OIL CROPS OUTLOOK December 13, 1999 December 1999, OCS-1299 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. -------------------------------------------------------------------------------- Weak Oil Prices Constrain Domestic Soybean Crushing The U.S. 1999/2000 average farm price for soybeans was forecast down to $4.45-$4.95 per bushel from $4.60-$5.10 last month. The U.S. average farm price dipped to $4.35 per bushel in November, down more than $1.00 from a year earlier. In the Midwest, the current soybean farm price compared to futures prices (the price basis) has strengthened little from normal harvesttime lows. For early December, the Iowa average basis is about 40 cents per bushel under January futures, compared to the 5-year average of 35 cents. Given tight storage capacity, price spreads had generally favored storage of corn over soybeans this season. The depressed cash soybean prices suggest that farmers may be delivering their crops sooner than in previous years. Therefore, a greater weight on fall marketings would tend to reduce the season average farm price. This could occur if farmers have taken loan deficiency payments (LDPs) early and anticipate marginal price improvement on unsold or unhedged soybeans. As of December 8, USDA reports indicated farmers had already taken $1.5 billion worth of LDPs on 1,605 million bushels of soybeans, or 60 percent of the U.S. harvest. Similarly, with local prices substantially below county loan rates, LDPs to date for sunflowerseed, canola, and flaxseed total $68 million, $32 million, and $7 million, respectively. Soybean quality analyses indicate that the protein level is below average this year while the oil content is average, at least. Soybean meal prices increased slightly to $154 per short ton in November and are $10 higher than in November 1998. These factors mean that the proportionately greater value of soybean meal this year will encourage more soybean crushing to obtain the same quantity of protein. Soybean crushing for October, at 150.3 million bushels, was an all-time high, which will likely be the case for November as well. However, comparatively weak soybean oil demand will cause the additional oil produced to end up being stockpiled. Despite the low cost of soybeans and somewhat firmer meal prices, depressed oil prices are still perpetuating narrow crush margins. Several crushing plants have recently announced temporary shutdowns. In the absence of much South American competition, current U.S. export shipments of soybeans have also been brisk, particularly to the European Union and Mexico. However, export demand for soybean products has lagged year-earlier levels. USDA still projects a slight increase in 1999/2000 soybean meal exports, but as of December 2, export commitments were down 20 percent from a year earlier. Current export commitments for soybean oil were off 65 percent from a year ago. Very slow oil sales to China and India, the largest U.S. markets, are largely responsible. Higher U.S. imports and consumption of rapeseed oil are anticipated to trim this season's growth in domestic disappearance of soybean oil to 15,800 million pounds, down 100 million from the November forecast. Assuming no change in forecast production, 1999/2000 year ending stocks of soybean oil would accumulate to 2,115 million pounds. The central Illinois cash price dropped again in November, averaging 15.6 cents per pound and down nearly 40 percent from a year earlier. The 1999/2000 average soybean oil price is projected 0.5 cents per pound lower this month to 15.0-17.5 cents. Ample World Rapeseed Oil Supplies Intensify Competition With Soybean Oil Global rapeseed imports are expected up 7 percent in 1999/2000 to 8.9 million metric tons. Bumper crops in Europe, Canada, and Australia have allowed this to occur, but the principal factor has been a fundamental shift in China's oilseed buying. For 20 years, China has been the world's leading rapeseed crusher, based on its large domestic production. Now, China has also surpassed Japan as the world's largest rapeseed importer. China's 1999/2000 rapeseed imports were forecast 400,000 tons higher this month to 2.8 million, compared to virtually nothing just 2 years earlier. The robust rapeseed crush has allowed China's government to further delay granting new import quotas for soybean oil and palm oil. USDA lowered the forecast of China's 1999/2000 imports of soybean oil (to 850,000 tons from 950,000 in 1998/99) and palm oil (to 1.3 million tons from 1.25 million in 1998/99). Despite adverse Canadian rapeseed planting conditions, subsequent weather favored bumper yields, raising the 1999 harvest to a record 8.8 million tons. While Canada has already sold a large volume of rapeseed to China, large concurrent exports of grain have created difficulties in transporting rapeseed. The shortage of railcars for rapeseed has stifled deliveries from production areas to western ports and complicated overseas shipments. European rapeseed exporters, such as France, stand to gain from Canada's transportation problems. Although Canadian crush margins are not particularly attractive, the backup may divert more supplies into domestic crushing, which is forecast up this month to 3.5 million tons. The additional output of rapeseed oil and meal is then likely to be exported to the United States. U.S. imports of rapeseed oil are expected to rise 100 million pounds to 1.2 billion in 1999/2000. The competitive pressure from imports of Canadian rapeseed products is another factor limiting the expansion of U.S. soybean crushing. The smaller 1999 Brazilian soybean harvest, accelerated marketings, and stronger than anticipated crush have drawn down existing stocks, aiding growth in U.S. soybean exports this fall. This situation should prevail another 3-4 months until Brazil's new crop is harvested. Brazilian soybean planting was reported about 85 percent complete by December 10. Planting progress was somewhat behind the 5-year average because of persistent dry weather. The delays may have trimmed Brazil's corn area and may increase area planted to soybeans, which can still be seeded for another 2 weeks if sufficient rainfall justifies the risk. Dry soils are detrimental for germination, but the most critical factor for determining Brazilian soybean yields is whether the dryness eases in January and February. Recent rains have stabilized soil moisture conditions and subdued Chicago soybean futures prices. The soybean crushing industry has been quite resilient in Brazil. USDA forecasts the 1999/2000 Brazilian crush at 21.1 million tons, up from the previous forecast of 20.8 million. Greater domestic use cuts the volume available for export, so Brazil's 1999/2000 soybean exports were scaled back to 9.2 million tons. Brazil's soybean meal exports are not deteriorating as much as previously anticipated, and estimates were raised for both 1998/99 and 1999/2000. Nonetheless, at 10.1 million tons, Brazil's soybean meal exports are still forecast to weaken this year compared to 1998/99's revised estimate of 10.4 million. Larger supplies are also seen supporting Brazil's 1999/2000 exports of soybean oil at 1.3 million tons. For Bolivia, a lack of credit that rationed input use and continued dryness should limit soybean yields, dropping projected 1999/2000 production 0.1 million tons this month to 0.95 million. Similarly, Argentina is experiencing dry planting conditions this year. Argentine farmers have planted nearly half of the expected soybean area and may expand plantings further on land they were unable to seed to cotton and other crops. However, 1999/2000 yields remain vulnerable to a large percentage of lower-yielding second crop plantings and below normal moisture, leaving the projected Argentine production unchanged at 18.5 million tons. Estimates of Argentine 1998/99 soybean exports were raised slightly to 3.2 million tons. Conversely, Argentine crush for 1998/99 (October-September) was scaled back this month to 17.5 million tons, which mostly offset the increase in the Brazilian soybean crush. With Argentine meal exports to China down by more than half in 1998/99, total Argentine soybean meal exports were trimmed also, to 13.4 million tons. Crush and meal export forecasts for 1999/2000 were unchanged at 17.6 million and 13.9 million tons, respectively. The next release of the Oil Crops Outlook is scheduled at 4:00 p.m. ET Thursday, January 13, 2000. 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 1,597 873 156 2,626 200 1998/99 1/ 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 15,262 3,079 18,341 1,382 1998/99 1/ 1,382 82 18,081 19,546 15,655 2,372 18,027 1,520 1999/00 2/ 1,520 79 18,115 19,715 15,800 1,800 17,700 2,115 ------------------------------------------------------------------------------ 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 1/ 563 207 5,365 6,135 2,719 68 2,955 5,742 393 1999/00 2/ 393 20 6,395 6,808 3,200 70 3,098 6,418 390 ------------------------------------------------------------------------------ 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 1,175 121 1,295 24 1999/00 2/ 24 0 1,440 1,464 1,315 115 1,430 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 48.2 832 958 772 111 882 76 1999/00 2/ 76 9.0 1,025 1,110 925 110 1,035 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 4,967 2,153 460 401 562 3,575 1,392 1999/00 2/ 1,392 169 3,827 5,388 2,141 700 351 800 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 4.93 123.00 10.60 28.40 5.05 1998/99 September 5.25 113.00 11.50 29.90 5.09 October 5.18 120.00 10.80 29.00 4.87 November 5.39 133.00 10.70 24.60 4.97 December 5.37 138.00 11.00 27.20 5.00 January 5.32 139.00 11.40 NA 5.05 February 4.80 141.00 12.00 NA 5.05 March 4.61 NA 10.80 NA 4.94 April 4.63 NA 9.62 NA 4.93 May 4.50 NA 9.80 NA 4.89 June 4.44 NA 9.54 NA 4.38 July 4.19 NA 9.09 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 4.47 89.00 6.77 25.40 3.76 November 1/ 4.35 94.00 7.11 24.20 3.65 -------------------------------------------------------- 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 16.08 20.15 17.78 40.40 21.97 November 1/ 15.63 19.69 17.91 41.00 21.96 ------------------------------------------------------ 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 150.65 111.92 61.25 102.50 80.00 1999/2000 October 153.57 111.83 63.75 98.00 89.38 November 1/ 154.71 112.00 65.00 103.00 114.00 ----------------------------------------------------------------------- 1/ Preliminary 2/ Hi-pro Decatur 3/ 41% Memphis 4/ Minneapolis 5/ 50% SE mills. 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