OIL CROPS OUTLOOK April 14, 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-0497. ------------------------------------------------------------------------------ BATTERED BY HIGH PRICES, U.S. SOYBEAN DISAPPEARANCE STARTS SLOWDOWN On March 31, the Grain Stocks data indicated that total soybean use in the second quarter exceeded the record offtake established in the first quarter. Second quarter disappearance was 19 percent higher than a year earlier. Soybean crush set a February record at 125.2 million bushels, and exports were the second highest ever for the month. Soybean stocks as of March 1 were 1,056 million bushels, down 767 million and 135 million from December 1 and March 1, 1996, respectively. Based on year to date use data and the stocks report, the 1996/97 expected residual was raised to 54 million bushels this month. Expected use of soybeans for seed, based on large intended plantings this spring, was raised to 77 million bushels. The rapid demand cannot be sustained, however, as U.S. carryover stocks cannot be reduced too much this fall without disrupting the market. To insure a minimally acceptable level of stocks, recent soybean prices already appear to be rationing domestic crush and exports and may also attract imports. Central Illinois cash prices have risen above $8.60 per bushel in early April. The season average farm price was forecast higher at $7.10-$7.50 per bushel this month, up from the March report's $6.90-$7.30. In the last half of March, lower weekly crush and export data indicate that the rationing is underway. Weakening profit margins have forced several crushing plants to halt or slow operations. Even so, U.S. 1996/97 ending stocks of soybeans are forecast down 15 million bushels this month to a very tight 125 million. In coming months, soybean exports should show the greatest percentage decline as most importers turn to South American suppliers. Recent U.S. soybean shipments have been narrowed to just four major destinations: Japan, Taiwan, Netherlands, and Mexico. The upheaval in Taiwan's swine industry is anticipated to curtail U.S. soybean exports to Taiwan for the remainder of the crop year, restraining growth in 1996/97 exports to 895 million bushels. This forecast implies about a 56-percent reduction in March-August exports from September-February. By comparison, 1995/96 exports dropped 34 percent over the same period. Favorable weather has advanced Brazil's soybean harvest well ahead of average and export registrations already exceed total 1995/96 shipments. Despite some interruptions, loadings at the port of Paranagua were at a record high by the end of March. The monthly average price for soybean meal rose to $280 per short ton in March and had surpassed $300 in early April. USDA forecasts a higher marketing year average price of $240-$270 per ton, up from the March forecast of $235-$250. The March 1 hog and pig inventory was down 1 percent from a year earlier. The December-February pig crop, which will reach maturity by this fall, was virtually unchanged from last year. March through May farrowing intentions are also unchanged, delaying an expected rebound in production. However, there are signs of a modest expansion, with a solid increase in the breeding herd from the December report. June through August farrowing intentions are up 2 percent from 1996. But this will not represent a potential increase in soybean meal consumption until the 1997/98 marketing year. The outbreak in foot-and-mouth disease in Taiwan's hog sector will force at least a 2-year ban on its pork exports (because the meat can carry the virus). Japan, the world's largest pork importer and Taiwan's major trading partner, will have to turn to the United States as the principal source to fill the gap. U.S. hog prices have rallied and domestic production will accelerate in response. Consequently, domestic soybean meal consumption will benefit, but at the expense of U.S. soybean exports to Taiwan. Taiwan's imports of soybeans for crush are projected down 200,000 metric tons to 2.4 million tons, reducing soybean meal production and consumption to 1.6 million tons. The outlook for 1996/97 U.S. soybean oil exports appears slightly dimmer this month, dropping to 1,800 million pounds from 1,850 last month. Taiwan's imports of soybean oil will increase to compensate for the domestic supply deficit. But, a more optimistic situation for domestic Chinese oil production may curb further import requirements for U.S. soybean oil. On the other hand, 1996/97 domestic disappearance of soybean oil has been relatively robust, and is projected up to 13,850 million pounds. The oil price forecast reverts to USDA's February forecast of 22.75-24.25 cents per pound. U.S. export shipments of sunflowerseed oil have been very disappointing to date. Through January, 237 million pounds had been exported, compared with 328 million a year earlier. This has been reflected by lackluster prices for sunflower oil. With time running out on the usual marketing season, the 1996/97 oil export forecast was reduced to 520 million pounds, from 628 million last year. The sluggish oil demand is backing up onto the seed crushing pace. Projected crushings were dropped to 1,640 million pounds, 378 million pounds below last season. Seed exports are also lagging, helping sunflowerseed stocks to accumulate. Year ending stocks of sunflowerseed are forecast at 590 million pounds, the largest since 1982/83. Despite ample seed supplies, expected oil production drops to 656 million pounds, the lowest level in 3 years. DROUGHT LIMITS ARGENTINE SOYBEAN YIELDS In Argentina, the soybean harvest has just begun. The status of first crop soybeans, particularly in the province of Buenos Aires, is quite good. Despite recent scattered rains, double cropped soybeans deteriorated in March because of a continuing drought in the provinces of Santa Fe and Cordoba. USDA reduced its forecast of Argentine soybean production from 13.5 million tons to 13.25 million. This would still be a record Argentine harvest, but that is mainly due to a large expected area. National average yields are anticipated to remain below trend because of the dryness and a larger double cropped area, which typically yield less than single crop soybeans. The dip in projected 1996/97 production resulted in lower forecasts for exports (1.9 million tons), crush (10.8 million), and stocks (4.8 million). Imports of soybean meal by China this year was projected up again this month, to 2.3 million tons. And, based on a revision in Chinese data, 1996/97 China cottonseed production was raised 700,000 tons this month to 7.56 million. The larger output is expected to raise Chinese cottonseed crush to 6.2 million tons. Although less than 1995/96, this would boost China's cottonseed oil production this season to 867,000 tons. ATTRACTIVE PRICES TO SWELL 1997 SOYBEAN PLANTING TO 15-YEAR HIGH Responding to comparatively strong soybean prices (versus corn, sorghum, wheat, and cotton), farmers in nearly every State are considering much higher soybean acreage in 1997. According to the March 31 Prospective Plantings report, U.S. farmers intend to plant 68.8 million acres of soybeans. If realized, this would be the largest area planted to soybeans since 1982. Prior to the intentions report, the soybean to corn price ratio was a healthy 2.75, while the ratio of futures prices for November soybeans and December corn was about 2.45. In previous years, these ratios would not portend such a large shift between the competing crops, but the elimination of deficiency payments has reduced the ratio where corn and soybean production have equivalent cash returns. November 1997 soybean futures subsequently tumbled on what could (weather permitting) be an unusually large crop. Last year, many eastern Corn Belt farmers planted soybeans because wetness delayed them from planting corn. This spring, rotational considerations generally supports more corn for this region. Planting successive soybean crops tends to worsen disease problems. Soybean acreage in Indiana and Ohio, which were the only major producing States to indicate a decline from 1996, was down 200,000 acres for each State. With a few exceptions, corn and cotton generally held onto acreage against soybeans. Much of this year's additional soybean acreage appears to be coming at the expense of wheat, sorghum, and reduced fallow. A modest net increase in Conservation Reserve Program acres returning to production may also contribute to higher soybean area this year. A late grain and soybean harvest in 1996, along with much lower wheat prices, prevented as much winter wheat area from being planted. And, if the current wet conditions don't improve in the East Corn Belt and wheat diseases develop, some farmers may find it worthwhile to replant with soybeans this spring. Record soybean planting is expected in 1997 for Iowa, Minnesota, Nebraska, South Dakota, Kansas, North Dakota, and Wisconsin. Many farms in these traditional feed grain States are probably adopting a 50-50 corn-soybean rotation. With the elimination of government payments tied to crop acreage bases, farmers will quickly exploit the yield advantages of a 50-50 rotation versus continuous corn. The westward expansion of hog production into the Great Plains is also increasing local demand and production of soybeans. In the South, the early soil warmup this spring favors more corn planting, although this will probably crowd out more cotton than soybeans. Early planting tends to improve corn yields. But continued wet conditions in the Delta region may induce farmers to plant even more soybeans instead of cotton. Soybeans can be planted later than cotton, which must usually be seeded by the end of April. Some southern farmers may try to capture very high prices this summer by planting early maturing varieties for harvest in August. And where winter wheat is produced, double cropping of soybeans will be quite attractive this year. HIGHER SUNFLOWER, FLAXSEED ACREAGE ANTICIPATED Last year's high grain prices have plummeted while oilseed prices have remained stable. And near record snow depths last winter have greatly increased the probability of spring flooding and late planting in the Northern Plains. These factors are expected to shift acreage from wheat to sunflowers, which have a shorter growing season than wheat. Intended sunflower area in 1997 is 3.1 million acres, up 20 percent from 1996. A record 712,000 acres of confectionery sunflowerseed is anticipated. U.S. flaxseed area is also expected to rebound. Farmers intend to plant 197,000 acres, with area in North Dakota (the leading producer) more than doubling from 1996. ****************************************************************************** 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 ****************************************************************************** The next Oil Crops Outlook is scheduled for 4:00 pm ET Tuesday, May 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 residual 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 5 2,382 2,571 1,420 895 131 2,446 125 ------------------------------------------------------------------------------ 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 32,527 32,825 26,611 6,002 32,613 212 1996/97 3/ 212 33,538 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 15,240 16,472 13,465 992 14,457 2,015 1996/97 3/ 2,015 15,460 17,550 13,850 1,800 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 February 7.38 128.00 12.20 NA 6.30 March1 7.95 NA 11.50 NA 6.28 -------------------------------------------------------- 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 1995/96 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 February 22.41 25.44 23.07 43.88 23.97 March 1 23.29 26.18 22.70 44.75 24.38 --------------------------------------------------- 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 1995/96 235.90 190.74 123.75 202.70 159.05 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 February 262.40 183.75 137.50 228.13 156.25 March1 280.50 189.10 121.70 225.00 163.30 ---------------------------------------------------------------------------- 1/ Preliminary 2/ Hi-pro Decatur 3/ 41% Memphis 4/ Minneapolis 5/ 50% SE mills END_OF_FILE