OIL CROPS OUTLOOK May 13, 1998 May 1998, OCS-0398 Approved by the World Agricultural Outlook Board ------------------------------------------------------------------------------ OIL CROPS OUTLOOK is issued six times a year by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. Electronic release only; no printed copies are available. ------------------------------------------------------------------------------ Rebound in 1998 Oilseed Production Expected To Pressure Prices World oilseed production for 1998/99 is projected up 2 percent to a record 288.5 million metric tons. Foreign oilseed production is expected to total 202.3 million tons, 3.2 million tons greater than this year's output. Larger rapeseed and sunflowerseed crops account for much of the increase. Spurred by attractive oil prices, farmers in Canada and Europe are seen expanding plantings of both high-oil content oilseeds. Gains in U.S. soybean production are expected to make up 38 percent of the global gain in 1998/99 oilseed production. However, foreign soybean production should decline next year as yields are likely to slip from the high yields produced by very favorable weather in 1997/98. In addition, foreign harvested soybean area should flatten as producers shift to grains and other oilseeds. Total U.S. oilseed output in 1998/99 is projected at 86.2 million metric tons, topping this year's record 84.2 million. Higher production of all oilseeds except cottonseed is expected. U.S. farmers intend to plant a record 72.0 million acres of soybeans this spring, so 1998 soybean production is anticipated to eclipse the record 1997 output. An estimated trend yield of 39.5 bushels per acre would genreate 1998 production of 2.8 billion bushels (76.2 million metric tons), nearly 3 percent larger than last year's bumper harvest. Grain planting in the western and northern parts of the Corn Belt is advancing well, but wet conditions in the eastern part have held back seeding. Cotton planting is lagging throughout the South. New-crop soybean futures have slid recently on ideas that delays in grain planting would continue and consequently add even more soybean acreage. As of May 10, 15 percent of U.S. soybeans had been planted, ahead of the 5-year average of 10 percent. Soil moisture conditions appear favorable for good germination once planted. For other oilseeds, firm topsoils in the Northern Plains have expedited grain seeding and promoted an early start for sunflowers, flax, and canola. Rain and cool temperatures, particularly in Georgia, were delaying peanut planting. As of May 10, 31 percent of peanuts had been planted, compared to the 5-year average of 41 percent. While ample soybean supplies will reduce prices enough to sustain a comparatively brisk export pace, a large South American carryover will curtail U.S. trade through the early months of 1998/99. Current harvest delays in Brazil and Argentina have only accentuated this outcome. USDA projects a small increase in soybean exports for 1998/99 to 925 million bushels. The dynamic domestic crush market will endure next year, as mills process an expected record 1,575 million bushels into meal and oil. Despite increases in domestic and foreign demand, a larger carryin and record output will boost carryout soybean stocks. Year ending stocks would increase to 410 million bushels, the largest since 1986/87. Such abundance should moderate soybean plantings in 1999, so 1998/99 seed demand should decline somewhat. In the absence of weather-related problems in the coming summer, a sharp reduction in the 1998/99 average farm price to $4.75-$5.75 per bushel is projected from $6.45 per bushel this season. Soybean oil production is projected to reach an alltime high of 17.7 billion pounds in 1998/99. However, given low carryin stocks (1,255 million pounds) and modest anticipated growth in domestic and export demand, this volume would be insufficient to rebuild the stocks. It is common for domestic disappearance of soybean oil to plateau following a year of considerable growth. End users may have exaggerated domestic disappearance this year by accumulating oil stocks that would be actually consumed in 1998/99. Carryout supplies are projected to slightly decline, to 1,180 million pounds. Even with renewed growth in global vegetable oils output, steady increases in consumption will keep the supply-demand balance tight. Domestic soybean oil prices will be supported between 27.0 and 30.0 cents per pound. Even at an intense crush rate, soybeans alone do not have a high enough oil content to quickly rebuild world oil supplies. World soybean production rebounded in 1997/98, but oil supplies only grew smaller because of shortfalls by major palm oil producers. An enduring crush for oil market heralds another record supply of soybean meal in 1998/99 and a price that will stay depressed. An outlook for the second-largest outturn of competing protein meals will also maintain price pressure. The average price for soybean meal should remain soft in 1998/99, between $145 and $160 per short ton. Such a price level would support U.S. exports but greater competition from foreign protein meal suppliers should limit export growth to a projected 8.5 million short tons. Lower feed prices would also accelerate 1998/99 U.S. soybean meal consumption by poultry, although consumption by hogs will likely slow from this year's robust pace. Domestic disappearance of soybean meal is forecast to rise from 28.2 million short tons this season to 29.0 million in 1998/99. U.S. 1998/99 Cottonseed Crop Forecast at 6.4 Million Short Tons In its initial forecast of 1998/99 U.S. cottonseed production, USDA sees cottonseed output at 6.4 million short tons, the lowest since the 1993 season. The smaller crop and total supply is forecast to sharply reduce 1998/99 cottonseed crush to 3.65 million tons, other use to 2.875 million, and exports to 100,000 short tons. Estimated to total 250,000 short tons on July 31, 1999, ending stocks of cottonseed next season could fall to their lowest level since the 1986 season. U.S. 1997/98 Cottonseed Crop Revised Downward USDA this month reduced the estimate of 1997/98 U.S. cottonseed production by 343,000 short tons to 6.935 million. Total supply was forecast lower by a similar amount. This smaller supply estimate is consistent with recent industry reports of reduced crushing rates as mills eye tightening stocks and new crop supplies still several months away. All offtake components were forecast lower this month, with 1997/98 mill use seen 25,000 tons below last month's estimate at 3.875 million, other use 219,000 lower to 2.982 million, and exports 50,000 lower to 125,000 tons. Ending stocks on July 31, 1998 were forecast lower to 475,000 short tons. Current Season Soybean Crushing Stays Brisk, Exports Fade Soybean crushing showed surprising strength in April, despite declining margins. Harvest delays in South America have extended the demand for U.S. meal and oil. Brazilian soybean and soybean meal exports during February-March 1998 were down 15 percent from last year and current export registrations are down about one-third. Forecast U.S. crushings for 1997/98 were raised 25 million bushels this month to 1,550 million. On the other hand, U.S. soybean exports have become quite sluggish. New sales plunged in April, with little chance for improvement over the next several months. It is unlikely that U.S. exports this summer will repeat last summer's pace, when a short Argentine harvest allowed U.S. shipments to bounce back. As of April 30, export shipments had reached 792 million bushels, although outstanding sales through August were only 50 million. USDA cut its 1997/98 soybean export forecast to 915 million bushels. The reduction offsets larger domestic use and nudges the 1997/98 ending stocks forecast up to 240 million bushels. Some glitches in the transportation system are also hindering U.S. export prospects. The United States has long dominated Mexican soybean trade, but continuing railcar backups at the border have motivated Mexican importers to substitute some Brazilian soybeans. And, a low water level in the Panama Canal has restricted the maximum draft for ocean vessels. The associated limits on cargo weights is raising per unit freight costs to Asia via the canal, or compelling some shippers to take longer alternate routes. High water levels on the Mississippi River and a strike by barge pilots have complicated grain movements to the Gulf ports. While soybean exports are static, exports of soybean meal and oil are establishing new highs. Higher exports of soybean meal were forecast this month, raising the 1997/98 total to 8.45 million short tons. Soybean oil prices continued their upward march last month, rising to 28.1 cents per pound. The yearly average was forecast higher to 27.25 cents per pound. Conversely, the still active crush pace caused soybean meal prices to drift lower in April, to $162.50 per short ton. The average price of soybean meal for 1997/98 was forecast at $185 per ton. U.S. 1997/98 Peanut Food Use Seen Higher USDA this month raised the 1997/98 U.S. peanut food use estimate by 20 million pounds, from last month, to 2.115 billion pounds, in-shell. If realized, the 1997/98 food use estimate would represent a 4.2-percent rise from last season's use. Peanut use in primary products continues to exhibit strong gains in monthly use versus a year ago. Among major product categories, peanut use in peanut candy for the August-March period is 1.9 percent ahead of a year ago, snack peanut use is up 9.0 percent and peanut butter use is up 6.3 percent. Total use in primary products is 5.9 percent ahead of last season. Also aiding total food use higher is roasting stock use, which is about 10 million pounds ahead of last season's record pace. U.S. peanut crush for 1997/98 is reduced this month by 24 million pounds, in-shell, from last month, to 575 million. If realized, this crush estimate would represent the lowest annual peanut crush since the 1987 season. Even at this lower level, peanut oil production, when combined with large beginning stocks, should be adequate to provide for domestic use near its usual 200 million pound level. Foreign Oilseeds and Vegetable Oil Trade Encounter Adverse Weather Farmers in Argentina are still struggling to complete the sunflowerseed harvest, which was 91 percent percent done by the first week of May. What was once considered a potentially bumper sunflowerseed crop has vanished as yield potential and crop quality have been marred by flooding and excessive moisture. Argentina's 1997/98 output is forecast down 200,000 tons this month, to 5.0 million. All year, the rains have likewise promoted high soybean yields, but now the problem lies in getting this bumper crop out of the ground. Farmers hope to avoid these problems with soybeans, which follow the sunflower harvest, but they have been set back by the same wetness. Current harvest progress has reached 50 percent, compared to 75 percent a year ago. Floods have also damaged Argentina's cotton crop, reducing projected cottonseed output to 580,000 tons. Nearly all cottonseed in Argentina is crushed, so the change accordingly scales back oil and meal production there. In Paraguay, record soybean plantings had been expected to produce a record harvest of 2.9 million tons in 1998. Despite flooding along the Parana River, soybean fields in Paraguay have been relatively unharmed. The excess rain has delayed harvest, however, and reduced USDA's forecast to 2.7 million tons, slightly below the 1997 crop. Paraguay has a negligible domestic market for meal and oil and its larger neighbors have advantages in crushing. So, unprocessed soybean exports (including to Brazilian and Argentine crushers) bring the best returns from the country's output. Paraguayan exports are forecast to total 2.1 million tons, compared to crushings of 0.5 million tons. After many interruptions from rain, Brazilian producers have nearly wrapped up this year's soybean harvest. In May, USDA raised its forecast of Brazilian production to 30.7 million metric tons. The increase was based on an upward revision in area (to 13.0 million hectares) and average yield. In 6 out of the last 7 years (including 1998), Brazil has established a record soybean yield. Generally good weather, adoption of superior management practices, and increasing use of inputs are responsible. With greater supplies, the soybean export forecast for Brazil was raised to 8.25 million tons, just below the prolific 1996/97 volume. Based on official Chinese data, last year's drought did not damage China's peanut production as much as previously thought. The 1997/98 output was raised to 9.6 million tons, up from 8.8 million previously and down from 10.1 million in 1996/97. The quality of this harvest is suspect, however, requiring a greater proportion to be crushed for peanut oil instead of direct human consumption. Malaysian palm oil production was scaled back this month to 8.7 million tons (down from 9.0 million in 1996/97), based on a year-old drought. Monthly oil production has been falling since December. Because of events in Indonesia, Malaysian palm oil exports have been able to increase, but at the cost of very low stocks and rising domestic prices. Malaysia's domestic consumption is expected to show little growth in 1997/98. And while Indonesia lifted its export ban on palm oil in April, it is still a challenge getting the trade flowing again. In early May, riots on Sumatra disrupted shipments between palm plantations and local refineries and ports. Deliveries have resumed in recent days but the volatile situation will create another substantial obstacle for palm oil exporters. The next release of the Oil Crops Outlook is scheduled for 3:00 p.m. ET Monday July 13, 1998. Information Contact: Mark Ash Soybeans, minor oilseeds, oils (202) 694-5289 Scott Sanford Cottonseed, peanuts (202) 694-5309 This report is also available electronically at the ERS website http://www.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--------------------------- 1996/97 183 9 2,382 2,575 1,436 882 125 2,443 132 1997/98 2/ 132 6 2,727 2,865 1,550 915 160 2,625 240 1998/99 2/ 240 6 2,800 3,046 1,575 925 136 2,636 410 ------------------------------------------------------------------------------ 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-------------------------- 1996/97 212 102 34,209 34,523 27,322 6,994 34,316 207 1997/98 2/ 207 60 36,630 36,900 28,200 8,450 36,650 250 1998/99 2/ 250 65 37,435 37,750 29,000 8,500 37,500 250 ------------------------------------------------------------------------------ 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--------------------------- 1996/97 2,015 53 15,743 17,811 14,247 2,045 16,291 1,520 1997/98 2/ 1,520 70 17,365 18,955 14,800 2,900 17,700 1,255 1998/99 2/ 1,255 70 17,705 19,030 14,950 2,900 17,850 1,180 ------------------------------------------------------------------------------ 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-------------------------- 1996/97 517 0 7,144 7,661 3,860 116 3,162 7,138 523 1997/98 2/ 523 0 7,250 7,773 3,875 150 3,248 7,273 500 1998/99 2/ 500 0 6,400 6,900 3,650 100 2,900 6,650 250 ------------------------------------------------------------------------------ 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 ------------------------------------------------------------------------------ -------------------------1,000 Short tons--------------------------- 1996/97 51 4 1,752 1,807 1,649 132 1,781 26 1997/98 2/ 26 0 1,765 1,791 1,610 145 1,755 36 1998/99 2/ 36 0 1,645 1,681 1,530 120 1,650 31 ------------------------------------------------------------------------------ 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--------------------------- 1996/97 94 0.3 1,216 1,310 1,012 232 1,244 66 1997/98 2/ 66 0.3 1,230 1,297 1,005 225 1,230 67 1998/99 2/ 67 0.3 1,170 1,237 965 210 1,175 62 ------------------------------------------------------------------------------ 1/ Estimated. 2/ Forecast. Table 7--Peanuts: U.S. supply and disappearance ------------------------------------------------------------------------------ Supply Disappearance ------------------------- ---------------------------------------- Year begin. Beg. Im- Produc- Total Domest. Crush Seed& Ex- Total End. Oct. 1 stocks ports tion Food resid. ports stocks ------------------------------------------------------------------------------ -------------------------- Million pounds--------------------------- 1996/97 758 127 3,661 4,545 2,029 692 363 666 3,751 795 1997/98 2/ 795 139 3,537 4,470 2,115 575 315 700 3,705 765 1998/99 2/ 765 152 3,755 4,672 2,155 725 316 700 3,897 775 ------------------------------------------------------------------------------ 1/ Estimated. 2/ Forecast. Table 8--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 1996/97 7.35 126.00 11.70 28.10 6.37 1997/981 6.45 120.00 11.35 26.40 5.80 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 December 6.71 122.00 11.00 26.90 5.72 January 6.69 122.00 11.10 28.40 5.86 February 6.57 108.00 11.90 NA 6.27 March 6.40 NA 12.00 NA 6.24 April1 6.22 NA 12.60 NA 6.25 -------------------------------------------------------- 1 Preliminary. NA = Not available. Table 9--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 1996/97 22.50 25.58 22.64 43.70 24.05 1997/981 27.25 30.00 27.50 52.25 28.80 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 December 25.08 26.78 26.36 51.25 26.28 January 25.09 27.69 25.75 51.60 26.04 February 26.51 29.37 25.91 51.00 27.31 March 27.09 30.46 26.51 51.00 28.50 April1 28.10 32.47 28.38 50.00 30.93 ------------------------------------------------------ 1 Preliminary 2 Decatur 3 PBSY Greenwood MS 4 Minneapolis 5 Southeast mills 6 Chicago Table 10--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 1996/97 262.00 192.00 110.60 232.00 158.75 1997/981 185.00 142.00 68.00 145.00 110.00 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 December 222.50 190.50 100.00 210.00 150.50 January 202.85 153.10 90.00 210.00 130.00 February 192.75 139.10 75.87 210.00 121.25 March 174.20 128.70 72.60 210.00 116.25 April1 162.50 118.75 66.75 210.00 105.00 ----------------------------------------------------------------------- 1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills END_OF_FILE