.77 per bushel in September, which is higher than at the start of 1993/94, when a short crop sent prices soaring. As corn prices spiral upward, acreage and production of soybeans for 1996/97 look less encouraging, which may strengthen soybean prices by next spring. Already below year-ago levels, gross crush margins in 1995/96 may weaken in response to higher soybean prices and lower soybean oil prices, helping to curtail crush. Soybean oil prices should remain under pressure as stocks build through the year. The 1995/96 expected soybean oil carryout of 1,840 million pounds would be 62 percent above last season's. Larger carryin stocks are mainly responsible, as production was unchanged and total use was slightly down from October. Based on a lower 1994/95 domestic disappearance for soybean oil, this year's U.S. offtake was forecast at 13,050 million pounds, down 50 million pounds from last month. The expected price range was lowered to 23.5-27.5 cents per pound, down from 24.0-28.5 cents last month. The most recent Hogs and Pigs report indicated that hog inventories on September 1 were 2 percent below a year earlier. The market hogs inventory was 2 percent below a year ago. With soybean meal prices $5-$10 per ton higher than last year, this suggests that domestic meal disappearance in the first quarter of 1995/96 will be curbed. If the relatively low hog-corn ratio (15.8 in October) continues to slip, fewer hogs would be held back for breeding in 1996. The breeding inventory is 5 percent below September 1994 and December-February farrowing intentions are even with last year, meaning that the following quarters will likely show little growth, at best, in protein meal demand. While ample invisible soybean meal stocks (1994/95 production held by feeders and feed compounders) may help livestock producers exceed their breakeven prices longer, they could also restrain this year's domestic disappearance. On the other hand, poultry producers are better able to weather rising feed costs. Record-setting exports are expected to push poultry production about 6 percent higher than in 1995. And higher corn prices have dropped the soybean meal to corn price ratio to the lowest level in years, encouraging a greater meal portion of the feed ration. Wheat feeding is expected down by 120 million bushels in 1995/96, also favoring soybean meal use. FOREIGN OILSEED OUTPUT EXPECTED TO DECLINE IN 1995/96 Foreign oilseed production for 1995/96 is expected to slightly increase from last month, but fall 2 percent from the 1994/95 estimate. China's soybean production was reduced 500,000 metric tons this month to 14.5 million tons. Recent official estimates suggest that 1995 soybean area harvested was below previous expectations. The smaller soybean output and increasing demand for soybeans and soybean products will likely boost soybean and soybean meal imports. Although soybean imports are projected at 350,000 tons (up 75 percent from last month's estimate), China's potential for imports is greater, and will heavily depend on supplies and domestic policy. China's 1995/96 soybean oil imports are also expected up from last month, but still below last year's record. Strong growth in China's of rapeseed and cottonseed production and significant carryin stocks of vegetable oils should limit China's vegetable oil imports this year. Russia's projected 1995 sunflower crop is revised upward to 4.2 million tons, the largest since 1972. The revision is based on new information regarding yield estimates. Sunflowerseed exports, at a record 1.5 million tons, have risen nearly 300 percent since 1992. The striking climb in Russian sunflowerseed trade has been primarily driven by Western European and Turkish demand. Three consecutive years of drought in Spain have contributed to the lowest output in nearly 15 years, which has left domestic supplies significantly short of demand. In Turkey, excess crushing capacity and barter agreements with Ukraine and Russia have allowed massive amounts of sunflowerseed imports. However, if crushing facilities in Russia are renovated and processing resumes in larger quantities, domestic consumption should increase at the expense of exports. The Government of Brazil announced a new farm debt relief package worked out between congress and the central government. The legislation allows the rescheduling of agricultural debts for about $7.4 billion. The new agreement provides farmers a grace period of 1 to 2 years, and a repayment term of 7-10 years at 3 percent interest. Undoubtedly, this package is highly beneficial for farmers, but it does little to solve the current shortage of credit. In addition, inputs (previously obtained from swap deals with soybean buyers) have drastically dropped. These economic and financial factors, combined with less than optimal weather conditions for planting, support smaller soybean production in Brazil in 1995/96. 1994/95 WRAP-UP U.S. soybean exports finished 1994/95 at 838 million bushels. The Netherlands narrowly edged out Japan as the top U.S. soybean importing country (138.5 million bushels versus 133.6 million). September soybean oil production finished the year with another monthly record, pushing 1994/95 output to a record 15,613 million pounds. But an upward revision of U.S. season ending stocks to 1,135 million pounds meant total soybean oil disappearance unexpectedly dropped in September to its lowest monthly mark of the year. Domestic disappearance fell from October's estimate to 12,908 million pounds. Expected soybean oil exports declined 60 million pounds to 2.69 billion. Consumption of soybean oil in edible products for 1994/95 was only 1.6 percent larger than in 1993/94 (see ERS Autofax document #2375). Consumption in salad and cooking oils was relatively good (up 11 percent). However, the year-to- year increase in soybean oil use was held back by more sluggish markets for baking and frying fats and margarine (down 4 percent and 8 percent, respectively). The strong September crush also helped final 1994/95 soybean meal production reach 33,271,000 short tons. Soybean meal exports were raised 75,000 tons from the October estimate to 6,675,000 tons. This was at the expense of domestic disappearance, which dropped 115,000 tons from the October estimate of 26.7 million tons. Ending stocks of soybean meal were 224,000 tons. 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 6 2,517 2,731 1,405 838 153 2,396 335 1995/96 2/ 335 5 2,183 2,523 1,395 800 113 2,308 215 ------------------------------------------------------------------------------ 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 33,271 33,484 26,585 6,675 33,260 224 1995/96 2/ 224 33,041 33,325 27,000 6,100 33,100 225 ------------------------------------------------------------------------------ 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 15,613 16,733 12,908 2,690 15,598 1,135 1995/96 2/ 1,135 15,695 16,840 13,050 1,950 15,000 1,840 ------------------------------------------------------------------------------ 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 1994/95 5.45 101.00 10.75 29.00 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 30.60 4.54 October 5.30 96.00 10.80 28.60 4.49 November 5.36 107.00 10.60 25.90 4.51 December 5.41 104.00 10.30 25.80 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 June 5.68 NA 10.50 NA 5.13 July 5.90 NA 11.50 NA 5.10 August 5.83 100.00 11.40 30.70 5.16 1995/96 September 5.99 99.00 11.00 29.70 5.11 October1 6.17 97.00 11.00 29.50 5.20 -------------------------------------------------------- 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 23.67 45.50 27.50 1991/92 19.10 20.10 21.63 27.30 25.82 1992/93 21.40 25.00 25.37 27.40 20.90 1993/94 27.09 27.78 31.08 43.20 26.38 1994/95 27.55 25.80 28.10 44.30 26.47 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 June 26.78 26.72 27.30 39.00 26.61 July 27.60 28.25 28.69 39.13 27.38 August 26.56 27.09 27.47 41.50 26.35 September 26.26 26.50 27.41 41.30 25.93 1995/96 October1 26.56 28.12 27.58 42.50 26.05 ------------------------------------------------------------------------- 1 Preliminary 2 Decatur 3 Beginning Oct 1995, PBSY Greenwood MS 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 1994/95 162.55 112.02 62.70 128.94 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 June 160.40 108.75 62.38 134.00 85.00 July 170.45 116.90 73.75 138.75 92.50 August 166.70 116.50 83.75 136.25 95.00 September 180.99 137.60 NA 142.00 112.50 October1 193.92 151.88 81.00 132.50 129.38 ---------------------------------------------------------------------------- 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 Castaneda World Oilseeds (202) 219-0826 ****************************************************************************** The next release of the OIL CROPS OUTLOOK is scheduled for 4:00 p.m. ET Wednesday, December 13. 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