OIL CROPS OUTLOOK December 12, 1997 December 1997, Issue number OCS-1397 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 20036-5831. This report and the others in this series (COTTON & WOOL OUTLOOK, FEED OUTLOOK, RICE OUTLOOK, and WHEAT OUTLOOK) are only available electronically; there is no published version of these reports. For further information on our products and services, please call the ERS Information Center at (202) 694-5050. ------------------------------------------------------------------------------- World Snatches Up U.S. Soybeans and Soybean Products Like the many holiday shoppers, world soybean buyers have been very busy in the present U.S. soybean market. Inspections of U.S. soybeans for export in October soared to a record 173.6 million bushels, well surpassing the previous high of 152.4 million in November 1996. The price spreads between nearby and deferred Chicago soybean futures have narrowed, signaling a greater risk for storage and encouraging near term physical marketing. Shifting an even greater proportion of the farm marketings to the first half of the marketing year has boosted the season average price forecast to $6.20-$7.00 per bushel. Soybean prices were able to rally last spring because of tighter supplies and emerging drought in Argentina. On the other hand, year to date U.S. export sales of soybeans to Mexico have moderated. Mexico's 1997/98 soybean imports were trimmed from 3.1 million to 3.0 million tons this month, although still up from 2.7 million in 1996/97. The difficulty in acquiring railcars from the United States this fall, including for soybean deliveries, has also dimmed trade prospects. To supply the very brisk export trade in soybean meal, U.S. crushers processed 140.4 million bushels in October, a record volume for any single month. U.S. soybean meal exports have benefited from the sharp decline in South American crushing. Low Brazilian soybean supplies and unfavorable crush margins have cut exportable meal and oil supplies. Brazil's 1997/98 imports and crush were trimmed to 1.6 million and 20.45 million metric tons, respectively. Trade reports indicate U.S. soybean meal exports soared again in November, on the heels of a very robust October volume. The world's dependence on U.S. supplies has kept meal prices relatively firm, currently around $245 per short ton. This price situation will last another 3 months until the 1998 soybean harvest begins in South America. If the expected record planting and decent weather materialize to produce bumper Brazilian and Argentine crops, U.S. soybean and meal prices will likely slide next spring. The market reflects this viewpoint with a price inverse for deferred versus nearby soybean meal futures. Despite early wetness that stalled seeding in southern Brazil, a recent window of clear weather has advanced soybean planting to nearly three-fourths complete by late November. Recent rains in the drier northern regions have also improved planting conditions. Soybean planting progress in Argentina has been near average, with 64 percent planted by December 5. Other than the United States, India is the only major soybean meal exporter in the current picture. The forecast for India's soybean crop was raised this month from 5.0 million tons to a record 5.35 million. This was based on a higher area harvested estimate and the best soybean yields ever seen in India. Most of the increased supply will be crushed. Indian soybean meal prices are about $20 per metric ton less than U.S. gulf quotes, resulting in a significant competitive advantage in several major Asian markets. Forecast 1997/98 Indian soybean meal exports were raised to 3.2 million tons this month. The additional soybean oil produced may lift India's domestic consumption to almost 1 million tons. Despite this month's better yield estimate for 1997/98 Chinese cottonseed production, a shortfall in oilseeds production and unabated consumption have accelerated Chinese imports of soybeans this fall. However, this has also moderated China's import demand for soybean meal so far. Import demand from the rest of Asia for soybean meal will show no growth in 1997/98 because of the region's serious economic downturn. Persistently wet and cold weather has hampered the sunflowerseed harvest in Russia and the Ukraine. Lower yields dropped projected output by all the New Independent States below last year's disappointing level to 5.2 million. Similar shortfalls have occurred in Romania and Hungary. This tightening of supplies may curtail sunflowerseed imports and crushing in the EU and would favor greater processing of soybeans and rapeseed. This has contributed to the surge of soybean exports from the United States to the EU, which are 16 percent ahead of last year's pace. Soybean oil prices have risen steadily since last summer to near 26 cents per pound. The 1997/98 average price was forecast up to 24.0-27.0 cents per pound this month. Even with a tremendous production increase in October, month-ending oil stocks barely budged as already robust domestic consumption and exports expanded. Concerns about tropical oils production in Southeast Asia have also supported the world soybean oil market. Indonesia and Malaysia have been struck by a serious drought. Recent rains have eased the dryness in Java and Sumatra although the seasonal moisture deficit is still substantial. The weather will limit 1997/98 production growth compared to recent years. Indonesian palm oil production is expected to rise modestly, from 5.1 million tons in 1996/97 to 5.36 million this season. Last summer, the Indonesian government dramatically reduced export taxes on crude palm oil. But that regime has been replaced by a newly instituted quota system, where exporters are to limit their exports to one-fourth of their total palm oil production to stabilize domestic prices. Steadily rising domestic consumption of palm oil and lower production and imports from Malaysia are expected to shave Indonesian 1997/98 palm oil exports to 2.15 million tons. This would be virtually unchanged from the 1996/97 export volume. Despite higher fish catches in Peru and Chile, the fish have been smaller than usual. This has reduced the quantity and quality of the fish oil produced in Chile, which would reduce exports and raise domestic inedible consumption. Sharply rising prices will curtail fish oil imports and consumption by the major buyers in Western Europe. The reduction further tightens projected ending stocks for world edible oils to 6.5 million tons. The last time world oil stocks have been this low was in 1995. The next Oil Crops Outlook is scheduled for 4:00 p.m. ET Wednesday, January 14. Because of resource constraints, ERS will publish only 6 issues of this report in 1998. We will continue to publish the Oil Crops Yearbook, which will released in October 1998. This will include both sector data and analysis of critical issues and topics. Check the ERS web site (http://www.econ.ag.gov) for the full schedule and for other publications relating to oil crops. If you have questions or comments about this change in our schedule, please contact Joy Harwood, Chief, Field Crops Branch (202-694-5310; jharwood@econ.ag.gov) or Fred Surls, Outlook Program Coordinator (202)694-5320; fsurls@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 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 6.72 106.00 11.50 29.30 5.19 1996/971 7.35 125.00 11.70 28.50 6.37 1996/97 September 7.79 129.00 12.00 27.70 5.89 October 6.94 123.00 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 7.52 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 6.50 119.00 10.60 25.40 5.81 November1 6.95 124.00 10.70 23.50 5.97 -------------------------------------------------------- 1/ Preliminary. NA = Not available. 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 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 22.90 47.25 25.15 1997/98 October 24.31 28.47 24.51 49.63 25.20 November1 25.73 29.11 26.41 51.00 26.25 --------------------------------------------------------------------------- 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 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 278.30 192.00 89.20 210.00 136.70 1997/98 October 229.30 189.10 96.90 210.00 140.60 November1 245.35 189.06 88.13 210.00 161.25 ------------------------------------------------------------------------------ 1/ Preliminary 2/ Hi-pro Decatur 3/ 41% Memphis 4/ Minneapolis 5/ 50% SE mills END_OF_FILE