OIL CROPS OUTLOOK August 13, 1999 August 1999, OCS-0899 Approved by the World Agricultural Outlook Board --------------------------------------------------------------------------- OIL CROPS OUTLOOK is issued 11 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. OIL CROPS OUTLOOK is supplemented by an annual OIL CROPS YEARBOOK. The yearbook summary for 1999 will be released on October 22, 1999. Yearbooks are available in print from ERS-NASS Order Desk. For the 1999 issue, call 1-800-999-6779 (703-605-6220) and ask for stock #ERS-OCS-1999, $21. --------------------------------------------------------------------------- Oilseed Yields Wilt Through Heat Wave Soybean crop conditions were generally quite good in early July. Central Illinois spot prices reflected this by falling below $4.00 per bushel. But intense heat in much of the Nation stressed soybean crops in the last half of the month. Temperatures moderated in early August, but soil moisture in most areas has been drawn down substantially. For soybeans, the current period is a pivotal time in the development stage. As of August 8, 91 percent of soybean fields had reached the blooming stage and 65 percent were setting pods. This faster than average pace may have dulled some of the adverse effects from the heat, but additional rainfall will be needed soon. While many of the major western production regions still have adequate subsoil moisture and can achieve average yields, more severe moisture shortages are threatening yield potential in the eastern Corn Belt and the northern Delta regions. Much of the South has experienced dry weather, although it has not been as bad as the extreme drought a year ago. Crops deteriorated quickly from a month ago, when 71 percent of U.S. soybeans were rated in good-to-excellent condition. As of August 8, just 54 percent had that same status, compared to 66 percent a year earlier. This month's forecast, based on conditions observed around August 1, trims the national average soybean yield to 39.2 bushels per acre. Although forecast production of 2,870 million bushels is down 65 million bushels from the July forecast, it would still top last year's record harvest by 113 million bushels. However, the reduction from trend yield would shrink the expected oversupply. An ample cushion carried over from this season, estimated at 385 million bushels, will prevent prices from rising very much, provided weather conditions do not deteriorate further. Ending stocks for 1999/2000 would moderate somewhat to 540 million bushels, versus 590 million in last month's forecast. Consequently, new crop soybean futures prices have rallied about 75 cents in the last several weeks to the highest level since early May. Even so, current prices are still about $1 per bushel less than a year ago. USDA projects 1999/2000 average farm price at $4.10-$4.90 per bushel, below last year's average of $5.00, but above last month's $3.90-$4.70 forecast. Defying the squeeze on profits, U.S. soybean processors crushed record volumes for May and June. Cutbacks in Brazilian crushing can partly explain the buoyant U.S. market, although Argentine processors are also setting volume records. This month, USDA raised its forecast of 1998/99 crush 5 million bushels to 1,585 million. On the other hand, smaller new-crop supplies would shave 10 million bushels from last month's 1999/2000 crush forecast to 1,645 million. Likewise, U.S. soybean exports are projected lower at 915 million bushels, which would be up from 790 million this season. Much of the expansion in crushing is supported by an anticipated increase in exports of soybean meal. Soybean prices would have to rise even more to prevent South American producers from planting less area than this year. In view of the uncertain U.S. weather outlook, greater planting incentives (and more foreign competition) cannot be ruled out. For now, it would appear that lower South American production would favor larger U.S. soybean meal exports. This season's forecast was revised upward to 6.95 million short tons and is projected to increase to 8.0 million in 1999/2000. The crushing gains are also linked to strong growth in domestic soybean meal disappearance. Very hot weather and a contracting hog herd will curb meal consumption in the last quarter, but October-June use was high enough to warrant a larger estimate of 30.6 million short tons for 1998/99. However, the odds of repeating the same 6-percent growth in 1999/2000 are remote. Higher meal prices and a minimal increase in livestock are expected to slow domestic disappearance to just 31.1 million tons next year. A tightening of world meal supplies is anticipated to lift domestic soybean meal prices to $130-$155 per short ton, up from the 1998/99 average of $137.50. The reduction in soybean oil supplies implied by the August crop forecast is offset by a larger expected 1998/99 carryover, leaving the 1999/2000 average price projection unchanged at 15.0- 18.0 cents per pound. Yet, with growth in domestic use only slightly outweighing the decline in soybean oil exports, carryout stocks would still grow to an unprecedentedly large 2,520 million pounds. Cottonseed and Peanut Supplies Expected Higher Southern dryness should also cause below average cotton yields, reducing the 1999/2000 cottonseed production forecast to 6.9 million short tons. Despite this setback, a rebound in acreage and yields from last year's plunge will vastly ease tight supplies of cottonseed. Imports, which extended supplies last season by soaring to an estimated 150,000 tons, would fall back to 10,000 tons in 1999/2000. Cottonseed prices should ease considerably from the 1998/99 average of $112 per ton. Cottonseed exports should again approach 1997/98 levels around 150,000 tons. Greater cottonseed supplies will permit 1999/2000 crushing to rebound to around 3.6 million tons from the previous year's drop to 2.7 million. Lower oil prices would return domestic demand for cottonseed oil to a more normal level of 1,005 million pounds, versus 830 million in 1998/99. Weighed down by soybean oil prices, cottonseed oil prices are expected to plunge as much as 7 cents from the 1998/99 average of 28.75 cents per pound. Peanut crop conditions are basically good, with 65 percent rated good-to-excellent as of August 8. U.S. peanut production in 1999 is forecast to decline just 3 percent to 3,849 million pounds, based on minimal reductions in harvested acreage and yield. Even with robust growth in crush and exports, ending stocks of peanuts are projected to fall modestly from a very large 1,440 million pounds in 1998/99 to 1,350 million in 1999/2000. Smaller U.S. Soybean Crop Alters Expected World Trade Flows A smaller than anticipated U.S. soybean harvest will favor Argentina's 1999/2000 soybean meal exports, supporting the Argentine crush near this season's level and reducing ending stocks. Proportionately greater supplies of soybean meal from Argentina are expected to moderate EU 1999/2000 soybean imports at 16.3 million tons, up from 16.1 million this season. EU soybean meal imports are now forecast down only slightly from 1998/99 to 20.0 million tons. Sunflowerseed production within the EU is forecast to the smallest since 1985 because of declining area and a drought that may slash Spanish output nearly in half. While soybean meal demand in western Europe continues to surge, the lag in Chinese buying persists. Forecast imports by China for this year were revised lower to 1.85 million tons, and 1999/2000 imports are projected to stagnate at the same level. Trimming China's 1999/2000 domestic rapeseed production to 9.7 million tons means a record harvest is no longer expected, yet it would be up 17 percent from last year. Combined with massive rapeseed imports, China has even become an exporter of surplus rapeseed meal production. In addition, with historically low cotton area, Chinese cottonseed output is projected to fall to 7.25 million tons. Crushing for both these oilseeds was forecast lower, reducing domestic supplies of protein meal and edible oil. Brisk Indian Imports Counter Sluggish Chinese Vegetable Oil Imports Global vegetable oil prices have firmed with declining prospects for U.S. oilseeds. But before the most recent escalation in prices, cheap vegetable oils had stimulated consumption in India. Record June imports swelled the forecasts for India's 1998/99 imports of palm oil, soybean oil, and sunflowerseed oil to 2.2 million, 0.8 million, and 0.5 million tons, respectively. Total vegetable oil imports would be nearly double the 1997/98 volume. With a general election beginning in September, Indian government officials have resisted appeals to impose price-supporting import controls. At least for this year, India has supplanted China as the world's largest importer of vegetable oils. Internal vegetable oil stocks should accumulate, so 1999/2000 imports are expected to moderate. After months of relative inactivity, Chinese oil imports may soon accelerate. Now that domestic oilseed supplies have waned, the government has distributed long delayed 1999 import quotas for vegetable oil. However, an emphasis on increasing domestic oil output by crushing oilseed imports has limited the oils quota to a less-than-expected 1.2-1.3 million tons, compared to 2 million last year. Some importers have also deferred buying as they wait for global oil prices to bottom out so they can maximize their profit margins. USDA forecasts China's 1998/99 soybean oil imports down to 1.25 million tons, compared to last month's forecast of 1.5 million and 1997/98's 1.65 million. Chinese soybean oil imports are projected modestly higher for 1999/2000 to 1.3 million tons. Greater growth in Chinese palm oil imports is anticipated, rising from 1.4 million tons this year to 1.8 million in 1999/2000. The next release of the Oil Crops Outlook is scheduled at 4:00 p.m. ET Monday, September 13, 1999. The report may be accessed at http://usda.mannlib.cornell.edu/ or via the ERS website at 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@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--------------------------- 1997/98 132 5 2,689 2,826 1,597 870 158 2,626 200 1998/99 2/ 200 6 2,757 2,961 1,585 790 201 2,576 385 1999/00 2/ 385 4 2,870 3,259 1,645 915 159 2,719 540 ------------------------------------------------------------------------------ 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-------------------------- 1997/98 210 56 38,171 38,437 28,889 9,330 38,219 218 1998/99 2/ 218 45 37,537 37,800 30,600 6,950 37,550 250 1999/00 2/ 250 50 39,050 39,350 31,100 8,000 39,100 250 ------------------------------------------------------------------------------ 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--------------------------- 1997/98 1,520 60 18,143 19,724 15,264 3,077 18,341 1,382 1998/99 2/ 1,382 73 17,945 19,400 15,350 2,350 17,700 1,700 1999/00 2/ 1,700 65 18,505 20,270 15,750 2,000 17,750 2,520 ------------------------------------------------------------------------------ 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-------------------------- 1997/98 523 96 6,935 7,553 3,885 149 2,957 6,990 563 1998/99 2/ 563 150 5,365 6,078 2,730 50 2,948 5,728 350 1999/00 2/ 350 10 6,907 7,267 3,600 150 3,117 6,867 400 ------------------------------------------------------------------------------ 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--------------------------- 1997/98 26 0 1,767 1,793 1,596 109 1,705 88 1998/99 2/ 88 0 1,235 1,323 1,195 105 1,300 23 1999/00 2/ 23 0 1,620 1,643 1,500 100 1,600 43 ------------------------------------------------------------------------------ 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--------------------------- 1997/98 66 0.1 1,223 1,289 1,003 208 1,211 79 1998/99 2/ 79 38.0 880 997 830 102 932 65 1999/00 2/ 65 10.3 1,150 1,225 1,005 135 1,140 85 ------------------------------------------------------------------------------ 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--------------------------- 1997/98 795 141 3,539 4,475 2,099 544 303 681 3,627 848 1998/99 2/ 848 156 3,963 4,968 2,130 475 324 600 3,528 1,440 1999/00 2/ 1,440 165 3,849 5,454 2,170 805 328 800 4,104 1,350 ------------------------------------------------------------------------------ 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 December 5.37 138.00 10.80 24.00 5.01 January 5.32 139.00 11.40 25.50 5.06 February 4.80 141.00 12.20 NA 5.05 March 4.61 NA 10.70 NA 4.95 April 4.63 NA 9.44 NA 4.94 May 4.51 NA 9.85 NA 4.87 June 4.44 NA 9.52 NA 4.37 July 1/ 4.04 NA 9.09 NA 4.40 -------------------------------------------------------- 1/ Preliminary. NA = Not available. Table 9--Vegetable oil prices --------------------------------------------------- Cotton- Sun- Marketing Soybean seed flower Peanut Corn year oil 2/ oil 3/ oil 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 25.24 1996/97 22.50 25.58 22.64 43.70 24.05 1997/98 25.80 28.85 27.00 49.00 28.94 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 December 23.99 33.40 26.70 44.25 29.88 January 22.88 31.72 23.41 44.00 29.15 February 19.96 28.21 19.86 39.75 26.58 March 18.54 26.27 19.11 34.75 23.01 April 18.78 24.39 19.60 35.20 23.08 May 17.85 24.25 19.90 35.00 22.96 June 16.50 25.19 18.78 37.75 22.95 July 1/ 15.29 24.70 17.08 39.00 22.43 ------------------------------------------------------ 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 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 1995/96 235.90 190.74 123.75 202.70 159.00 1996/97 262.00 192.00 110.60 232.00 158.75 1997/98 185.30 144.00 84.20 209.60 110.00 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 168.55 126.00 88.35 210.00 100.00 July 183.40 145.65 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 December 146.40 119.75 80.90 103.75 102.50 January 138.80 110.60 77.50 105.00 95.00 February 132.30 101.25 73.75 102.50 87.25 March 133.00 106.90 70.00 91.25 83.00 April 134.50 110.90 70.00 94.50 83.00 May 133.20 108.75 70.00 93.75 80.60 June 139.10 114.50 57.00 100.00 80.00 July 1/ 132.75 115.85 62.50 100.00 75.00 ----------------------------------------------------------------------- 1/ Preliminary 2/ Hi-pro Decatur 3/ 41% Memphis 4/ Minneapolis 5/ 50% SE mills END_OF_FILE