OIL CROPS OUTLOOK November 13, 1996 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- OIL CROPS OUTLOOK is issued monthly by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. OCS-1196. ------------------------------------------------------------------------------ SOYBEAN YIELDS CONTINUE TO SURPRISE By mid-November, 89 percent of the Nation's soybean harvest had been completed, with the greatest delays still in Ohio. Late planted soybeans, which many observers a few months ago had considered unlikely to reach maturity, have turned in surprisingly respectable yields. A fortuitous absence of freezing weather in October enabled even the latest planted fields to mature. Pod counts in 1996 did not increase any from previous years but the favorable fall weather allowed for maximum bean size. This year's national average yield of 37.9 bushels per acre ranks behind only the 1994 record. With a relatively large area harvested, the exceptional yield has produced the second-largest U.S. soybean crop at 2,403 million bushels. This year's increased production should ease tightness, raising 1996/97 ending stocks to 210 million bushels from 183 million in 1995/96. Forecast yields were raised this month for Ohio, Indiana, Illinois, and Missouri. The Northern Plains States of Kansas, Nebraska, North and South Dakota, which were generally planted on time, are having record soybean output. A low harvested soybean area in Missouri is being offset by a record yield. Market expectations for improved yields have suppressed soybean prices in recent weeks. Declining corn and wheat prices are also applying pressure on the soybean sector. The seasonal soybean cash basis (the difference between farm and futures prices) generally widens as farmers begin to deliver the new crop to market. But the stronger than usual cash basis this fall implies that farmers have held back on current sales in anticipation of better prices later. A recent Internal Revenue Service tax ruling on deferred payments for forward contracts may also affect farmers' decisions whether to deliver prior to January 1. USDA forecast the 1996/97 season average farm price to range between $6.15 and $6.85 per bushel, down from the October forecast of $6.50- $7.40. DOMESTIC CRUSH AND EXPORTS SPEED UP WITH SOFTENING SOYBEAN PRICES A heavy soybean crush in October followed a weak September pace as the U.S. harvest progressed and more newcrop supplies became available. Abundant supplies are expected to permit 1996/97 domestic crush to reach 1,390 million bushels. While still below the record 1994/95 crush, this year's demand for crushing is expected up 20 million bushels from the tight situation last year. While the later than usual harvest held down export shipments in September and October, rising supplies and falling prices are accelerating 1996/97 export sales of U.S. soybeans and soybean meal. As of October 31, soybean export commitments were 16 percent above a year earlier. China is a chief source of the spurt in new sales. The sales pace may quicken further with the larger and better confirmation of U.S. production. A lack of competition from Brazil, due to diminished supplies, is also aiding U.S. exports this fall. A smaller expected gain in 1996/97 Argentine soybean production would also benefit U.S. trade. U.S. 1996/97 soybean exports are forecast at 870 million bushels, the largest volume since 1982/83. On the other hand, sales to the EU have lagged last year's pace, primarily due to large new EU feed wheat supplies. Total 1996/97 soybean imports by the EU, projected down 3 percent from 14.3 million tons in 1995/96, were forecast 200,000 metric tons higher this month based on lower U.S. prices. Greater supplies and lower prices will enable U.S. exporters to sell more soybean meal abroad. USDA raised its forecast for U.S. soybean meal exports to 6.3 million short tons, up from almost 6.0 million in 1995/96. Prices are projected to range from $210 to $225 per ton, below the 1995/96 average of $236. Meal consumption is anticipated to increase at home as well. Falling feed prices will give livestock producers an incentive to expand production and raise feeding rates. Domestic disappearance for 1996/97 is forecast at 26.85 million tons, up from 26.6 million last season. U.S. export sales of soybean oil have not shown much early strength and continue to be a drag on the U.S. oilseeds sector. Like last season, the outlook for the 1996/97 oil market heavily depends on China. However, there are signs for improvement over the disappointing 1995/96 trade. U.S. soybean oil prices this fall are more than 4 cents per pound less than a year ago and down 2 cents from September. China's imports of soybean oil from South America have been strong this fall, and when prices soon favor U.S. supplies, China will probably switch sources. Projected U.S. soybean oil exports were raised 50 million pounds this month to 1,750 million. Lower soybean oil prices are expected to encourage domestic disappearance, rising 1.3 percent from 1995/96 to 13,650 million pounds. Despite these expected increases in offtake, a large outturn is forecast to push 1996/97 ending stocks of oil to a record large 2,255 million pounds. The growing surplus of oil (and potential oil represented in the larger soybean harvest) may force the U.S. oil price down to 22.0-23.5 cents per pound. WORLD SOYBEAN TRADE TO REVIVE World soybean production for 1996/97 is projected up 7.5 percent from a year earlier, more than offsetting a decline in other oilseeds production. This substitution will help alleviate the imbalance of short protein meal supplies and surplus vegetable oil stocks. Based on burgeoning U.S. supplies, 1996/97 world soybean imports are projected to rebound to 32.4 million metric tons after last year's decline. Although still representing a record harvest, Argentine 1996/97 soybean production is projected down this month to 13.0 million tons. With a large increase in Argentine wheat area, much more of the soybean crop will be double-cropped, which would tend to hold down soybean yields. The decline is allocated between exports (-300,000 tons) and ending stocks (-200,000 tons). Argentina is also expected to have a larger sunflowerseed output, based on a higher harvested area. USDA projects Chinese 1996/97 soybean imports to rise to 1 million tons from nearly 800,000 last year. Also, China's imports of soybean meal were expected to rise to 1.6 million tons from 929,000 in 1995/96. The forecast for Canadian rapeseed crush was reduced 150,000 tons this month. Tighter rapeseed supplies, ample crushing capacity, and a low oil price are squeezing crush margins, which are forcing Canadian processors to restrict their output. However, this frees up more supplies for export. The poor European rapeseed harvest should attract more Canadian rapeseed exports in 1996/97. The forecast for Canadian exports was raised this month to 2.4 million tons. ****************************************************************************** Information Contacts: Mark Ash Soybeans, Minor Oilseeds, Fats and Oils (202) 219-0712 Scott Sanford Peanuts, Cottonseed (202) 219-0835 ****************************************************************************** The next Oil Crops Outlook is scheduled for 4:00 pm ET Friday, December 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 1995/96 335 5 2,177 2,516 1,370 851 112 2,333 183 1996/97 1/ 183 5 2,403 2,590 1,390 870 120 2,380 210 ------------------------------------------------------------------------------ 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 1/ ports stocks ------------------------------------------------------------------------------ ---------------------------1,000 short tons-------------------------- 1994/95 150 33,265 33,479 26,538 6,717 33,256 223 1995/96 2/ 223 32,517 32,820 26,625 5,966 32,591 229 1996/97 3/ 229 33,066 33,375 26,850 6,300 33,150 225 ------------------------------------------------------------------------------ 1/ Includes imports. 2/ Estimated. 3/ 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 1/ ports stocks ------------------------------------------------------------------------------ -------------------------- Million pounds--------------------------- 1994/95 1,103 15,613 16,733 12,916 2,680 15,596 1,137 1995/96 2/ 1,137 15,236 16,472 13,480 986 14,466 2,007 1996/97 3/ 2,007 15,570 17,655 13,650 1,750 15,400 2,255 ------------------------------------------------------------------------------ 1/ Includes imports. 2/ Estimated. 3/ 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 6.77 107.00 11.00 29.80 5.27 February 7.01 117.00 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 July 7.62 NA 13.60 NA 6.19 August 7.82 118.00 12.70 NA 6.15 1996/97 September 7.79 134.00 12.00 27.70 5.89 October1 6.85 127.00 11.00 26.20 6.51 -------------------------------------------------------- 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 24.70 26.53 25.40 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 26.57 27.61 27.49 42.50 26.05 November 25.42 26.27 26.25 41.63 25.54 December 24.76 26.10 25.98 39.20 24.99 January 23.52 24.45 24.65 37.25 24.52 February 23.49 24.35 24.23 36.00 24.30 March 23.60 24.25 24.28 36.60 24.34 April 25.70 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 July 24.10 28.25 24.58 43.00 25.46 August 23.99 27.81 24.90 42.60 24.33 September 23.92 26.13 24.90 40.80 24.14 1996/97 October1 21.95 24.55 22.80 41.50 22.67 ------------------------------------------------------------------------- 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 1995/961 235.90 190.74 123.75 202.70 159.05 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 1995/96 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 July 252.50 201.56 135.00 224.25 174.00 August 261.20 193.10 126.25 227.00 170.00 September 276.40 193.10 125.60 192.80 167.50 1996/97 October1 248.60 182.50 116.00 170.00 175.00 ---------------------------------------------------------------------------- 1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills END-OF-FILE