OIL CROPS OUTLOOK January 13, 1999 January 1999, OCS-0199 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 published copies are available. --------------------------------------------------------------------------- Slower Global Soybean Meal Use, Higher Foreign Exports Stall U.S. Demand USDA's Crop Production--1998 Summary indicated 1998 U.S. soybean production of 2,757 million bushels, down 6 million from the last estimate. An upward yield revision for Iowa mostly offset reductions in harvested acreage and yields elsewhere. The final U.S. average soybean yield settled to 38.9 bushels per acre. Final USDA historical revisions, which are based largely on data from the forthcoming 1997 Census of Agriculture, dropped 1997 soybean acreage harvested 0.5 million acres to 69.1 million. This cut 1997 soybean production 14 million bushels to 2,689 million bushels. Other soybean production and stocks revisions going back to 1992 were relatively minor (see ERS Autofax document numbers 12309, 12312, and 12316). Other than China and Mexico, there are few foreign markets that will import more soybeans this season. For 1998/99, global soybean imports are forecast down 3 percent to 38.9 million metric tons. EU crushers have run down supplies of rapeseed and sunflowerseed, so a short term acceleration in U.S. export sales of soybeans and soybean meal is likely. However, given the comparatively large stocks remaining in South America, U.S. export commitments continue to trail last year's fast pace. This month, USDA reduced its U.S. soybean export forecast to 830 million bushels, which is down 40 million from 1997/98. Soybean crush was at an alltime high in the first quarter (September-November). But, unlike a year ago, the outlook for U.S. crushers is likely to stagnate. USDA trimmed its 1998/99 soybean crush forecast 10 million bushels from last month to 1,595 million, which is now slightly less than the 1997/98 crush. The stark change in the crush market is due to much lower soybean meal prices. Competition from Brazil and Argentina has also picked up from a year ago. Soybean meal has fallen to just 55 percent of the soybean's crush value, compared with a normal average of 65-70 percent. Based on November cash prices for soybeans, meal, and oil, the estimated gross crushing margin fell to $0.50 per bushel, compared with a very attractive $1.40 in November 1997. Lower total soybean demand raises 1998/99 expected ending stocks to 390 million bushels. The U.S. 1998/99 average farm price range was shaved to $5.10-$5.60 per bushel. Every improvement in growing conditions for the new South American crop pressures potential U.S. soybean meal exports. Total U.S. export commitments are down one-third from a year ago. The 1998/99 U.S. export forecast was reduced 0.25 million short tons this month to 8.25 million, down from 9.33 million in 1997/98. USDA's Hogs and Pigs report indicated a December 1 U.S. hog inventory that was up 2 percent from last year, compared with an 11-percent increase in 1997. This current supply of animals will be enough to sustain growth in U.S. soybean meal disappearance from 28.9 million last year to 29.6 million short tons. Despite record slaughter this fall, constrained meatpacking capacity and snowstorms have delayed marketings and increased the percentage of market hogs in the largest weight classes (which consume the most feed per head). But large global meat supplies have sharply cut prices, which will lead to decreased pig production and soybean meal consumption by the summer of 1998/99 and into 1999/2000. Hogs kept for breeding are down 4 percent from a year earlier. Farrowing intentions this winter are down 1 percent and intentions for next spring are 7 percent lower than a year earlier. The cutbacks would weaken soybean meal prices further and likely constrain soybean crushing in 1999/2000. USDA forecasts the 1998/99 average soybean meal price down to $130-$150 per short ton, compared with the December forecast of $135-$155 and the 1997/98 average of $186. Global soybean oil imports for 1998/99 are forecast higher this month, with all of the gain accruing to Argentina and Brazil. With U.S. soybean oil production down 73 million pounds from 1997/98, projected 1998/99 exports remain unchanged this month at 2,700 million pounds. Even this forecast still implies a round of heavy U.S. sales in the next several months. Current domestic disappearance of soybean oil appears firm, edging this season's forecast back up to 15,450 million pounds. The anticipated strengthening of use and softening of output would constrain 1998/99 ending stocks at 1,360 million pounds, slightly below current stocks. This would suggest that the soybean oil price would have to rise from the December average of 24 cents per pound to reach the projected yearly average of 25.0-27.0 cents per pound. U.S. Sunflowerseed and Canola Demand Brisk A major increase U.S. sunflower acreage in 1998, to 3.6 million acres, pushed sunflowerseed production to 5,247 million pounds. This is the third largest U.S. harvest, behind 1979 and 1982. Given the rebound in yields and harvested area, oil-type sunflowerseed production increased 49 percent, while output of non-oil varieties rose 14 percent. Domestic sunflowerseed crushing was slowed this fall because of relatively tight carryover stocks. The Census of Agriculture data reflected this situation with an 86-million-pound downward revision in the 1997 harvest to 3,677 million (see ERS Autofax document numbers 12350 and 12351). But with the influx of new crop production, crushing to date has caught up to last year's rapid pace. This season's U.S. sunflowerseed crush is forecast higher at 2,765 million pounds, compared with 2,338 million in 1997/98. Smaller French and Spanish sunflowerseed crops have swelled imports from Russia and Ukraine. But dry weather produced disappointing 1998 harvests in the latter exporting countries, shrinking supplies available to western European crushers. Consequently, demand for U.S. exports of oil-type sunflowerseed has been robust last fall and this winter. The fast pace (cumulative export inspections are currently 3 times the year ago volume) should continue until the expected bumper Argentine harvest becomes available beginning in March. Total 1998/99 sunflowerseed exports are forecast to rise to 520 million pounds, the largest since 1994/95. Despite robust domestic and foreign demand, 1998/99 year ending sunflowerseed stocks are expected to soar to 565 million pounds from the tight 1997/98 carryout of 202 million. With good Argentine weather, sunflowerseed prices should recede somewhat from the current level of 10.4 cents per pound. Like soybean oil, demand for U.S. sunflower oil exports (particularly by Mexico and India) should be brisk. Current export commitments for sunflower oil are 10 percent higher than a year ago. U.S. exports for 1998/99 are forecast at 935 million pounds, not quite equaling the 1994/95 record of 978 million. U.S. canola acreage surged again in 1998 to 1.1 million acres from a recently revised 671,000 in 1997 (see ERS Autofax document number 12365). Excellent yields also helped increase canola seed output to a record 1,590 million pounds. Rising domestic supplies are reducing U.S. import needs. In addition, Canada's canola seed supplies have been committed to unprecedentedly high exports to China (nearly 1.0 million tons so far). The United States has gained in exports of canola seed to the EU, which moderates the increase in 1998/99 domestic canola crush. Yet, Canadian crushing has been very brisk, and is expected to generate a record volume of canola oil and meal, much of which will be exported to the United States. A depreciated Canadian dollar and relatively tight U.S. vegetable oil supplies will draw in about 1.1 billion pounds of canola oil from Canada in 1998/99. Expected canola meal imports near 1.5 million short tons would contribute to an already ample domestic supply of protein meals and further pressure prices. Rain Boosts South American 1999 Oilseed Output and Export Potential Brazil's government, in defending the value of the currency and protecting foreign investment, allowed domestic short term interest rates to soar last year. Farmers' borrowing costs for the current growing season escalated as a consequence. Because farmers have applied fewer inputs, Brazilian 1999 soybean yields are not expected to equal last year's record. However, improved rainfall in December and early January has calmed earlier concerns about dryness. The timing is especially good as development for much of the crop will soon reach the reproductive stage. While still below Brazil's record 1998 soybean harvest of 31.0 million metric tons, this month's 1999 production forecast was raised 0.5 million to 29.5 million. The increase is anticipated to push Brazilian soybean exports and crush to 8.45 million and 20.7 million tons, respectively. Larger supplies also would lift soybean meal exports to 10.6 million tons, up from 10.3 million in 1997/98. Recent precipitation also benefited Argentine oilseed producers. But soil moisture deficits persist in some areas and more rains will be necessary in January and February to complete crop development. Projected 1999 Argentine soybean output was raised to 17.5 million tons from last month's 17.0-million-ton estimate. Higher Argentine production raises projected soybean crushing to a record 14.7 million tons (October-September), although this would still leave some slack in the capacity utilization rate. All of the increased production of Argentine soybean meal and oil would be exported, boosting foreign trade to 11.6 million and 2.4 million tons, respectively. USDA offset a portion of the South American increase by reducing its estimate of India's 1998 soybean production from 5.7 million tons to 5.5 million tons. Rains during the harvest in October and November in the main growing region of Madhya Pradesh damaged soybean yields. A corresponding reduction in crushing cut projected 1998/99 soybean meal production and exports to 3.8 million and 2.95 million tons, respectively. Given lower soybean oil output and high prices for palm oil, projected Indian soybean oil imports were raised to 0.25 million tons. Cheaper prices for imported soybean meal are supporting global consumption, particularly within the EU. However, the high rates of crushing in the major soybean producing countries will also weaken crush margins in the EU. Thus, EU nations will import more soybean meal in 1998/99 (rising to 17.2 million tons from 16.3 million a year earlier) than soybeans. Soybean Oil Gains at Palm Oil Expense Rising domestic consumption within the major palm oil producing nations is anticipated to absorb production gains and continue drawing down 1998/99 global stocks. Price premiums are deterring palm oil imports in countries where soybean and sunflower oil are competitive, such as the Middle East, North Africa, and South Asia. This is a major impetus for the high soybean crushing rates in Argentina, Brazil, and the United States. Malaysian palm oil production is expected to increase slightly from 8.5 million to 8.8 million tons in 1998/99. Although monsoon rains have ended the drought in Southeast Asia, this year's gains are not based on better yields but on a gradual increase in mature trees. Indonesia will exhibit a similar pattern in palm oil output. Indonesian exports in 1998/99 are expected to modestly rise to 2.45 million tons from 2.3 million in 1997/98. Soon, the Indonesian government is expected to incrementally reduce the 60-percent export tax on crude palm oil, which would free up more supplies for export markets. The next release of the Oil Crops Outlook is scheduled prior to 9:30 a.m. ET Wsday, February 11, 1999. This report is also available electronically at the ERS website http://www.econ.ag.gov Information Contacts: Mark Ash--Soybeans, minor oilseeds oils(202) 694-5289, mash@econ.ag.gov Robert Skinner--Cottonseed, peanuts(202) 694-5313 skinner@eco.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--------------------------- 1992/93 278 2 2,190 2,471 1,279 770 130 2,179 292 1993/94 292 6 1,870 2,168 1,276 589 95 1,959 209 1994/95 209 5 2,515 2,729 1,405 838 151 2,395 335 1995/96 335 4 2,174 2,514 1,370 851 109 2,330 183 1996/97 183 9 2,380 2,573 1,436 882 123 2,441 132 1997/98 132 5 2,689 2,826 1,597 870 158 2,626 200 1998/99 2/ 200 6 2,757 2,963 1,595 830 148 2,573 390 ------------------------------------------------------------------------------ 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 34,211 34,525 27,321 6,994 34,316 210 1997/98 210 56 38,171 38,437 28,889 9,330 38,219 218 1998/99 2/ 218 50 37,807 38,075 29,600 8,250 37,850 225 ------------------------------------------------------------------------------ 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--------------------------- 1996/97 2,015 53 15,752 17,821 14,264 2,037 16,300 1,520 1997/98 1,520 60 18,143 19,724 15,264 3,077 18,341 1,382 1998/99 2/ 1,382 58 18,070 19,510 15,450 2,700 18,150 1,360 ------------------------------------------------------------------------------ 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. Aug. 1 stocks ports tion ports stocks ------------------------------------------------------------------------------ -------------------------- 1,000 Short tons-------------------------- 1996/97 517 20 7,144 7,681 3,860 116 3,182 7,158 523 1997/98 523 96 6,935 7,553 3,885 149 2,957 6,990 563 1998/99 2/ 563 200 5,182 5,945 2,650 75 3,020 5,745 200 ------------------------------------------------------------------------------ 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 26 0 1,767 1,793 1,596 109 1,705 88 1998/99 2/ 88 0 1,195 1,283 1,250 10 1,260 23 ------------------------------------------------------------------------------ 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 66 0.1 1,223 1,289 1,003 208 1,211 79 1998/99 2/ 79 66.4 850 995 850 100 950 45 ------------------------------------------------------------------------------ 1/ Estimated. 2/ Forecast. Table 7--Peanuts: U.S. supply and disappearance ------------------------------------------------------------------------------ Supply Disappearance ------------------------- ---------------------------------------- Year begin. Beg. Im- Produc- Total Dom. 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 1997/98 795 141 3,539 4,475 2,099 544 303 681 3,627 848 1998/99 2/ 848 152 3,931 4,932 2,135 775 321 750 3,982 950 ------------------------------------------------------------------------------ 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 1997/98 6.47 121.00 11.60 28.30 5.81 1997/98 September 6.72 115.00 11.20 29.70 5.73 October 6.49 119.00 10.60 27.90 5.78 November 6.86 124.00 11.10 25.00 5.71 December 6.72 122.00 11.10 26.90 5.72 January 6.69 121.00 11.10 30.70 5.82 February 6.57 107.00 11.80 NA 6.27 March 6.40 NA 12.10 NA 6.26 April 6.26 NA 12.70 NA 6.23 May 6.26 NA 13.80 NA 6.33 June 6.16 NA 14.40 NA 6.17 July 6.14 NA 15.80 NA 6.17 August 5.43 113.00 14.40 NA 5.45 1998/99 September 5.25 113.00 11.40 26.80 5.09 October 5.18 120.00 10.70 26.30 4.86 November 5.40 133.00 10.50 21.50 4.97 December1 5.27 138.00 10.40 21.50 4.90 -------------------------------------------------------- 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 1997/98 25.80 28.85 27.00 49.00 28.94 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 23.21 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 April 28.10 32.47 28.50 50.00 30.93 May 28.28 33.13 31.06 47.20 33.20 June 25.83 30.22 28.40 45.50 32.82 July 24.88 29.40 NA 44.00 31.52 August 23.99 30.11 NA 43.75 29.93 September 25.13 33.26 NA 43.88 29.25 1998/99 October 25.21 33.99 NA 45.40 29.46 November 25.20 34.16 NA 45.00 29.65 December1 23.99 33.57 24.55 44.25 29.88 ------------------------------------------------------ 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 1997/98 185.30 144.40 84.20 209.60 110.00 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 April 162.50 116.25 64.90 210.00 102.50 May 160.00 105.00 66.90 210.00 96.25 June 168.55 129.40 88.35 210.00 100.00 July 183.40 146.65 97.50 210.00 117.50 August 146.25 130.30 85.00 207.50 101.00 September 135.80 115.60 NA 205.00 90.00 1998/99 October 135.70 106.50 50.00 161.00 83.75 November 144.45 107.90 50.00 100.00 92.50 December1 146.45 117.90 63.00 103.75 102.50 ----------------------------------------------------------------------- 1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills. 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