OIL CROPS OUTLOOK January 17, 1996 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- OIL CROPS OUTLOOK is published monthly by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. OCS--0196. ----------------------------------------------------------------------------- FINAL 1995/96 SOYBEAN YIELD DECLINES, TIGHTENING MARKET FURTHER The 1995 U.S. soybean crop yielded 34.9 bushels per acre, down from the previous forecast of 35.4 bushels. Although many States had slightly higher yields than in USDA's last production report, Illinois and Iowa yields declined 1.5 and 1.0 bushels per acre, respectively. This lowered U.S. soybean output from 2,183 million bushels to 2,152 million. Several northern States (especially Minnesota and Michigan), in which soybeans were planted on time and benefited from abundant summer precipitation, set or neared their production records. Other States had relatively good pod counts, but the condensed growing season reduced yields through shorter plant heights, fewer beans per pod, and smaller bean size. Based on strengthening soybean prices and slightly weaker export markets for soybean meal and oil, expected 1995/96 crush is reduced 5 million bushels to 1,390 million. The smaller soybean supplies trimmed projected ending stocks to 190 million bushels, which would be the smallest since 1988/89. In terms of stocks relative to total use, this year's carryout would be the slimmest in 20 years. Producer prices for soybeans soared to $6.71 per bushel in December, up from $6.39 in November and $5.41 for December 1994. Farmers have reportedly slowed their soybean marketings, waiting for signs of further price increases. Robust domestic soybean meal demand has sustained crushing, which also supports soybean price strength. The projected price range for 1995/96 is $6.55-$7.55 per bushel. U.S. SOYBEAN MEAL DEMAND SEEN STRENGTHENING ON SURPRISING HOG DATA The December 1, 1995, hog inventory was the largest December inventory since 1980. The September-November 1995 pig crop was 2 percent above the same quarter for 1994. Intended farrowings for December 1995-February 1996 and March-May 1996 are, respectively, 1 and 2 percent above a year earlier. Breeding inventory was up 1 percent from a year earlier. Sow slaughter rates are not increasing. On the contrary, sow slaughter has declined from a year earlier. These data suggest that hog farmers are not planning to cut back their herds for 1996, despite rising feed costs. On the other hand, average live weights for slaughter hogs are below last year's, so that the large increase in soybean meal prices should be curtailing the length of time the animals are fed before reaching an acceptable market weight. USDA increased its forecast for domestic soybean meal disappearance to 27.15 million short tons, up 150,000 tons from the previous report. Despite a lower projected soybean crush this month, higher 1995/96 soybean meal production is expected because of a greater meal extraction rate. While official crush and trade data from the Census Bureau have been delayed by the government shutdown, reports from the crushing industry warrant an increase in the rate. The 1995/96 meal extraction rate is 47.6 pounds per bushel, versus the previous forecast of 47.4 pounds. Rising cash and futures prices for soybean meal also indicate that meal demand will remain firm. The average monthly price rose again in December to $223.60 per ton and is nearly $67 higher than a year earlier. USDA now anticipates an average soybean meal price for 1995/96 of $210-$235 per ton, up $15 from last month. However, with stronger domestic use heating up protein meal prices, U.S. exports of soybean meal are projected 100,000 tons lower this month to 6.0 million short tons. U.S. SOYBEAN OIL EXPORTS EXPECTED TO DECLINE Weak sales from Middle East and North African countries have dimmed the outlook for U.S. soybean oil exports in 1995/96. Outstanding export sales on December 28 were 56,000 metric tons, compared to 428,900 tons a year earlier and 80,600 tons 2 years ago. Total commitments (outstanding sales plus shipments) currently represent 20 percent of the 1995/96 forecast. As this is a smaller than normal ratio for this date, a considerable acceleration is implied later in the marketing year to meet the export projection. U.S. soybean oil exports are now projected at 1,825 million pounds, down 125 million pounds from the December forecast and 855 million below a year earlier. With softer world import demand and higher U.S. stocks, the U.S. soybean oil price is projected down 0.5 cent per pound from December to the 23.0-27.0 cents per pound range. Cash prices continued to slip in December, to 24.8 cents per pound. SOUTH AMERICAN SOYBEAN PRODUCTION AND STOCKS LOWER ON WEATHER-RELATED PROBLEMS South American production is expected down 600,000 metric tons this month, as unfavorable weather in Brazil, Argentina, and Paraguay dims the outlook for soybeans. Widespread drought in Brazil's leading soybean producing state, Rio Grande do Sul, has reduced yield potential. Recent heavy rainfall has been beneficial for crop prospects. Brazil's projected soybean output of 23 million tons is only 300,000 tons lower this month. Nevertheless, Brazil's soybean outlook remains extremely uncertain and will depend on more timely rains. Area planted is expected to be unchanged from last month as the recent rally in soybean prices has encouraged farmers in the center-west to increase planting, thus offsetting a potential abandonment of soybeans in the south. In Argentina, soybean production is projected down 200,000 tons in response to long periods of dryness and above normal temperatures that have depleted topsoil moisture. Current Argentine soybean yield estimates are based on normal growing conditions. Thus, if the sporadic rains persist in the main growing areas of Southern Santa Fe, Northern Buenos Aires, and Cordoba, it is likely to be insufficient to yield the expected output. Global ending stocks are projected 900,000 tons lower this month as soybean demand outpaces soybean production in South America and the United States. Projected world ending stocks for 1995/96 (the lowest in more than 10 years) are pushing internationally traded soybean prices to their highest level since 1988/89. Soybean meal prices continue to drive the increase in soybean prices, while soybean oil prices continue their downward trend. A shortage of feed grains has pushed soybean meal demand up, while strong competition from other oils has driven soybean oil stocks up and prices down. However, at this time, soybean futures are highly speculative on South American weather and global demand for soybean meal. Any significant departure from prevailing weather or demand assumptions may produce vast changes in international prices. World soybean trade is expected to fall in response to the smaller U.S. and South American soybean crops. South America is likely to maintain a strong crush at the expense of soybean exports and stocks. The EU-15 is expected to account for most of the decline in import demand this month. Although soybean meal demand in Asia is soaking up the limited exportable supplies from India, global soybean meal exports this month are expected down in response to lower supplies. GLOBAL SOYBEAN OIL IMPORTS PROJECTED DOWN Despite lower soybean oil prices, soybean oil imports in the Middle East and North African countries are reduced by 7 percent from last month. Iran and Morocco account for most of the decline, but most countries in the region are also expected to reduced imports from last month and last year. The smaller imports reverse the strong demand growth experienced by these countries during the last 6 years. Soybean oil import demand is projected to slow down in response to keen competition from other oils, such as sunflower, rapeseed, and palm, and overbuilt stocks in several countries. In December, sunflower oil from Argentina was sold at a discount to Argentine soybean oil. Likewise, Dutch rapeseed oil in December was sold on average about $10 per metric ton less than soybean oil. Additional discouragement to buyers comes from current market conditions that have led to unsubsidized soybean oil trade. Although there have been numerous reports of large unofficial soybean oil imports from South America, China's soybean oil imports are unchanged this month. Last year, China bought its largest share of imports from the United States between February and June. Because the supply of South American soybean oil will be at its lowest during the next few months, the United States has the potential to recover and provide China with an increasing amount of soybean oil exports. SMALLER SUNFLOWER YIELD AND ACREAGE CUTS PRODUCTION AND USE The January Crop Production report substantially lowered the 1995 sunflowerseed crop from previous estimates. The 1995/96 U.S. sunflower yield dropped to 1,189 pounds per acre because of poorer growing conditions in all major producing States. An abnormally wet spring delayed planting, a wet summer contributed to more severe disease problems, and a late September frost shortened the growing season. With harvested area 116,000 acres less than previously estimated (North Dakota accounted for nearly all the reduction), these components reduced production to 4,005 million pounds, down 17 percent from the large 1994 harvest. Given much smaller supplies, projected sunflowerseed use also is expected to decline. Export demand took a large portion of the cut, falling from the previous 1995/96 forecast by one-third to 355 million pounds. The year-to- year reduction in seed exports is 44 percent. Non-oil uses, such as birdfood, dropped 14 percent from a year earlier to 1,125 million pounds. A less active oil market this year also limits crushing potential to 2,635 million pounds, down 55 million from December and 259 million from 1994/95. Projected exports of sunflowerseed oil were reduced from 850 million pounds to 827 million this month. While a reduced crush will curtail sunflower meal supplies, the soybean meal situation has the largest influence on sunflower meal prices. The brisk market for protein meals should boost sunflower meal prices to the highest level since 1988/89, and well above 1994/95's $65 per short ton. Prices for sunflowerseed are expected somewhat higher in 1995/96 but pale in comparison to competing crops. The likelihood of minimal set-asides and rising wheat and feed grain prices in 1996 should reduce plantings of sunflowers next spring. ****************************************************************************** Information Contacts: Mark Ash Soybeans, Minor Oilseeds, Fats and Oils (202) 219-0712 Scott Sanford Peanuts, Cottonseed (202) 219-0835 Jaime Castaneda World Oilseeds (202) 219-0826 ****************************************************************************** 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 2,152 2,492 1,390 800 111 2,301 190 ------------------------------------------------------------------------------ 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 33,265 33,479 26,538 6,717 33,256 223 1995/96 2/ 223 33,067 33,350 27,150 6,000 33,150 200 ------------------------------------------------------------------------------ 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 12,916 2,680 15,596 1,137 1995/96 2/ 1,137 15,640 16,790 13,050 1,825 14,875 1,915 ------------------------------------------------------------------------------ 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 10.60 29.00 4.65 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 10.50 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 October 6.15 97.00 11.00 28.80 5.11 November 6.39 114.00 10.80 29.50 5.13 December1 6.71 111.00 10.80 30.80 5.12 -------------------------------------------------------- 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 26.21 26.50 27.41 41.30 25.93 1995/96 October 26.57 28.12 27.49 42.50 26.05 November 25.41 26.88 26.25 41.63 25.54 December1 24.76 26.10 25.87 39.20 24.99 ------------------------------------------------------------------------- 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 95.85 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 October 193.90 153.25 82.88 132.50 131.00 November 204.10 165.00 99.00 175.00 151.67 December1 223.60 185.83 123.00 204.00 143.75 ---------------------------------------------------------------------------- 1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills . 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