OIL CROPS OUTLOOK May 13, 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--0596. ------------------------------------------------------------------------------ Little Easing Expected in 1996/97 Soybean Market As of May 5, spring grain planting was generally on schedule in the Corn Belt and well ahead of the 1995 pace, but was behind normal in the Northern Plains because fields were still too wet and cold. Soybean planting, which normally follows grains, has only just begun in most States (4 percent planted nationwide). Poor conditions are causing farmers in Illinois and Indiana to evaluate abandoning failed soft red winter wheat acreage and replanting with soybeans or corn. With adequate rainfall, many would have double-cropped soybeans after wheat anyway, so it is unclear whether this would represent a net increase from intended soybean plantings. The first forecast for 1996/97 assumes a soybean yield of 37 bushels per acre, based on a weighted average of regional trend yields (1974-95). Projected soybean harvested area is 61.5 million acres, virtually unchanged from 1995/96. Production would equal 2,275 million bushels and rank as the second-largest U.S. soybean crop ever. Although production is forecast nearly 6 percent above this season's output, an expected lower carryin would put total supplies for 1996/97 slightly below this year's level. Carryin stocks in September are projected at 190 million bushels, down sharply from the 335 million bushels carried into 1995/96. The reduced stocks leave a relatively small cushion in the case of adverse growing weather this summer. Although a comparatively large crop is expected next fall, the tight market going into the 1996 crop year is not likely to loosen much. This is because total soybean demand should remain robust. Domestic crush is forecast up 10 million bushels from this season to 1,370 million. Soybean exports, while projected down 35 million bushels from the previous year, would still be a relatively healthy 790 million bushels. Attractive soybean prices this fall may prompt record planting in Brazil, where higher production would curb U.S. soybean exports next spring. Carryout stocks are projected to increase only 5 million bushels, to 195 million. The 1996/97 season average farm price for soybeans is expected to range between $5.75 and $8.00 per bushel, compared to $6.80 for 1995/96. Supply and demand for soybean meal are expected to keep an even pace next season. Domestic disappearance is projected to rise a modest 1 percent to 27.3 million short tons. U.S. exports are seen falling again in 1996/97, to 5.25 million tons, down 100,000 from this season. This would be the smallest volume traded since the 4.9 million tons exported in 1984/85, as soybean imports are favored over meal and availability of meal supplies from competitors increases. The relative equilibrium between supply and demand should ease the price for soybean meal only marginally from the $230 per ton estimated for 1995/96. The crush for meal markets in 1996/97 should increase soybean oil supplies and place additional pressure on U.S. oil prices. USDA forecasts soybean oil prices to range from 22 to 26 cents per pound next season, compared with the 25.0 cents this year. With ample carryin stocks of 1.6 billion pounds and an outturn of 15.4 billion pounds, total supplies will reach a record 17 billion pounds. Nevertheless, oil stocks may rise only modestly as domestic use climbs and exports rebound, helped by reduced foreign supplies of high oil-content seeds, particularly rapeseed. World Oilseed Supplies To Decline Slightly for 1996/97 Lower carryin stocks but slightly higher production are expected to leave world oilseed supplies at nearly 280 million metric tons down slightly from 1995/96. Projected foreign oilseed production is virtually unchanged from this year's 186 million tons. Higher grain prices and lower vegetable oil prices are reducing output of high oil-content seeds, such as rapeseed and sunflowerseed. In contrast, the robust increases in soybean meal prices during 1995/96 are expected to significantly boost global and foreign soybean production. Therefore, protein meal availabilities are expected to grow faster than vegetable oil, leading to keen competition in the meal market, but improving opportunities for U.S. soybean oil exports. Supply and demand for feed grains could be the largest uncertainty for the oilseed market in 1996/97. Tight feed grain supplies have driven grain prices to record levels, thus leading to greater competition for land, but also inducing higher protein meal use in feed rations. China's vegetable oil imports will also add to uncertainty due to expected lower supplies of oilseeds and slow growth in China's palm oil imports. Although China is expected to remain the world's largest vegetable oil importer, the relative mix of palm and soybean oil imports is unclear. The mix will largely depend on global supplies of each oil in 1996/97, and internal Chinese policies such as import licenses, import tariffs, and domestic oilseed production incentives. Continued strong feed grain prices in 1996/97 could lead to gains in protein meal consumption and prices. However, high feed costs could weaken growth in foreign soybean meal and feed grain consumption that would otherwise be generated by rising livestock inventories and feed usage. Moreover, the extent to which feed grain supplies and stocks recover in 1996/97 could add pressure to feed grain prices, and limit protein meal demand as the price ratio turns favorable to feed grains. The latter could be achieved because of prospects for a large expansion in grain production throughout the world. Feed Market Stretching 1995/96 Protein Supplies Prices for soybean meal spurted up in April, with the monthly average increasing to $249 per ton, 10 percent above the March price. Cash and futures prices reacted strongly to USDA reports that indicated tight grain stocks, less than expected planting intentions for corn, and only modest changes in the swine inventory and slaughter. This plateau is expected to prevail for the remainder of 1995/96, and the season average price for soybean meal was revised up to $230 per ton this month. Rising prices for feed grains and soybean meal this year have accelerated for alternative feedstuffs. Corn gluten meal prices have increased about 60 percent over a year ago, with similar increases for meals produced from processing cottonseed, sunflower, linseed, and fish and animal byproducts. But demand for meat and bone meal has recently suffered from adverse publicity of the British BSE situation. Feeding of meat and bone meal to ruminants may be banned and some U.S. poultry producers have announced that they would voluntarily stop feeding it to reassure consumers of their meat's wholesomeness. The hog and pet food sectors will likely absorb more of the meat and bone meal supply. Other feedstuffs, such as soybean meal and feather meal, may stand to gain from these developments. Expected soybean meal supplies for 1995/96 were shaved further this month as the October-September crush was reduced 5 million bushels to 1,355 million. This reduced estimated soybean meal output to 32.3 million tons. Domestic soybean meal disappearance for 1995/96 was reduced to 27.05 million short tons, down 100,000 from last month. Since early April, weekly data show a modest slowing from the previous year for broiler eggs set and broiler chicks placed. This is the first sign that a cutback in the poultry sector has begun. Hogs producers are marketing at lighter weights, up to 10 pounds per head less than a year ago. This implies less feed consumption per animal. Gilt retention (for breeding) has also dropped recently, as hog producers have sent more gilts to slaughter. However, by itself, this latter item should have less impact on 1995/96 soybean meal consumption and more consequences for 1996/97. U.S. Exports of Soybean Products Projected To Fall Again U.S. soybean meal exports are expected to fall to 5.350 million short tons, down 50,000 tons from last month's estimate. Sluggish global demand due to high soybean meal prices, shrinking U.S. domestic production, and greater competition from South America are supporting the lower estimate. The absence of China, the Middle East, and North Africa from the U.S. soybean oil market is directly responsible for the reduction in 1995/96 exports, projected down this month to 1,450 million pounds. This year, China increased domestic oilseed production and crush, raised oilseed imports, and bought a myriad of Brazilian soybean oil, rationing oil imports from the United States. On the other hand, U.S. domestic oil disappearance has risen more than expected, and is forecast up 150 million pounds this month to 13.3 billion. Ending stocks of soybean oil dropped slightly as a result to 1.6 billion pounds. Cash soybean oil prices have strengthened recently, rising from 23.6 cents per pound in March to 25.8 cents in April. Sunflower oil prices have been rising as well, which have helped boost sunflowerseed prices to $12.40 per hundredweight in April. The 1995/96 projected sunflowerseed price was raised to $11.40 per cwt this month, largely based on the resurgence in oil prices. Foreign Soybean Supplies Improved in 1995/96 This month, soybean production are projected up 300,000 tons each in Argentina and Paraguay to 12.6 and 2.3 million tons. Larger area than previously anticipated, timely rains, and good harvesting conditions boosted soybean output in both countries. The supply gains are expected to support additional soybean exports of 200,000 and 300,000 tons for Argentina and Paraguay, with soybean exports reaching 2.8 and 1.5 million tons, respectively. Also, sharp gains in Brazilian soybean exports during March and April have bolstered Brazil's projected exports for 1995/96 (Oct.-Sept.) to 3.4 million tons. However, Brazil's anticipated smaller crop likely will be insufficient to fill the demand needs, so Brazil will probably boost soybean imports, especially from Paraguay and Argentina. The latter are supported by the newly implemented differential export tax for Rio Grande do Sul, which provides an advantage to crushers in that state to purchase soybeans from Argentina and Paraguay and re-export the products. Although China's total vegetable oil imports are unchanged from last month, the import mix among soybean, rapeseed, and palm oils varied substantially. Steep soybean oil imports by China during October-March have raised China's projected soybean oil imports to 1.3 million tons, up 150,000 tons from last month, while other oil imports were cut by 150,000 tons. Hefty declines in rapeseed oil imports during the same period and large supplies of domestic rapeseed oil are expected to dampen China's rapeseed oil imports. Likewise, China's palm oil imports are projected to fall slightly in response to high prices and less favorable import policy compared with soybean oil. The next Oil Crops Outlook is scheduled for 4:00 p.m. ET Thursday, June 13. 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--------------------------- 1994/95 209 6 2,517 2,731 1,405 838 153 2,396 335 1995/96 1/ 335 5 2,152 2,492 1,360 825 117 2,302 190 1996/97 1/ 190 5 2,275 2,470 1,370 790 120 2,280 190 ------------------------------------------------------------------------------ 1/ 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----------------------------- 1994/95 150 33,265 33,479 26,538 6,717 33,256 223 1995/96 1/ 223 32,332 32,625 27,050 5,350 32,400 225 1996/97 1/ 225 32,480 32,775 27,300 5,250 32,550 225 ------------------------------------------------------------------------------ 1/ 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--------------------------- 1994/95 1,103 15,613 16,733 12,916 2,680 15,596 1,137 1995/96 1/ 1,137 15,155 16,355 13,300 1,450 14,750 1,605 1996/97 1/ 1,605 15,380 17,025 13,500 1,700 15,200 1,825 ----------------------------------------------------------------------------- 1/ 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 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 5.41 103.00 10.30 25.80 4.71 January 5.47 95.00 10.60 25.70 4.76 February 5.40 70.00 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 5.84 100.00 11.70 30.70 5.16 1995/96 September 5.99 100.00 11.00 29.70 5.11 October 6.15 99.00 11.00 28.80 5.11 November 6.39 114.00 10.80 29.50 5.13 December 6.76 116.00 10.90 28.30 5.03 January 6.78 98.00 11.00 29.80 5.27 February 7.01 120.00 11.50 NA 5.18 March 7.00 NA 11.90 NA 5.28 April 1 7.51 NA 12.40 NA 5.40 -------------------------------------------------------- 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 24.10 23.67 45.50 27.50 1991/92 19.10 22.83 21.63 27.30 25.82 1992/93 21.40 30.07 25.37 27.40 20.90 1993/94 27.00 30.30 31.08 43.20 26.38 1994/95 27.51 29.23 28.10 44.30 26.47 1994/95 October 27.06 27.81 28.90 46.00 24.73 November 29.84 30.72 29.40 50.88 24.75 December 30.61 31.83 30.63 53.80 24.75 January 29.04 28.70 29.25 50.25 28.01 February 28.15 29.95 27.66 41.83 27.26 March 28.33 27.14 27.97 41.00 28.17 April 26.30 27.61 26.89 41.25 27.30 May 26.00 27.51 26.34 40.25 26.42 June 26.78 30.04 27.30 39.00 26.61 July 27.60 30.63 28.69 39.13 27.38 August 26.56 30.26 27.47 41.50 26.35 September 26.26 28.61 27.41 41.30 25.93 1995/96 October 26.56 27.61 27.49 42.50 26.05 November 25.41 26.27 26.25 41.63 25.54 December 24.76 26.10 25.98 39.20 24.99 January 23.69 24.45 24.65 37.25 24.52 February 23.65 24.35 24.23 36.00 24.30 March 23.60 24.25 24.28 36.60 24.34 April1 25.82 26.77 25.63 39.25 26.60 ------------------------------------------------------------------------- 1 Preliminary 2 Decatur 3 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 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 December 223.60 185.80 122.50 204.00 143.75 January 232.00 208.80 135.00 220.00 142.00 February 228.30 202.80 130.00 215.00 143.75 March 226.57 195.60 123.50 210.00 155.00 April1 249.30 220.00 132.00 210.00 172.00 ---------------------------------------------------------------------------- 1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills . 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