OIL CROPS OUTLOOK November 12, 1999 November 1999, OCS-1199 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 was 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. ------------------------------------------------------------------------------ Oil Smaller Crop, Strengthening Foreign Competition Trim U.S. Soybean Demand The U.S. soybean harvest is virtually complete except for the last double-cropped fields in the South. Dry weather prevailed throughout the United States in September and October, producing very favorable harvest conditions, but a dry summer cut yields. Estimated 1999 U.S. soybean production fell 23 million bushels this month to 2,673 million. Yield reductions for Iowa, Minnesota, Indiana, and Nebraska accounted for most of this month's change, partially offset by upward revisions for Illinois, Missouri, and other States. The national average yield estimate now drops to 36.7 bushels per acre. Low soybean prices and slowing exports from South America have encouraged brisk U.S. export shipments this fall. As of November 4, cumulative soybean exports for the 1999/2000 crop year were 13 percent higher than a year earlier. Recent shipments to the EU and Mexico have been comparatively strong. However, the outlook for future exports may be softening. The smaller U.S. harvest and prospects for larger Brazilian and Argentine production intensify the competition for exports several months from now. Outstanding export sales are 10 percent below a year ago, implying the brisk shipment pace may slow down sooner. USDA reduced its forecast of 1999/2000 soybean exports to 865 million bushels from 880 million in last month's forecast. Prospects for domestic crushers have improved compared to a year ago, but are reduced 20 million bushels from last month's forecast to 1,610 million bushels. Although still historically low, soybean meal prices rose in October to $154 per short ton versus $136 a year earlier. Soybean oil prices have dropped from 25.2 cents per pound in October 1998 to 16.1 cents in October 1999, but soybean meal nearly always forms the major component of crushing value for soybeans. Despite this month's lower soybean supply estimate, the decline in crush and exports edges the 1999/2000 ending stocks forecast up to 395 million bushels. U.S. average soybean prices are forecast lower to $4.60-$5.10 per bushel for 1999/2000. This price range would be well below the $5.26 national loan rate and the lowest since 1986/87. In October, President Clinton signed the agricultural appropriations act for fiscal year 2000. Among the provisions to assist commodity producers was funding of $475 million in payments to oilseed producers, based on their 1997 or 1998 production. U.S. oilseeds production in 1999 totals 83.2 million metric tons, so the payment rate to soybean producers would be about 15 cents per bushel. More general provisions extended the discount of 30 percent on crop insurance premiums and the payment limitation for loan deficiency payments (LDP) and marketing loan gains was raised (for crop year 1999 only) from $75,000 to $150,000 per person. At average LDP rates for soybeans of about 90 cents per bushel, many mid-sized farms might have been affected by the lower payment limit. The act also funds support payments for quota peanuts at $30.50 per ton and $8.75 per ton for additional peanuts (which are produced in excess of the national poundage quota). Demand for Soybean Products To Stagnate in 1999/2000 The modest 0.5-percent rise in global soybean meal output should lead to slightly stronger U.S. prices this year. The 1999/2000 average soybean meal price is expected at $140-$165 per short ton, down $5 from last month's forecast but up from $138.50 last year. Growth in domestic disappearance of soybean meal was projected to slow to 31.0 million tons from 30.6 million in 1998/99. Most of the increase will be in poultry feeding, since the long anticipated contraction in hog production is well underway. The September 1 hogs and pigs inventory was 4 percent below a year earlier. Current slaughter volumes are very high and the trend should continue into next year. Hogs kept for breeding were down 8 percent from a year earlier and June to November intended farrowings were down 4 percent. Current export commitments of soybean meal are trailing year ago levels by nearly one-fifth. U.S. soybean meal exports for 1999/2000 were projected lower this month to 7.4 million tons and would be only 0.2 million higher than 1998/99. Chinese import demand is down substantially and is not likely to strengthen much in coming months. Despite large soybean oil supplies and low prices, prospects for 1999/2000 U.S. soybean oil exports may be limited by potentially greater foreign competition. Current export commitments are down almost 60 percent from a year ago. For 1999/2000, soybean oil exports are forecast down to 1,800 million pounds, which would be off one-fourth from the previous season. South American Soybean Farmers Ready for Planting As the U.S. 1999/2000 harvest is just winding up, Brazilian farmers have begun to plant soybeans. Dry conditions in Brazil's northern states have slowed planting progress, although recent showers will help the conditions. As of November 5, soybean plantings were estimated about 16 percent completed, compared to the 5-year average of 21 percent. Rainfall has been better in southern Brazil, but this is usually the last region to begin planting. The current burden of dollar-denominated farm debts will arrest the long term expansion in Brazilian soybean area. However, lower per hectare production expenses for soybeans will favor soybeans versus corn. Smaller U.S. and Indian crops have buoyed world prices. Soybean prices in local currency have firmed as Brazil's real weakened against the U.S. dollar from 6 months ago, back near levels early this year just after the collapse of the fixed exchange rate policy. Brazilian soybean area is now expected to match last year's 12.9 million hectares. Normal weather is assumed, although the inflation in input costs may curtail yields. These factors are expected to generate a 1999/2000 harvest equaling the 31.0 million metric tons produced last season. In Paraguay, soybean production is also likely to stabilize near the revised 1998/99 level of 3.0 million tons. Brazil's domestic crushing industry has shown more strength than earlier anticipated. Forecasts of 1998/99 and 1999/2000 crush were raised this month to 20.6 million and 20.8 million tons, respectively. The dynamic performance of Brazil's domestic livestock feeding has been the major reason. Conversely, increases in Argentina's production and exports will pare back Brazil's expected soybean meal exports to 9.8 million tons in 1998/99 and 10.0 million in 1999/2000. With the firming of soybean prices, a 14-percent expansion in Argentine wheat area is likely to allow farmers to increase double-cropping of soybeans. Continued weakness of vegetable oil prices will discourage sunflowerseed planting. Argentine soybean area was forecast up to 7.7 million hectares this month, from the October forecast of 7.5 million. Although dry weather has made for less than ideal preplanting conditions, it is too early yet to predict any yield problems. A trend yield would produce 18.5 million tons, up 0.5 million from last month. Based on the robust monthly crush data from Argentina, it was apparent that both the 1997/98 and 1998/99 soybean harvests had been underestimated. USDA revised production estimates of these crops up to 19.5 million and 19.9 million tons, respectively. Higher production would support Argentina's 1999/2000 soybean exports at 2.8 million tons, down slightly from 3.1 million in 1998/99. Argentine soybean crushing for 1998/99 is predicted to reach 17.6 million tons, which would be 36 percent larger than the previous year. However, such growth is not likely to be duplicated this season, and USDA forecasts a leveling off at 17.6 million. Therefore, Argentina's 1999/2000 soybean meal exports are forecast virtually unchanged from 1998/99 at 13.9 million tons. A major constraint on world trade for these soybean meal producers is the dramatic reversal of China's buying patterns. China has shifted toward greater use of domestic oilseed crushing capacity versus imports of protein meal and vegetable oil. Soybean imports surged 31 percent to 3.85 million tons in 1998/99, and USDA projects them to rise to 4.3 million in 1999/2000. Alternatively, Chinese soybean meal imports were estimated down one-third to 1.4 million tons in 1998/99 and only 1.1 million tons are projected for 1999/2000. Greater requirements for vegetable oil than protein meal have also encouraged greater rapeseed use at the expense of soybeans. Rapeseed imports have been very brisk from Canada, Europe, and Australia. Chinese rapeseed imports are now expected to reach 2.4 million tons in 1999/2000, compared to 2.1 million in 1998/99. Without a substantial Chinese import demand, the surplus of South American soybean meal supplies is backing into EU markets at a very favorable price. But with bumper EU rapeseed harvests, margins for EU soybean crushers have been squeezed very tight. As soybean processing drops, EU soybean imports are forecast to decline from 16.1 million tons in 1998/99 to 16.0 million this year. Not only will EU soybean meal consumption fail to repeat its robust 12-percent gain in 1998/99, it may even decline by 1 percent. Therefore, EU soybean meal imports also may shrink, from 20.2 million to 20.0 million tons in 1999/2000. Other markets in Asia and the former Soviet Union are likely to absorb most of the global growth in soybean meal output. But global soybean meal consumption is projected to rise only 1 percent in 1999/2000, compared to nearly 5 percent last season. Later than normal freezing weather allowed most of the Canadian rapeseed crop to reach maturity, which had been in doubt because an excessively wet spring seriously delayed planting in the Canadian prairies. As a consequence, the Canadian harvest is estimated at a record 8.6 million tons. Despite projections for a record volume of rapeseed exports (largely to China), Canadian ending stocks may still accumulate to an historically high level. Ukraine's sunflowerseed production for 1999/2000 is forecast up this month to 2.7 million tons. Compared to last year, area harvested expanded to 2.8 million hectares. Although input application was minimal, somewhat better weather improved 1999 Ukrainian yields. In the mid-1990's, the government of Ukraine liberalized marketing of sunflowerseed. As a result, Ukrainian sunflowerseed exports surged in following years. However, domestic crushing sagged, as the processors were unable to compete effectively against their western European counterparts. To address this greatly underutilized capacity and a shortage of government revenues, officials advocated a 30-percent export tax on sunflowerseed. The International Monetary Fund, which lent Ukraine $2.6 billion in 1998 to cover foreign debt payments, opposed the tax as detrimental to earning much needed foreign exchange from one of the country's largest export products. Nevertheless, effective October 2, the government enacted a new 23-percent tax on sunflowerseed exports. Ukrainian sunflowerseed exports have already stalled, and USDA forecasts 1999/2000 exports to decline more than 40 percent to 0.5 million tons. Conversely, domestic crushing is expected to soar over 60 percent from 1998/99 to 2.1 million tons. Ukrainian exports of sunflowerseed oil (a large proportion of which go to Russia) are forecast to expand 50 percent to 0.3 million tons. But crop rotation needs, lower farm prices, and difficulties obtaining credit should substantially reduce Ukrainian sunflowerseed planting next year. Smaller supplies would again depress crushing if more seed imports are not allowed. Although Russia has itself imposed a 10-percent oilseed export duty, it is an obvious source of imports as its crushing industry is even less competitive. Ukrainian rapeseed area more than doubled in 1999 and should swell again next year as farmers would obtain relatively better returns for this crop, which is not subject to an export tax. The next release of the Oil Crops Outlook is scheduled at 4:00 p.m. ET Monday, December 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 1998/99 200 3 2,741 2,944 1,590 801 205 2,596 348 1999/00 2/ 348 3 2,673 3,024 1,610 865 154 2,629 395 ------------------------------------------------------------------------------ 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 38,176 38,443 28,895 9,329 38,225 218 1998/99 1/ 218 100 37,792 38,110 30,580 7,200 37,780 330 1999/00 2/ 330 50 38,270 38,650 31,000 7,400 38,400 250 ------------------------------------------------------------------------------ 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 19,723 15,264 3,079 18,341 1,382 1998/99 2/ 1,382 83 18,081 19,547 15,600 2,372 17,972 1,526 1999/00 2/ 1,526 79 18,115 19,720 15,900 1,800 17,700 2,020 ------------------------------------------------------------------------------ 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/ 563 207 5,365 6,135 2,719 68 2,955 5,742 393 1999/00 2/ 393 20 6,255 6,668 3,150 70 3,098 6,318 350 ------------------------------------------------------------------------------ 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 1,769 1,795 1,598 109 1,705 88 1998/99 1/ 88 0 1,232 1,320 1,175 120 1,295 24 1999/00 2/ 24 0 1,420 1,444 1,295 115 1,410 34 ------------------------------------------------------------------------------ 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 1,224 1,291 1,004 208 1,212 79 1998/99 1/ 79 37.0 832 948 760 112 872 76 1999/00 2/ 76 7.5 1,010 1,094 909 110 1,019 75 ------------------------------------------------------------------------------ 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 1/ 848 155 3,963 4,968 2,153 460 403 561 3,575 1,392 1999/00 2/ 1,392 169 3,827 5,388 2,175 700 317 800 3,993 1,395 ------------------------------------------------------------------------------ 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 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 4.20 NA 9.16 NA 4.40 August 4.39 70.00 8.28 NA 3.86 1999/2000 September 4.57 72.00 8.41 27.00 4.00 October 1/ 4.49 89.00 7.32 26.00 3.84 -------------------------------------------------------- 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 1998/99 October 25.20 33.99 NA 45.40 29.46 November 25.20 34.16 NA 45.00 29.65 December 24.00 33.40 26.70 44.25 29.88 January 22.90 31.72 23.40 44.00 29.15 February 20.00 28.21 19.90 39.75 26.58 March 19.50 26.27 19.10 34.75 23.01 April 18.80 24.39 19.10 35.20 23.08 May 17.85 24.25 19.90 35.00 22.96 June 16.50 25.19 18.80 37.75 22.95 July 15.30 24.70 17.10 39.00 22.43 August 16.50 21.39 18.75 38.75 22.41 September 16.80 20.22 18.75 38.00 22.08 1999/2000 October 1/ 16.08 20.15 17.78 40.40 21.97 ------------------------------------------------------ 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 1998/99 October 135.70 106.50 50.00 161.00 83.75 November 144.50 107.90 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 82.50 May 133.20 108.75 70.00 93.75 80.60 June 139.10 114.50 57.00 100.00 80.00 July 132.70 115.00 62.50 100.00 75.00 August 141.70 100.65 60.00 105.00 71.25 September 150.65 111.90 61.25 102.50 80.00 1999/2000 October 1/ 153.57 111.40 63.75 98.00 89.40 ----------------------------------------------------------------------- 1/ Preliminary 2/ Hi-pro Decatur 3/ 41% Memphis 4/ Minneapolis 5/ 50% SE mills END_OF_FILE