OIL CROPS OUTLOOK January 14, 1998 January 1998, OCS-0198 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. Electronic release only; no published copies are available. ----------------------------------------------------------------------------- USDA's Crop Production--1997 Summary reported a final 1997 U.S. soybean production estimate of 2,727 million bushels, down 9 million from the previous forecast. The change reflects mostly offsetting yield revisions in the major production States, with the largest reductions occurring in Minnesota, Arkansas, Iowa, and Ohio. The final U.S. average soybean yield settled to 39.0 bushels per acre, ranking behind only 1994 as the highest yield ever. By January 1, U.S. soybean exports had already reached half of the revised 1997/98 forecast of 975 million bushels. With the lower revised soybean harvest, the current year carryout stocks projection slips to 250 million bushels. A disappointing pace in corn exports prompted the central Illinois corn price to decline 10 cents in December. Similarly, the December average soybean price fell to $6.85 per bushel from $7.13 in November. Based on a weaker price outlook for soybean meal, the 1997/98 projected average farm price for soybeans is reduced to $6.10-$6.90 per bushel. Despite no change in soybean crush this month, a smaller expected meal extraction rate trimmed soybean meal production 150,000 tons from the December forecast of 35.6 million short tons. Greater competition from South American exporters also pares the forecast for U.S. soybean meal exports to 7.3 million short tons, which would still be a record volume. Although the brisk current pace of sales justifies a year-to-year increase, there should be a dramatic export slowdown by next summer. Most of the present demand originated from the EU, where U.S. export commitments are nearly four times those of a year ago. With a stronger world oil market foreseen in coming months, the current rapid crush pace is expected to continue. Weaker corn prices, dimmer prospective Asian demand, and indications of potentially larger South American supplies have also pressured soybean meal prices. The monthly average price slid $20 per ton in December to $225. The 1997/98 soybean meal price forecast was lowered this month to $195-$220 per ton. The December Hogs and Pigs report indicated that the total swine herd was a robust 7 percent above a year earlier. Last summer's expansion should continue, with fall farrowings 8 percent higher than a year earlier and intended winter farrowings up 9 percent. However, recent hog prices have dropped $15 per hundredweight since last summer, due to the large herd and a less optimistic outlook for pork exports to Asia. Spring farrowings were forecast a modest 3 percent higher than a year earlier, but this pig crop would have less impact on 1997/98 feed consumption. By comparison, this year's expansion in poultry production will remain subdued. Domestic soybean meal disappearance is forecast up 3.4 percent in 1997/98 to 28.3 million short tons. Higher Area Boosts 1997 Domestic Production of Minor Oilseeds With 1997 U.S. sunflowerseed acreage rebounding to 2.9 million acres, sunflowerseed production increased to 3,763 million pounds from 3,587 million in 1996. Despite an increase in harvested area, production of non-oil varieties fell 4 percent because of lower yields. This season's sunflowerseed crush is forecast higher to 2,195 million pounds. The major reason for the surge in crushing is that cumulative 1997/98 exports of sunflower oil are up 145 percent from a year ago. That growth in demand considerably reduces anticipated year-ending sunflowerseed stocks following 2 years of large carryover. A stronger world vegetable oil market this year supports prices of high oil content oilseeds such as sunflowerseed. U.S. sunflowerseed oil exports were projected up this month to 805 million pounds, compared to 709 million in 1996/97. This is mainly because year-to-date exports to Mexico are triple the volume of a year earlier and shipments to North Africa have rebounded. Current monthly sunflower oil stocks have increased from the rapid crushing pace but should tighten by next fall. The spurt in sunflower oil production has caused an unusually small price premium relative to soybean oil. Final 1997/98 U.S. cottonseed production was 7.3 million short tons, slightly higher than the previous estimate and the second largest output ever. With moderate increases in cottonseed crush and feeding, 1997/98 ending stocks are forecast higher to 550,000 tons. Cottonseed prices should ease somewhat from 1996/97 levels. U.S. canola acreage soared in 1997 to 728,000 acres from 366,000 in 1996. Production of canola rose to a record 914 million pounds. U.S. safflowerseed production increased a modest 2 percent in 1997 to 430 million pounds. Excellent Conditions Favor Bumper South American Soybean Crop Soybean planting is complete in Brazil, with indications for a record area of 12.86 million hectares. Timely planting and generous rainshowers throughout South America have been quite favorable for soybean development. Topsoils have become dry in the Center-West states, but subsoil moistures are generally adequate. Based on prospects for better than average yields, Brazil's soybean production was forecast higher to 30 million metric tons. While more abundant U.S. soybean stocks and uncertain foreign demand later this year will not allow duplication of Brazil's massive 1997 exports, a record harvest would lift 1997/98 Brazilian export potential to 7.4 million tons. Anticipated Brazilian soybean crush is raised to 20.75 million tons. The resulting increase in soybean meal production pushes the export forecast to 10.9 million tons. Brazilian soybean oil exports are also forecast higher to 1.35 million tons. Until the expected record 1998 harvest becomes available, Argentina's soybean imports are seen rising to an unprecedentedly high 0.9 million tons. By itself, the United States has already shipped more than a half million tons to Argentina. Greater supplies raise projected 1997/98 Argentine soybean crush to 12.1 million tons. This would permit Argentina to reexport more soybean meal, with 1997/98 exports estimated at 9.35 million tons, up from 8.7 million in 1996/97. Financial Turmoil Clouds Asian Soybean Markets A financial crisis forced Thailand to float its currency, the baht, last July. Thailand's action triggered a wave of devaluations throughout Asia. Currencies in Thailand, Indonesia, and the Philippines have fallen to historical lows against the U.S. dollar. In return for economic and banking reforms, several Southeast Asian countries have accepted multi-billion-dollar loan packages from the International Monetary Fund, which may alleviate the short term debt crises. The baht has fallen about 80 percent against the U.S. dollar in the last year. As a consequence, prices of agricultural imports in dollar terms have risen dramatically. Thailand had already begun reducing tariffs, pulling in a record volume of soybeans and soybean meal. The U.S. market share in 1996/97 was 28 percent for soybeans and 16 percent for meal. To help Thailand compensate for the steep rise in import prices, USDA increased Thailand's credit under the Export Credit Guarantee Program (GSM-102) from $100 million to $300 million. Changes in Thailand's soybean and meal imports will be moderated by a still vital poultry export trade, which has been supported by the devaluation and Hong Kong's wholesale poultry slaughter (to control transmission of the bird flu). Thai soybean imports are projected at 0.6 million tons, although 1997/98 soybean meal imports are forecast down 1 percent to 0.9 million. South Korea is struggling to cope with a serious short term debt problem. Korea's GDP growth in 1998 may drop in half from 1997's 6 percent. It is the world's eighth largest soybean importing country and the sixth largest importer of U.S. soybeans. The United States accounts for 90 percent of South Korea's soybean imports. So far in 1997/98, U.S. soybean exports to Korea are lagging 25 percent from a year earlier. USDA has approved $100 million in GSM-102 credit for South Korea to help purchase soybeans. Total South Korean soybean imports in 1997/98 are projected at 1.4 million metric tons, down from 1.5 million a year earlier. South Korea imports comparatively little soybean meal from the United States, but market access gains under the Uruguay Round agreement may encourage more soybean meal imports in the future. Indonesia's rupiah has lost nearly three-fourths of its value in the last year. USDA increased Indonesia's total GSM-102 allocation from $250 million to $400 million. Indonesia had already dropped the import duty on soybeans to zero last summer. Indonesian soybean imports should be stable as they are used directly as a food staple and are not processed to produce inputs for the meat production sector. Indonesia imported 0.8 million tons of soybeans in 1996/97 (nearly all from the United States) and is expected to import 0.87 million this year. But 1997/98 soybean meal imports may stagnate as swelling feed costs trim meat consumption. India is the major supplier of soybean meal to Indonesia, with a typically much smaller share held by the United States. To restore dollar reserves to service foreign debt, Indonesian exports (including palm oil) need to expand greatly, which raises the domestic prices for these goods. However, the Indonesian government has enacted a 3-month ban, effective January 1, on all exports of crude palm oil. This restriction supercedes the recent export quota that limited palm oil exports to 20 percent of exporters' production. Customary imports of palm oil from Malaysia would only exacerbate the foreign exchange difficulties. While the ban stabilizes palm oil prices for Indonesian consumers, world market prices have become more volatile. Malaysian palm oil prices have risen 9 percent since last summer to $530 per metric ton in December. This narrows its discount under soybean oil and favors more world soybean oil trade. Complicating the economics of export demand is the continuing drought, which adds uncertainty to this year's palm oil production potential. Indonesia is projected to export 2.15 million tons of palm oil in 1997/98, unchanged from last year. Short oil supplies and the obstacles in retaining capital throughout the economy have also encouraged the Indonesian government to drop last year's restrictions on foreign investment in palm plantations. By revising down 1996/97 soybean imports by Malaysia, 1997/98 imports were also forecast down this month, to 0.55 million tons. U.S. 1997/98 shipments of soybeans to Malaysia are 44 percent behind last year's pace. The Malaysian ringgit has declined more than 40 percent since last summer. USDA extended a new credit line of $100 million to help Malaysia purchase U.S. agricultural commodities. On the other hand, the currency devaluation and the restrictions on Indonesian exports have made Malaysian palm oil exports more competitive. Malaysia's 1997/98 palm oil exports are forecast to rise to 7.5 million tons from 7.4 million in 1996/97. While Taiwan's consumption of pork has recovered from last year's outbreak of foot and mouth disease in hogs, the loss of its pork exports to Japan will continue to suppress Taiwanese soybean consumption. The slaughtering of the poultry flocks in Hong Kong may also represent an opportunity for Taiwan to expand chicken production and exports. Taiwan's soybean imports are projected to decline from a revised 1996/97 level of 2.6 million tons to 2.5 million this season. Even the relatively stable Japanese yen has fallen 16 percent from a year ago to the lowest level versus the dollar in 5 years. Rising meat imports will also slightly cut Japanese soybean imports and soybean meal consumption. China has not yet experienced the financial problems of its neighbors, but Chinese economic growth should eventually slow as export competition from the other countries intensifies. Based on reports of better yields, China's 1997 soybean harvest was also revised upward this month to 13.8 million tons. U.S. 1997/98 soybean shipments to China have already surpassed the 1996/97 total. However, with a better 1997 Indian harvest, U.S. soybean meal trade to China has significantly slowed. The next release of the Oil Crops Outlook is scheduled for 3:00 p.m. ET Friday April 10, 1998. Information Contact: Mark Ash Soybeans, minor oilseeds, oils (202) 694-5289 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 2,727 2,863 1,500 975 137 2,617 250 ------------------------------------------------------------------------------ 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/ 212 102 34,209 34,523 27,322 6,994 34,316 207 1997/98 2/ 207 125 35,443 35,925 28,250 7,300 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 15,743 17,811 14,247 2,045 16,291 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--Cottonseed: U.S. supply and disappearance ------------------------------------------------------------------------------ Supply Disappearance -------------------------------- ------------------------------------ Year begin. Beg. Im- Produc- Total Crush Ex- Other Total End. Sept. 1 stocks ports tion ports stocks ------------------------------------------------------------------------------ -------------------------- 1,000 Short tons-------------------------- 1995/96 551 0 6,849 7,399 3,882 114 2,886 6,882 517 1996/97 1/ 183 0 7,144 7,661 3,860 116 3,162 7,138 523 1997/98 2/ 132 0 7,278 7,801 3,900 125 3,226 7,251 550 ------------------------------------------------------------------------------ 1/ Estimated. 2/ Forecast. Table 5--Cottonseed 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 ------------------------------------------------------------------------------ ------------------------------Short tons--------------------------- 1995/96 47 0 1,748 1,795 1,632 111 1,744 51 1996/97 1/ 51 4 1,752 1,807 1,649 132 1,781 26 1997/98 2/ 26 0 1,755 1,781 1,645 95 1,745 36 ------------------------------------------------------------------------------ 1/ Estimated. 2/ Forecast. Table 6--Cottonseed 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 82 0.3 1,229 1,311 996 221 1,217 94 1996/97 1/ 94 0.3 1,216 1,310 1,012 232 1,244 66 1997/98 2/ 66 0.3 1,250 1,317 1,015 220 1,235 82 ------------------------------------------------------------------------------ 1/ Estimated. 2/ Forecast. Table 7--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 7.35 126.00 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 November 6.85 124.00 11.00 23.60 5.71 December1 6.68 122.00 10.50 25.60 5.74 -------------------------------------------------------- 1 Preliminary. NA = Not available. Table 8--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 25.24 1996/971 22.50 25.58 22.64 43.70 24.05 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 November 25.73 29.11 26.41 51.00 26.25 December1 25.08 26.78 26.36 51.25 26.28 ------------------------------------------------------------------------- 1 Preliminary 2 Decatur 3 PBSY Greenwood, MS 4 Minneapolis 5 Southeast mills 6 Chicago Table 9--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 1995/96 235.90 190.74 123.75 202.70 159.00 1996/971 262.00 192.00 110.60 232.00 158.75 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 244.30 191.25 137.00 212.00 176.25 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 248.50 183.25 116.00 170.00 167.50 November 251.50 196.60 105.00 146.13 168.30 December 250.60 224.50 113.35 172.67 170.00 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 November 245.30 189.10 88.10 210.00 161.25 December1 222.50 190.50 100.00 210.00 150.50 ---------------------------------------------------------------------------- 1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills END_OF_FILE