OIL CROPS OUTLOOK November 13, 1997 November 1997, OCS-1297 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. This report is only available electronically, except the annual Yearbook issue, which is available as a published document. Call 1-800-999-6779 to order. ----------------------------------------------------------------------------- Notice: This release corrects the November 12,1997 release, which contained several errors in the text and omitted the tables. ------------------------------------------------------------------------------ Short World Supplies Spark U.S. Soybean and Product Exports In late October, heavy snow in the western Corn Belt interrupted farmers' harvesting activities, although most of the affected areas were nearly finished with soybeans. As of November 2, 89 percent of U.S. soybeans had been harvested. The November Crop Production report slightly raised the 1997/98 estimate of U.S. soybean production to 2,736 million bushels and the average yield to 39.2 bushels per acre. Higher yields in several States, including Indiana, Ohio, and South Dakota offset lower yields elsewhere, particularly in Iowa and Nebraska. The 1997/98 marketing year is only 10 weeks old, but with a record harvest, it is already apparent that another record-breaking year is shaping up. Soybean crushing is ahead of all previous rates, and mills should operate near capacity through next winter. The resurgence of soybean oil prices and the drop in the cost of soybeans has enhanced crushing margins, hiking 1997/98 domestic crush to an expected 1,500 million bushels. With very depleted global soybean stocks and attractive foreign crushing margins, export demand this fall has been very brisk. Like the U.S. industry, many importers drew down soybean inventories last summer, waiting until the less costly new U.S. crop was available before replenishing stocks. But further waiting is not an option, so the pace of exports from the United States has accelerated. As of October 30, U.S. export shipments (189 million bushels) were 40 percent ahead of last year's rapid pace, and outstanding export sales of soybeans (298 million) were 7 percent higher. U.S. 1997/98 soybean exports are forecast to reach 980 million bushels, an all-time high. Nearly half of the current gain in 1997/98 export commitments (shipments plus outstanding sales) is due to greater demand from European Union (EU) countries. U.S. export commitments to the EU were 34 percent larger than a year ago. With the current rally in soybean oil prices, lucrative EU crushing margins have developed. EU 1997/98 imports from all sources of 15.5 million metric tons were projected, up 450,000 tons from last month. China is the other major force currently driving world demand for soybeans. To date, U.S. soybean shipments to China are 626 percent above a year ago. Since China will have large deficits in both protein meal and vegetable oils, it may slightly emphasize more imports of soybeans versus meal and oil this year, although trade in all three commodities will remain strong. USDA forecasts 1997/98 Chinese soybean imports to reach 3.0 million metric tons, up from a revised 1996/97 estimate of 2.27 million. Drought on some soybean producing areas of Java reduced the estimate of Indonesian soybean output 50,000 tons to 1.45 million. Despite the reduction in supplies and growing demand, projected Indonesian soybean imports are scaled back to 870,000 tons as the government trading agency moderates its purchases in response to the country's volatile foreign currency swings. The rupiah has been devalued more than one-fourth since last summer, which dramatically raises the cost of imported goods. Indonesia has no crushing facilities, so the supply reduction curtails the growth in food consumption of soybeans. The United States is almost the exclusive foreign supplier of soybeans to Indonesia. Growth in Indonesian soybean meal imports is also expected to flatten in 1997/98, rising to just 1.05 million tons, from 1.03 million last season. Based on projections for greater offtake, a smaller increase in U.S. season ending soybean stocks, to 255 million bushels, is expected. Reflecting a smaller anticipated gap between demand and supply, the 1997/98 average farm price was forecast higher this month, to $5.90-$6.90 per bushel. Soybean Oil Gains Prominence in World Trade Aside from soybean, rapeseed, and sunflowerseed oil, 1997/98 world production of other vegetable oils is expected to stagnate. The growth in world vegetable oil consumption is expected to outstrip the increase in production by about 0.8 million tons this year. Soybean oil will account for 70 percent of the increase in global oil production. World palm oil production is forecast up a modest 2 percent in 1997/98 (compared with a 7-percent increase the previous year). Drought throughout Southeast Asia is likely to hold down production of tropical oils through 1998. On the Indonesian island of Java, cumulative rainfall since June has been 25 percent of normal. World import demand for soybean oil will benefit (as well as the soybeans imported to produce it). As the world's leading producer of soybean oil, the United States stands to expand its presence in international oil trade. U.S. 1997/98 soybean oil exports are expected to rise to 2,400 million pounds, up from 2,050 million last year. Domestic disappearance of soybean oil this year is not projected to repeat last season's robust offtake, but to moderate around 14,350 million pounds. In anticipation of these trends, domestic prices for soybean oil have been on the upswing for several months, climbing to 24.3 cents per pound in October. USDA is forecasting a 1997/98 average price between 23.5 and 26.5 cents per pound. Considering the large increase in soybean supplies, this price increase (from 22.5 cents in 1996/97) is noteworthy. Year ending U.S. oil stocks will barely nudge from the 1.5 billion pound carryover. American Soybean Meal Dominates Current World Trade Compared with 1996/97, soybean meal will forfeit its typically predominant role in determining soybean value, as meal production rebounds and comes into closer balance with world consumption. In October, the average soybean meal price slid nearly $50 per short ton from September to $229. U.S. 1997/98 average soybean meal prices are forecast to drop to $200-$225 per ton, down from $271 last year. This lower price range and an expansion in U.S. livestock production is projected to increase domestic disappearance of soybean meal nearly 4 percent to 28.25 million short tons. Rain delays for the Indian soybean harvest extend the virtual U.S. monopoly of the current international market a little longer. Record South American soybean production next year will sharply curtail U.S. meal exports and reduce U.S. spring soybean planting. But until then, the current scarcity of South American supplies and growing world demand will catapult U.S. 1997/98 soybean meal exports. Only 1979/80 shipments totaling 7.9 million short tons would surpass this year's expected volume of 7.45 million tons. USDA raised its estimate of Chinese soybean meal imports for 1996/97 to 3.75 million metric tons. For 1997/98, surging soybean meal imports are again likely for China, which is projected to import 4.5 million metric tons. However, more temperate growth in soybean meal imports from the EU, the world's largest import market, is anticipated. Yet, total EU meal consumption is rising, so the gradual rise in meal imports is attributed to greater substitution with soybean imports and crush. EU soybean meal imports are projected to increase modestly from 14.8 million tons in 1996/97 to 15.2 million this year. Greater Foreign Soybean Planting Anticipated Comparatively firm U.S. harvest prices have pinched Brazilian crush margins, trimming the forecast of Brazil's 1997/98 soybean imports from 2.0 million to 1.75 million tons. The government's halving of time permitted for re-exporting products under the drawback program to 90 days may also slow imports. Projected soybean exports are similarly reduced, to 7.1 million tons. However, the shortage of current Brazilian supplies sets the stage for another surge in 1998 soybean plantings. Soybean planting is just beginning in Brazil, although dryness in the west-central and wet weather in the major southern States has prevented much progress so far. Brazilian soybean area is forecast to expand to 12.8 million hectares, further escalating 1997/98 production to 29.0 million tons. These additional supplies will permit Brazil to replenish stocks and improve the outlook for the crushing industry, which is projected to expand from 20.1 million tons in 1996/97 to 20.6 million this season. Much of the resulting soybean meal (10.9 million tons) will be shipped abroad. Given a small 1997 soybean harvest of 11.2 million tons, the current supply situation in Argentina is just as tight as in Brazil. Argentine producers are expected to raise harvested soybean area to 6.6 million hectares, largely at the expense of wheat and corn area. The area expansion would culminate in a record soybean output of 14.5 million tons. Argentine producers have already planted around one-third of the intended sunflower area, and soybean planting will follow as soon as soils dry from recent rains. In Paraguay, favorable prices and declining production costs are boosting relative returns of soybeans. Soybean plantings are projected to expand to 1.3 million hectares in Paraguay, raising production to 2.8 million tons. This would increase Paraguay's 1997/98 exports to 1.75 million tons, exceeding the 1.5 million tons forecast to be exported by Argentina. The next Oil Crops Outlook is scheduled for 4:00 p.m. ET Friday, December 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 residual stocks ------------------------------------------------------------------------------ -------------------------- Million bushels--------------------------- 1995/96 335 4 2,177 2,516 1,370 851 112 2,333 183 1996/97 1/ 183 9 2,382 2,575 1,436 882 125 2,443 132 1997/98 2/ 132 4 2,736 2,872 1,500 980 137 2,617 255 ------------------------------------------------------------------------------ 1/ Estimated. 2/ Forecast. Table 2--Soybean meal: U.S. supply and disappearance ------------------------------------------------------------------------------ Supply Disappearance -------------------------------- ------------------------------------ Year begin. Beg. Im- Produc- Total Domestic Ex- Total End. Oct. 1 stocks ports tion ports stocks ------------------------------------------------------------------------------ ---------------------------1,000 short tons-------------------------- 1995/96 223 75 32,527 32,825 26,611 6,002 32,613 212 1996/97 1/ 212 103 34,213 34,528 27,221 7,100 34,321 207 1997/98 2/ 207 125 35,593 35,925 28,250 7,450 35,700 225 ------------------------------------------------------------------------------ 1/ Estimated. 2/ Forecast. Table 3--Soybean oil: U.S. supply and disappearance ------------------------------------------------------------------------------ Supply Disappearance ----------------------------- -------------------------------- Year begin. Beg. Im- Produc- Total Domestic Ex- Total End. Oct. 1 stocks ports tion ports stocks ------------------------------------------------------------------------------ -------------------------- Million pounds--------------------------- 1995/96 1,137 95 15,240 16,472 13,465 992 14,457 2,015 1996/97 1/ 2,015 53 15,744 17,812 14,242 2,050 16,292 1,520 1997/98 2/ 1,520 60 16,725 18,305 14,350 2,400 16,750 1,555 ------------------------------------------------------------------------------ 1/ Estimated. 2/ 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 1995/96 6.77 106.00 11.50 29.30 5.19 1996/97 1/ 7.38 125.00 11.80 28.50 6.21 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 April 8.23 NA 12.40 NA 6.49 May 8.40 NA 12.10 NA 6.50 June 8.16 NA 11.90 NA 6.03 July 7.53 NA 10.70 NA 6.07 August 7.25 112.00 10.70 NA 5.53 1997/98 September 6.72 113.00 11.30 27.10 5.72 October 1/ 6.74 119.00 10.80 25.60 5.36 -------------------------------------------------------- 1/ Preliminary. NA = Not available. Table 5--Vegetable oil prices --------------------------------------------------- Cotton- Sun- Marketing Soybean seed flower Peanut Corn year oil 2/ oil 3/ oi1 4/ oil 5/ oil 6/ --------------------------------------------------- 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 1996/97 1/ 22.50 25.58 22.65 43.70 24.13 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 April 23.17 25.10 23.50 45.00 24.60 May 23.68 25.19 23.20 46.20 24.66 June 22.97 25.01 22.33 47.88 24.82 July 21.89 26.53 21.73 48.06 25.34 August 22.06 27.11 22.02 48.00 25.36 September 22.88 28.03 22.95 47.25 25.15 1997/98 October 1/ 24.31 24.00 49.63 25.20 ------------------------------------------------------------------------- 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 meal 2/ meal 3/ meal 4/ meal 5/ meal 4/ ----------------------------------------------------------- $/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 1996/97 1/ 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 288.60 197.25 124.00 233.75 168.00 May 306.40 193.75 120.00 222.00 188.30 June 287.90 188.44 106.25 235.00 171.25 July 273.60 170.75 84.00 220.00 124.00 August 273.30 176.25 85.00 213.00 126.25 September 278.30 191.25 91.50 210.00 136.00 1997/98 October 1/ 229.30 190.85 96.65 210.00 138.15 ---------------------------------------------------------------------------- 1/ Preliminary 2/ Hi-pro Decatur 3/ 41% Memphis 4/ Minneapolis 5/ 50% SE mills END_OF_FILE