OIL CROPS OUTLOOK August 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-0896. ----------------------------------------------------------------------------- SMALLER SUPPLIES, HIGHER PRICES TO RATION SOYBEAN USE Precipitation during the last half of July and early August in formerly dry midwestern and southeastern locations sent soybean prices plummeting from their early July highs. Central Illinois soybean prices fell back from a high of $8.35 per bushel on July 12 to $7.63 by month's end. However, futures prices have begun to creep back up. The rains missed the southern halves of Illinois and Indiana and cool summer temperatures have slowed development of the late planted crop. Progress reports indicate that plant height and blooming are well behind average in the eastern Corn Belt. The western Corn Belt soybean crop is in generally good condition. As of August 4, just 51, 52, and 35 percent of Indiana, Ohio, and Michigan soybean acreage had reached the blooming stage, compared to the 5-year averages of 91, 92, and 76 percent. These fields will need more time to develop this year, so prices should be supported until a large proportion of the soybeans reach maturity prior to autumn freezes. The national average soybean yield is projected up to 36.2 bushels per harvested acre from 34.9 in 1995. Aside from the eastern Corn Belt, most States are indicating yields at or above last season's yields. Iowa is expected to retain its role as the leading soybean producing State and record its second highest average yield of 45.0 bushels per acre. But, the average soybean yield for Indiana is expected to drop to 35.0 bushels per acre from 39.0 in 1995. Similarly, the Ohio yield is forecast to fall from 38.0 bushels per acre in 1995 to 35.0 bushels, while the Michigan yield slips from 40.0 to 34.0 bushels. Drier weather in the last half of June allowed farmers to finish planting 64.3 million acres, up 420,000 from the June Acreage report. Indiana accounted for most of the higher acreage, with a 400,000-acre increase from the previous forecast. The increase came mostly at the expense of corn, as time to plant corn expired amid early June wetness. With harvested area of 63.4 million acres, total soybean production would be 2.3 billion bushels. The larger crop is not expected to appreciably ease the tight market. Total 1996/97 supplies would be 17 million bushels less than last year's 2,492 million. Expected ending stocks for 1996/97 will remain at a relatively tight 175 million bushels, just 5 million more than this season's forecast carryout. The reduction in supplies raises prices and trims demand from 1995/96. The soybean average farm price increases to $6.75-$8.25 per bushel from $6.80 this year, with part of this change prompted by rising corn prices. A higher soybean price narrows the crushing margin further. Domestic crush for 1996/97 would be shaved 10 million from July and 5 million from 1995/96 to 1,360 million bushels. Higher prices will also likely hinder more soybean exports, now forecast at 820 million bushels for 1996/97 and down 20 million from this year. U.S. soybean exports for 1996/97 should be heavily weighted to the first half of the crop year. Brazil is expected to have record soybean production of 26 million metric tons next year. Stronger prices and better farm finances should raise Brazilian soybean acreage. Brazilian yields should also improve from 1996, when the crop received fewer inputs and was planted late owing to lack of moisture. But surging domestic consumption in Brazil will somewhat restrain its growth in supplies for export. Higher corn and soybean meal prices will curb domestic meal disappearance to 26.7 million short tons, down 0.6 percent from 1995/96. With a price between $235 and $270 per ton for soybean meal (the highest since 1988/89), livestock and poultry feeders will be hard pressed to maintain production if demand for their products does not also strengthen. Foreign demand for U.S. soybean meal exports is not expected to greatly suffer from a higher price trend, based on strong demand from Asian countries. USDA forecasts U.S. meal trade at 5.75 million short tons, only 50,000 less than the 1995/96 estimate. The increase in 1996/97 carryin stocks outweighs the decline in expected soybean oil production. There was no change in projected demand from July, so ending stocks would rise to 1,930 million bushels, up 90 million pounds from this season's carryout and the third highest yearend stocks ever. U.S. soybean oil exports should benefit from larger grain and smaller oilseed production in 1996 for the EU and China. While this shifts EU imports more toward soybeans than soybean meal, crushing lower oil-content soybeans also means that EU exports of vegetable oil will probably decline. This should boost U.S. oil exports into markets such as North Africa and China. WORLD OILSEED SUPPLIES TO FALL FURTHER IN 1996/97 This month's lower projected production pulls 1996/97 world oilseed supplies down to 276.3 million metric tons, 1 percent below last month's estimate. Projected foreign oilseed production is down 1.7 million tons from July's estimate of 184 million tons. Foreign sunflowerseed output is projected almost 6 percent under the previous estimate to 21.7 million tons. Russia and Ukraine account for most of the nearly 1.3-million-ton drop in foreign sunflowerseed production. Unfavorable weather--a cold spring and a dry summer in Russia and Ukraine grain regions--has caused widespread damage to the grain crops, including sunflowerseed. Global oilseed ending stocks are projected 460,000 tons lower this month as global oilseed demand outpaces production. Soybeans regularly account for about 85 percent of all oilseed stocks. Projected world soybean ending stocks for 1996/97 (the lowest in more than 13 years) are supporting internationally traded soybean prices to their highest level since 1988/89. Soybean meal prices continue to drive the increase in soybean prices, while the softness in soybean oil prices persists. A tight supply of feed grains has pushed soybean meal demand up, while slower demand from major oil markets has driven soybean oil stocks up and prices down. However, a sharp reduction in global outturn of high oil-content seeds in 1996/97 is expected. This could offset robust palm and soybean oil production, leading to more stable vegetable oil prices. CURRENT OIL STOCKS CLIMB ON REVIVED CRUSH, SLUGGISH U.S. EXPORTS The recent upturn in soybean crush is the catalyst for raising this month's 1995/96 estimate to 1,365 million bushels. Outstanding export sales of soybeans were the highest ever for August 1 at 71 million bushels, which may mean a strong finish for the 1995/96 season. The full amount is unlikely to be shipped by September 1 as several countries have the flexibility to roll over sales into early 1996/97. Importers have an incentive to do so as this fall's U.S. harvest exceeds a year earlier and prices usually exhibit seasonal decline over the next several months. Consequently, USDA raised its export estimate for 1995/96 to 840 million bushels this month, virtually even with 1994/95 exports. The greater use drops estimated carryover stocks to 170 million bushels, which is the lowest in 20 years. Production of soybean oil for 1995/96 is forecast up 55 million pounds to 15,210 million. Based on stronger meal demand, higher soybean crush in June lifted end-of-month soybean oil stocks to 1,890 million pounds. This is the highest oil inventory in 3 years. With a further reduction in soybean oil exports to 1,200 million pounds, 1995/96 carryout stocks are expected to settle at 1,840 million pounds. Expectations for larger supplies dropped the monthly average soybean oil price to 24.1 cents per pound in July, the lowest since October 1993. Prices are now anticipated to remain below 24 cents for the next few months, which trimmed the 1995/96 average price forecast to 24.7 cents per pound. Heading in the opposite direction is the soybean meal price, which jumped to more than $250 per ton last month. The average price for the year is forecast slightly up, to $231.50 per ton. Domestic disappearance is expected to stall in July-September with very large wheat feeding and smaller livestock herds. U.S. disappearance was estimated 150,000 short tons lower this month from 27.0 million tons in July. But U.S. meal exports should benefit as port congestion and increasingly tight supplies slow Brazilian shipments. Lower freight rates from the United States are also encouraging recent soybean and soybean meal trade. U.S. meal exports were forecast up 300,000 short tons this month to 5.8 million. The promising export outlook this fall should keep pipeline stocks of soybean meal relatively ample. ****************************************************************************** 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 Thursday, September 12. 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 1,365 840 117 2,322 170 1996/97 1/ 170 5 2,300 2,475 1,360 820 120 2,300 175 ------------------------------------------------------------------------------ 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 32,622 32,925 26,850 5,800 32,650 275 1996/97 1/ 275 32,310 32,675 26,700 5,750 32,450 225 ------------------------------------------------------------------------------ 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 15,210 16,440 13,400 1,200 14,600 1,840 1996/97 1/ 1,840 15,265 17,180 13,500 1,750 15,250 1,930 ------------------------------------------------------------------------------ 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 1995/961 6.80 106.00 11.35 29.30 5.25 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 6.77 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 May 7.69 NA 13.60 NA 6.03 June 7.41 NA 14.30 NA 5.88 July1 7.76 NA 14.00 NA 6.21 -------------------------------------------------------- 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 1995/961 25.00 26.24 25.50 40.00 25.55 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 May 26.50 28.46 26.38 42.80 27.98 June 24.95 27.94 25.72 43.00 25.66 July1 24.10 28.25 24.58 43.00 25.46 ------------------------------------------------------------------------- 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 1995/961 230.00 189.38 130.00 190.00 133.60 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 May 244.30 191.25 137.00 212.00 177.00 June 238.80 192.20 135.00 210.00 178.75 July1 252.50 201.56 135.00 224.56 174.00 ---------------------------------------------------------------------------- 1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills END_OF_FILE