OIL CROPS OUTLOOK March 12, 1997 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--0397. ------------------------------------------------------------------------------ HEAVY BRAZILIAN SOYBEAN EXPORTS EXPECTED SOON Brazilian soybean farmers are about to rescue the world from uncomfortably low oilseed supplies. Despite a reduction in forecast harvested soybean area in Brazil, continuing good weather and higher input use is producing record expected yields. Brazilian 1997 soybean production is forecast up this month to a record 27.0 million metric tons, from 26.5 million last month. This is up 13 percent from last year's revised output of 23.7 million tons. Harvest is in full swing in the western areas and will commence in major southern states within 2-3 weeks. The Brazilian harvest is reported 15 percent completed, nearly double last year's pace. With increasing maturity and a drying weather pattern, the pace will soon accelerate. Brazilian soybean exports for 1996/97 were forecast up to 5.2 million tons this month, or 58 percent above last season. Exports this year would rank behind only 1993/94, which an analagous marketing year in which U.S. supplies plunged. The elimination of Brazilian export taxes favors increased soybean exports at the expense of the crushing industry. Very profitable world prices, ample Brazilian supplies, and recent improvements in transportation infrastructure should also considerably advance the soybean export pace from previous years. A newly operational system barges soybeans from northern Mato Grosso down the Madeira and Amazon rivers, where they are loaded onto ocean-going vessels. This will reduce high transportation costs from deep in the interior (compared to trucking to Paranagua) and expedite foreign shipments. Similar projects are progressing throughout the country but will not be functional this year. Such ventures will also take some pressure off Brazil's busiest port at Paranagua, which had a serious bottleneck a year ago. On the other hand, Brazil's 1996/97 crush is forecast down this month to 20.5 million tons, nearly a million tons less than the previous year. With more stable interest rates, the attractiveness of the drawback system (which imports soybeans for crushing and immediately exports the products) has been diminished. Forecast 1996/97 soybean imports for Brazil were reduced to 600,000 tons this month, less than half last season's volume. Retention of a 12-percent tax on intrastate soybean shipments exacerbates the situation, as Brazilian farmers are reluctant to sell to crushers in other states when they can get a higher price abroad. Consequently, Brazilian soybean meal exports are now forecast at 10.8 million tons, down from 11.4 million last month. Yet, domestic consumption of soybean meal continues to grow, aided by the country's improved investment climate. Capital improvements in the poultry and pork processing sectors have raised Brazil's per capita meat consumption and export capacity. Brazil's 1996/97 soybean oil exports are also curtailed (to 1.45 million tons) as more is exported in the form of unprocessed soybeans. Expected 1996/97 soybean production in Paraguay is increased to 2.7 million tons, from 2.4 million tons in 1995/96. Many farmers switched out of cotton and rice to plant a record area to soybeans. And, with near ideal weather conditions that have boosted yields, production is at an alltime high for Paraguay. Nearly two-thirds of the production (1.75 million tons) will be exported, ranking Paraguay just behind Argentina as an exporter of soybeans. Unlike Brazil and Paraguay, prospective soybean production for Argentina remains unchanged. The provinces of Santa Fe and Cordoba have not been favored by rainfall to the same degree. These are not major soybean producing regions, but their output, coupled with a higher proportion of second-crop soybeans, will limit Argentine yields. The dry spell occurred subsequent to the reproductive stage for the majority of soybean fields, allowing for good (but not record) yield potential. Harvesting will begin in late March. Increasing Argentine crush capacity and the strength of the world protein meal market is raising projected Argentine crush to 10.85 million tons. Fewer supplies available for export and harder competition from Brazil reduce the export forecast 500,000 tons to 2.0 million tons. Given ample product supplies, record volumes of soybean meal (8.5 million tons) and soybean oil (1.8 million tons) are expected to be exported in 1996/97. At the expense of exports, Argentine sunflowerseed crush was raised 500,000 tons to 5.1 million. Foreign protein meal demand has been strong compared to world oil demand. This has suppressed crushing margins in importing countries and favors trade in the products over the seed. Increased Argentine sunflowerseed oil exports were expected, particularly to India and Pakistan, where sunflowerseed oil has been attractively priced compared to palm oil. The increase in sunflowerseed meal consumption in the EU has also deterred imports of mid-protein substitutes such as corn gluten feed. U.S. corn gluten exports, the principal source of EU supplies, are forecast down nearly 10 percent. Given its own small rapeseed harvest, the EU is deficient in indigenous supplies of both vegetable oils and protein meals. So, the EU will import more soybeans in 1996/97--to 14.6 million tons, versus 14.2 million tons in 1995/96. But, total EU soybean meal consumption is also trimmed, cutting forecast EU soybean meal imports to 15.4 million tons. Soybean meal imports are being limited by high prices, cheaper competing feeds, and a larger proportion of supplies derived from crushing of soybean imports. This portends a slowdown for meal exporters, especially U.S. crushers. Production of Chinese oilseeds for 1996/97 is forecast higher, with a quarter-million-ton increase in rapeseed and a half-million-ton improvement for soybeans. The strong internal demand means that the increases will be consumed wholly within China. This will not, however, completely stanch the flow of imports into the country. Although at one time there were indications that China may implement tariff rate quotas, annual restrictions were never announced and imports continued uninterrupted. Current marketing year soybean imports are expected higher, to 1.9 million tons. The United States has already shipped 1.4 million tons of this amount. Chinese soybean meal purchases have slowed, however, shifting the focus onto soybean oil imports. Record Mexican soybean imports of 2.75 million tons are anticipated this year, up 100,000 from last month's forecast. Import commitments from the United States are up one-fifth from a year ago. As a result, Mexican crushers are mostly fulfilling protein feed requirements with larger domestic supplies, which is restraining meal imports. Timely rains across northern India in January helped improve conditions for India's rapeseed. This will result in record high yields for India, although they are still among the world's lowest. The 1996/97 production forecast rises to 6.3 million tons, surpassing the previous year's record of 6.2 million. The bulk of the current rapeseed harvest has just started, enabling crushers to largely satisfy the country's vegetable oil needs until June, when imports will again become necessary. Rapeseed oil will remain India's predominant edible oil this year (1.9 million tons), ahead of peanut oil. And a very good cottonseed output helps counter this season's disappointing Indian soybean harvest. But, despite producing more oilseeds than ever this year, India will have to raise vegetable oil imports again to meet thriving consumer demand. India is poised to eclipse Pakistan and trail only China as the world's largest importer of vegetable oils. This trend has become a political problem, pressing India to find ways to expand domestic oilseed production. CONTINUING ROBUST DOMESTIC SOYBEAN DEMAND SENDS PRICES SOARING There was no letup in soybean crushings in February. An alltime high U.S. soybean crush is expected in 1996/97, at 1,420 million bushels, which is up 10 million from last month's forecast. Projected U.S. exports are shaved back to 900 million bushels, given the comparative strength of domestic versus foreign soybean crush and as escalating prices choke off new sales. Greater supplies out of Brazil also add to pressure on U.S. soybean exports this spring and summer. While U.S. shipments to date are 110 million bushels ahead of a year earlier, outstanding sales are one-fifth less, suggesting an even sharper seasonal drop. Strong demand, both domestic and foreign, has pushed soybean prices up. U.S. farm prices for soybeans in February were nearly 40 cents per bushel above a year earlier. Strong year-to-date prices and higher prices necessary to ration demand for an adequate stock carryout necessitated raising the 1996/97 average price projection from $6.75-$7.25 to $6.90-$7.30 per bushel. Trying to catch up with demand, expanded crushing and meal imports push projected 1996/97 U.S. soybean meal supplies to 33.85 million short tons. Surprisingly strong domestic soybean meal disappearance (up 4 percent year-to-date) lifted the 1996/97 forecast to 27.0 million tons, up 200,000 tons from last month. Ample supplies of corn and profitable livestock prices have moderated the impact of very high soybean meal prices this season. However, the year-to-year increase would still be a modest 1.6 percent. Soybean meal prices rose above $260 per ton in February. U.S. protein meal prices haven't risen this high since 1988/89. That year's price spike was caused by a supply shortfall, unlike this season's demand-driven price. Based on higher demand, the 1996/97 average soybean meal price was forecast up again, to $235-$255 per short ton. But as exports and domestic consumption weaken by summer, monthly meal prices should (barring weather problems) soften somewhat. An increase 1996/97 expected soybean oil production to 15,460 million pounds corresponds to a larger crush. Domestic disappearance of soybean oil has increased a surprisingly robust 6 percent so far in 1996/97. Much of the growth has been in salad and cooking oil consumption, which is up 18 percent (October-January) from a year earlier. USDA raised its forecast for domestic disappearance 150 million pounds this month to 13.8 billion. The additional offtake offset the net increase in supplies, trimming year ending stocks to 1.9 billion pounds. This month's 1996/97 price forecast for soybean oil was raised a quarter-cent, to 23.0-24.5 cents per pound. U.S. imports and exports of canola oil were projected up this month to 1,213 million and 309 million pounds, respectively. A partial explanation for the unusually large trade to date may be an increase in Canadian transshipments. Shipments through western Canada were slowed because of bad winter weather and shortages of locomotives, which caused backlogs at Vancouver ports. To avoid substantial demurrage charges, Canadian exports may have been routed through Washington ports to Japan or back to Canada. The next Oil Crops Outlook is scheduled for 4:00 pm ET Monday, April 14. ****************************************************************************** Information Contacts: Mark Ash Soybeans, Minor Oilseeds, Fats and Oils (202) 219-0712 mash@econ.ag.gov Scott Sanford Peanuts, Cottonseed (202) 219-0835 ssanford@econ.ag.gov ****************************************************************************** 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 5 2,517 2,731 1,405 838 153 2,396 335 1995/96 335 4 2,177 2,516 1,370 851 112 2,333 183 1996/97 1/ 183 4 2,382 2,570 1,420 900 111 2,431 140 ------------------------------------------------------------------------------ 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 1995/96 223 32,514 32,813 26,581 6,002 32,584 229 1996/97 3/ 229 33,521 33,850 27,000 6,650 33,650 200 ------------------------------------------------------------------------------ 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 1,137 15,234 16,466 13,459 992 14,451 2,015 1996/97 3/ 2,015 15,460 17,550 13,800 1,850 15,650 1,900 ------------------------------------------------------------------------------ 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 6.77 106.00 11.35 29.30 5.25 1995/96 September 5.98 101.00 11.00 29.70 5.11 October 6.16 99.00 11.00 28.60 5.11 November 6.40 114.00 10.80 29.50 5.17 December 6.76 116.00 10.70 28.60 5.03 January 6.78 106.00 11.10 29.80 5.27 February 7.00 117.00 11.50 NA 5.18 March 7.00 NA 12.10 NA 5.28 April 7.43 NA 12.70 NA 5.31 May 7.69 NA 13.50 NA 6.03 June 7.41 NA 14.30 NA 5.88 July 7.62 NA 13.70 NA 6.19 August 7.82 118.00 12.70 NA 6.15 1996/97 September 7.79 129.00 12.00 27.70 5.89 October 6.95 123.00 11.70 25.80 6.49 November 6.90 117.00 11.90 25.00 6.50 December 6.91 136.00 11.60 25.60 6.79 January 7.13 132.00 11.80 24.30 6.42 February1 7.37 128.00 11.30 NA 6.34 -------------------------------------------------------- 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 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 October 21.95 24.55 22.80 41.50 22.67 November 21.80 24.28 22.50 39.20 22.96 December 21.60 24.29 22.30 40.75 22.27 January 22.45 25.21 22.65 43.50 23.39 February1 22.40 25.44 23.07 43.88 23.97 ------------------------------------------------------------------------- 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 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 October 248.50 183.25 116.00 170.00 175.00 November 251.50 196.60 105.00 146.13 166.25 December 250.60 224.50 113.35 172.67 171.65 January 249.20 207.20 125.00 221.00 165.00 February1 262.40 184.75 137.50 228.13 156.25 ---------------------------------------------------------------------------- 1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills END_OF_FILE