OIL CROPS OUTLOOK May 13, 1997 Approved by the World Agricultural Outlook Board ============================================================================== OIL CROPS OUTLOOK is a monthly report issued electronically by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. No printed copies available. OCS-0597. ============================================================================== Good Outlook for 1997 Soybean Planting To Ease Tight U.S. Market As of May 11, very favorable conditions had pushed soybean planting to 20 percent complete, compared to the preceding 5-year average of 12 percent. Firm (but not short of moisture) soils have advanced soybean planting in Ohio (39 percent complete), Indiana (31 percent), and Illinois (35 percent) to a record pace. This is a stark reversal from last year's late start and bodes well for yields. The opportunity to harvest some soybeans in August (when prices will be very strong) makes early planting quite appealing. Planting conditions are also shaping up favorably in the Southeast. In the Delta, excessive wetness during April hampered corn and cotton planting, which may increase Delta soybean acreage by as much as 250,000 acres over intentions. In the Northern Plains, stronger wheat prices may prompt farmers to plant more grains at the expense of oilseeds. However, saturated soils have kept Northern Plains farmers from much fieldwork this month, and continued delays could result in higher oilseed acreage there. USDA's initial 1997/98 projection starts with planted acreage at 68.8 million, as indicated in the Prospective Plantings report. Harvested acres are projected at 67.5 million, based on a typical proportion between harvested and planted area. The average yield of 38.5 bushels per acre is based on recent trend growth that best reflects the benefits from recent varietal improvements and higher seeding rates. Thus, an alltime high 2.6-billion-bushel soybean crop is projected for 1997/98. This would be 9 percent larger than 1996/97 and 3 percent above the 1994/95 record. Projected world oilseed production for 1997/98 is 273.0 million metric tons (up 6 percent), of which U.S. oilseeds account for 80.8 million tons (up 8 percent). The increase in U.S. soybean production makes up nearly 40 percent of the world's gain in 1997/98 oilseeds production. Foreign oilseed production is expected to climb 5 percent to 192.2 million tons. Such a large increase would quickly ease currently tight stocks. The average soybean farm price is expected to fall to $5.50-$7.00 per bushel. But, dry weather this summer is always possible, and the 125-million-bushel carryover from 1996/97 would not moderate a price surge from that contingency. Once the new U.S. crop arrives this fall, expected tight stocks in South America by September 1 would portend a brisk start to 1997/98 U.S. exports. The transition between fall and summer of 1997 should be radical, as summer quarter shipments are expected to be very slow. USDA forecasts next season's soybean trade at 890 million bushels, just 5 million below this year's considerable shipments. Domestic soybean crush is projected at 1,450 million bushels, up 25 million from this season. Year ending stocks would build to a more comfortable 260 million bushels, more than double the 1996/97 quantity. The rebound in U.S. supplies of soybean meal (up 2.5 percent to 34.8 million short tons) should bring down prices from the current peak. Meal prices are forecast to average $190-$225 per short ton, well below the estimated 1996/97 average of $262. Strong consumption growth in Asia and Latin America will support U.S. protein meal exports, although slower demand from Europe and Japan will shave 1997/98 exports to 6.6 million tons. At home, lower prices and a recovery for livestock populations will nudge U.S. soybean meal disappearance up to 28.0 million tons. U.S. 1997/98 production of vegetable oils is projected to be 8.6 million metric tons, where soybean oil constitutes 85 percent of the total. The spurt in domestic soybean oil disappearance seen this season would revert to more modest growth in 1997/98, rising 3 percent to 18,050 million pounds. U.S. soybean oil exports, projected to rise to 1,900 million pounds, will benefit from continued strength in world consumption and low global oil stocks. Even with much higher U.S. supplies, prices for soybean oil are likely to range between 22.0 and 26.0 cents per pound, little changed from this year. Domestic oil stocks may reach 1,950 million pounds, near levels for the previous 2 years. Drought Curbs South American Soybean Production Still suffering from more than 2 months without rain, Argentine 1996/97 soybean production is forecast at 12.4 million metric tons, down from 13.25 million last month and virtually even with 1995/96 production. Yields are seen at the lowest level since the 1988/89 drought. Unlike Brazil, Argentina's crushing industry will remain fully engaged, processing a record 10.8 million tons. The brunt of the production shortfall will be borne by lower stocks and soybean exports. The 950,000 tons of soybean exports anticipated this year are less than half the 2.1 million tons shipped last season. However, the dry weather has expedited the soybean harvest, with Argentine farmers now 63 percent finished, compared to 22 percent last year. This means Argentine soybean exports will be delivered onto the world market earlier than normal, although the cumulative volume will be much less by next fall. Poor weather also has dropped forecast Argentine sunflowerseed production to 5.2 million tons. The reduced supplies and an expanding domestic crushing industry substantially diminish Argentina's potential to export sunflowerseed to only about 100,000 tons. Argentina has little domestic consumption of the sunflowerseed products, so most must be exported. With adequate domestic oil supplies but a deficit of protein meals, the Netherlands, United Kingdom, and other EU countries have increased imports of sunflower meal from Argentina rather than seed. Projected EU sunflower meal imports from all sources are a record 2.5 million tons this year. The 1996/97 soybean harvest in Brazil is nearly complete. USDA's production estimate dropped from 27.0 to 26.5 million tons this month. Although record soybean crops are being observed in most Brazilian states, a serious drought during pod filling in Rio Grande do Sul has tempered the national average yield. Expected Brazilian soybean exports for 1996/97 were raised to 6.5 million tons. All Brazilian exporters must be registered with the government and obtain export licenses. As of May 2, 6.3 million tons of soybeans had been registered for export with the Secretariat of Foreign Trade, already well above the total 1995/96 volume of 3.5 million tons. Waiting times for vessels loading soybeans at Paranagua have fallen to 6 days (down from 28 days last month) as a wide price inverse has encouraged farmers to quickly market their harvests. Actual soybean shipments to date from Paranagua are more than double a year earlier, while soybean meal exports have lagged as berths have been switched to accommodate the torrent of soybeans. Brazilian 1996/97 soybean oil exports are projected at 1.5 million tons, of which 545,000 tons have been registered. While the elimination of the value added tax on Brazilian exports has vitalized foreign soybean trade, domestic crushing has languished. Brazil's crush is now projected at 20.3 million tons, down from 21.6 million in 1995/96. The brisk export demand is expected to decrease September 30 soybean stocks to no more than 4 million tons, the tightest in many years. Elsewhere in South America, previous 1996/97 soybean production forecasts for Paraguay and Bolivia were reduced to 2.6 million and 1.0 million tons, respectively. However, the revised forecasts would still be record harvests for both countries. Lower supplies would principally affect Paraguay's exports, which are accordingly reduced to 1.65 million tons. Bolivia's domestic crush (565,000 tons) and exports of soybeans (400,000 tons) and meal (352,000 tons) would all slip from previously expected highs. Soybean Imports From Brazil to Extend U.S. 1996/97 Supplies In April, the first-ever shipment of soybeans from Brazil to the United States arrived at the Gulf, with reports of other vessels to follow. These uncommon imports are made possible by a widening price differential between the Gulf and Brazilian ports. USDA raised its forecast of 1996/97 soybean imports to 10 million bushels to account for the trade. This will be a short-lived phenomenon, as it is quite likely that the Brazil will itself become a net importer later this year, when prices should be lower and available supplies to Brazilian crushers have been depleted by the active summer export trade. Although slipping lower each week, U.S. crushing is still comparatively solid. As smaller supplies dim prospects for South American meal exports, foreign demand for U.S. soybean meal will continue to buoy crushing. This year's domestic soybean crush was forecast 5 million bushels higher this month, to 1,425 million. The 1996/97 average farm price for soybeans is forecast at $7.35 per bushel, up from $6.72 in 1995/96. Assuming an October-September crush of 1,420 million bushels, 1996/97 soybean meal production is forecast higher this month to 33.7 million short tons. U.S. exports of soybean meal were expected to rise to 6.75 million tons, from 6.0 million in 1995/96. Despite larger supplies in China, swelling domestic use is raising Chinese soybean meal imports (up to 2.5 million metric tons), which has given a large boost to 1996/97 world trade. Domestic meal disappearance is projected 50,000 tons higher, from the April projection of 27.0 million tons. The basis for this forecast is enduring strength in year-to-date domestic meal disappearance and freeze damage to winter wheat that will likely reduce summer wheat feeding. The 1996/97 soybean meal price is expected to average $262 per short ton, the highest annual average ever. Despite a larger crush, 1996/97 soybean oil production was forecast only 25 million pounds higher because of a modest reduction in the oil extraction rate. This year's large domestic supplies have reduced U.S. imports of soybean oil, now expected down to 50 million pounds. With no change in total supply this month, robust domestic offtake of 13,950 million pounds will shrink 1996/97 carryout oil stocks to 1,800 million pounds. The season average oil price is at 23.5 cents per pound, implying nominally stronger prices through the summer. The 1996/97 forecast for domestic sunflowerseed crush was reduced to 1.57 million hundredweight, as cumulative crush continues to lag a year earlier. Greater nonoil use completely offsets the change, rising to 1.2 million hundredweight. Ample competing exports from Russia, Ukraine, and the recently completed Argentine harvest have made penetration of traditional EU markets very difficult this year for U.S. oil-type sunflowerseed. For sunflower oil, U.S. exports to Mexico are doing fine, but a rebound in domestic oil supplies in the important Middle East, North African, and EU countries have slowed the pace of imports. The 1996/97 export forecast for U.S. sunflower oil was cut to 476 million pounds this month, down nearly one-fourth from last season. The next Oil Crops Outlook is scheduled for release at 4:00 pm ET Friday, June 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--------------------------- 1995/96 335 4 2,177 2,516 1,370 851 112 2,333 183 1996/97 1/ 183 5 2,382 2,576 1,425 895 131 2,451 125 1997/98 1/ 125 5 2,600 2,730 1,450 890 130 2,470 260 ------------------------------------------------------------------------------ 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-------------------------- 1995/96 223 32,527 32,825 26,611 6,002 32,613 212 1996/97 3/ 212 33,663 33,975 27,050 6,750 33,800 175 1997/98 1/ 175 34,475 34,825 28,000 6,600 34,600 225 ------------------------------------------------------------------------------ 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--------------------------- 1995/96 1,137 15,240 16,472 13,465 992 14,457 2,015 1996/97 3/ 2,015 15,485 17,550 13,950 1,800 15,750 1,800 1997/98 3/ 1,800 16,170 18,050 14,200 1,900 16,100 1,950 ------------------------------------------------------------------------------ 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. 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 11.50 29.30 5.25 1996/971 7.35 125.00 11.85 28.50 6.25 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 March 7.97 NA 12.20 NA 6.66 April1 8.03 NA 11.80 NA 6.59 -------------------------------------------------------- 1/ Preliminary. Table 5--Vegetable oil prices --------------------------------------------------- Cotton- Sun- Marketing Soybean seed flower Peanut Corn year oil2 oil3 oil4 oil5 oil6 --------------------------------------------------- Cents/lb. 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 40.30 25.55 1996/971 23.50 25.50 24.00 41.50 24.00 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 23.29 26.18 22.70 44.75 24.38 April1 23.17 25.10 23.38 45.00 24.60 --------------------------------------------------- 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 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 1996/971 262.00 200.00 139.50 232.00 170.00 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 March 280.50 189.10 121.70 225.00 163.30 April 1/ 288.55 198.13 124.00 233.75 168.00 --------------------------------------------------- 1/ Preliminary 2/ Hi-pro Decatur 3/ 41% Memphis 4/ Minneapolis 5/ 50% SE mills END_OF_FILE