OIL CROPS OUTLOOK June 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--0696. ------------------------------------------------------------------------------ WET SOILS STALL SPRING OILSEED PROGRESS Like last year, soybean planting and emergence has been held up by excessively wet and cool conditions, especially in the eastern Corn Belt. Soybean planting in Indiana and Ohio, the fourth and fifth largest producing States in 1995, is at least 3 weeks late. Nationally, this year has not been delayed to the same extent (farmers had planted 59 percent by June 9, compared with 55 percent in 1995), but seeding is behind the 5-year average of 74 percent. On the other hand, planting of corn in Iowa has been unhindered, and problems with soybean cyst nematodes may induce more corn and fewer soybean acres than first intended there. While the window for corn planting has largely closed in most areas, soybeans can still be feasibly planted through the end of June. This has helped new crop soybean futures prices to slide in recent weeks. But if drying does not soon occur, the prevented plantings could again send soybean prices a good deal higher. The assessed increase in soybean acres (stemming from the impediments for planting corn) is 1.5 million, now projected at 64.0 million acres. If realized, this would be the largest U.S. soybean area since the 67.8 million acres planted in 1984. USDA's Acreage survey, to be released on June 28, should indicate how farmers' intended planting has changed because of rising prices, replantings after failure of winter wheat, and weather delays. Wetness has also hampered planting of sunflowers and flax in the Northern Plains. Just 80 percent of intended sunflower acreage in North Dakota was planted by June 9, compared with the 88-percent average for this date. Late planting is also expected to lessen yields somewhat, although the risk is larger for corn than for soybeans. The yield risk for soybeans would be greater in States that are farther north, like Minnesota and Michigan, than in Indiana, Ohio, or Kentucky. While later planting tends to result in shorter plants and fewer pods per plant, planting in narrower rows and increasing plant populations can partially compensate for this effect. At this early phase, a modest reduction of 0.3 bushel per acre is anticipated from the trend yield of 37 bushels. This year would still have the third highest U.S. average yield ever. Given favorable prices, no major decrease in harvested acreage is considered likely. These factors would result in U.S. soybean production of 2,310 million bushels, which pushes total 1996/97 supply up 40 million bushels from the May projection. The change in projected 1996/97 demand from last month is not expected to increase as much, however. The domestic crush forecast was raised 5 million bushels to 1,375 million, and exports were increased from 790 to 805 million bushels. This allows the ending stocks projection to increase to 210 million bushels. The stronger supply-to-use ratio prompts a slightly lower 1996/97 average price forecast, in the $5.70-$7.90 per bushel range. The conflux of favorable prices and large output, could push the 1996 soybean crop past the 1995 crop as the highest valued U.S. harvest. The moderate increases in 1996/97 production of soybean oil and soybean meal are expected to end up being exported, accompanied by a smaller increase in domestic soybean meal disappearance. Greater world production of grains, and less high-oil content oilseeds, is expected to tighten the world supply of vegetable oils. This should significantly enhance the U.S. competitive position in world trade for oilseeds and vegetable oil next season. FURTHER SLOWING IN USE OF SOYBEANS AND PRODUCTS FOR 1995/96 SEEN The U.S. crush forecast for 1995/96 was reduced to 1,355 million bushels this month. The April crush was down to 112.2 million bushels (compared with 119.4 million in April 1995). Weekly crush during May showed no interruption in this downward trend. Weak product export demand continues to weigh down crush activity. The smaller crush estimate increases 1995/96 ending stocks of soybeans 5 million bushels to 195 million. Export demand for U.S. soybeans has softened since April as prices have risen. The price spread between the Gulf price and what Illinois processors paid narrowed to 25 cents per bushel in April, down from over 40 cents earlier this year. The larger Brazilian crop projected this month should limit any rebound in U.S. exports late this summer. The cut in crush also slices the forecast for oil production 55 million pounds to 15.1 billion. As its recent strength continues, the 1995/96 oil price forecast was slightly raised to 25.25 cents per pound. Once again, projected U.S. exports of soybean oil have been reduced because of sluggish sales and shipments. U.S. soybean oil exports are expected down 100 million pounds (46,000 metric tons) this month to 1,350 million pounds (612,000 tons). Factors affecting the outlook for U.S. soybean oil trade include India's projected reduction in soybean oil imports by 50,000 tons, and the acceleration of China's shift to purchases of Asian palm oil and South American soybean oil. To illustrate the dramatic change of events from last year, total March exports were just 68 million pounds, compared with 564 million pounds in March 1995. Based on a strong year-to-date performance, projected domestic disappearance of soybean oil was raised to 13,350 million pounds, up from 13,300 last month. However, the data on consumption of refined oils still shows a year-to-date decline from last year of more than 3 percent. This implies that end users of oil have built up their supplies of oil to take advantage of lower prices from earlier in the year. Once this accumulation ends, soybean crush could suffer more unless foreign demand returns. Visible stocks of soybean oil have also risen substantially from a year ago. Oil stocks ending April were 1.7 billion pounds, compared with 1.1 billion for April 1995. Seasonal slowing in crush and exports should bring carryout oil stocks down toward the 1.6-billion-pound forecast. Domestic disappearance of soybean meal was reduced 50,000 tons to 27.0 million short tons, equalling the drop in expected production. The reduction in the 1995/96 average meal price from $230.00 to $227.50 per ton reflects a cooling of soybean meal prices in recent weeks. WORLD OILSEED PRODUCTION UNCHANGED World oilseed production for 1995/96 is estimated at 254.5 million metric tons, nearly unchanged from last month's 254.6 million tons. Increases in cottonseed production were offset by declines in soybean and rapeseed production. China's oilseed numbers were updated based on a new 1995/96 report from the State Statistical Bureau (SSB). Its cottonseed production was raised 400,000 tons, while soybean and rapeseed output were lowered 500,000 and 60,000 tons, respectively. Higher vegetable oil prices, combined with provincial and central government policies, pushed farmers in China to raise rapeseed and peanut area to new heights. Production of high-oil content seeds was encouraged to reduce import dependency and to compensate for soybean area lost to coarse grains. The Government of India also reported new oilseed estimates for 1995/96. While rapeseed production was reduced 300,000 tons to 6.2 million tons, smaller reductions occurred in sunflower and cottonseed. This month, global soybean production remain nearly unchanged at 123.7 million tons as increases in Brazil and Bolivia offset a large decline in China's output. Projected soybean production for China was dropped nearly 4 percent to 13.5 million tons. Pro-grain policies supported increased corn area at the expense of soybeans, as well as productivity due to greater input use in grains. In South America, Brazil, and Bolivia soybeans were raised 200,000 and 140,000 tons, respectively. Reported record yields in the State of Parana are expected to slightly raise Brazilian yield and production. Reports out of Bolivia indicated that area planted rose to 400,000 hectares in 1995/96, leading to a total production of 760,000 tons. ****************************************************************************** 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 ****************************************************************************** The next Oil Crops Outlook is scheduled for 4:00 pm ET Monday, July 15. 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 1,355 825 117 2,297 195 1996/97 1/ 195 5 2,310 2,510 1,375 805 120 2,295 210 ------------------------------------------------------------------------------ 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 short tons-------------------------- 1994/95 150 33,265 33,479 26,538 6,717 33,256 223 1995/96 1/ 223 32,272 32,575 27,000 5,350 32,350 225 1996/97 1/ 225 32,675 32,975 27,350 5,400 32,750 225 ------------------------------------------------------------------------------ 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 15,100 16,300 13,350 1,350 14,700 1,600 1996/97 1/ 1,600 15,435 17,075 13,500 1,750 15,250 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 5.48 101.00 10.70 28.90 4.63 1995/96 6.75 107.00 11.40 29.30 5.20 1994/95 September 5.47 101.00 10.70 30.60 4.55 October 5.30 96.00 10.50 28.60 4.52 November 5.36 107.00 10.60 25.90 4.52 December 5.41 103.00 10.60 25.80 4.72 January 5.47 95.00 10.50 25.50 4.76 February 5.40 70.00 10.80 NA 4.94 March 5.51 NA 10.40 NA 5.13 April 5.55 NA 10.70 NA 5.10 May 5.56 NA 10.60 NA 4.91 June 5.68 NA 10.70 NA 5.03 July 5.90 NA 11.50 NA 5.11 August 5.83 100.00 11.40 30.60 5.21 1995/96 September 5.98 100.00 11.00 29.70 5.11 October 6.15 99.00 11.00 28.60 5.11 November 6.40 114.00 10.80 29.50 5.17 December 6.76 116.00 10.60 28.60 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 7.43 NA 12.50 NA 5.31 May1 7.67 NA 13.40 NA 6.01 -------------------------------------------------------- 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 April 25.82 26.77 25.63 39.25 26.60 May1 26.50 28.46 26.38 42.80 27.98 ------------------------------------------------------------------------- 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 April 249.30 220.00 133.00 210.00 174.00 May1 244.30 194.75 137.00 212.00 177.00 ---------------------------------------------------------------------------- 1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills END-END-END