OIL CROPS OUTLOOK March 13, 2000 March 2000, OCS-0300 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 2000 will be released on October 23, 2000. Yearbooks are available in print from ERS-NASS Order Desk. For the 2000 issue, call 1-800-999-6779 (703-605-6220) and ask for stock #ERS-OCS-2000, $21. -------------------------------------------------------------------------------- Oil Crops Outlook Chinese Purchases Spark U.S. Soybean Exports, But Crushers Feel Squeezed USDA raised its 1999/2000 soybean export forecast to 910 million bushels from the February forecast of 890 million. If realized, this would be the largest U.S. export volume since the 1981/82 record of 929 million bushels. As of March 6, year-to-date U.S. soybean export inspections were 629 million bushels, compared with 552 million a year earlier. In February, Chinese importers bought at least 1 million tons (or 37 million bushels) of U.S. soybeans. Compared with the same date in 1998/99, current U.S. export commitments to China are 49 million bushels greater. U.S. shipments to Taiwan, South Korea, Indonesia, Thailand, and the Philippines have also rebounded. And, with respect to the debate over the trade impact of genetically engineered soybeans, U.S. 1999/2000 export shipments to the EU are 25 million bushels larger than a year ago. The lateness of the South American harvest and slower marketings by South American producers in hopes of higher prices next summer are also helping extend the vigor of U.S. exports this season. However, the anticipated narrowing of carryover stocks of soybeans to 325 million bushels will have a minimal impact on the current season average price forecast (but there may be a greater response in futures prices for the 2000/01 crop). The reason is that probably at least 70 percent of the 1999 soybean crop is already sold. With a normal South American crop reasonably secure, it would now take either a reduction in U.S. soybean plantings this spring or yield-threatening weather next summer to substantially raise prices. Neither of these events is assumed. Although midwestern soil moisture conditions have been below normal so far this year, it will be 2 months before soybean planting even begins in most States. China may make a few more U.S. purchases before South American supplies are available, but the U.S. share is probably almost fulfilled for this season. So, it is unlikely that soybean farm prices would be able rise enough on the unsold portion of the crop to exceed the latest 1999/2000 forecast range of $4.50-$4.90 per bushel. The strength of U.S. soybean exports also reflects a weakness in the exports of soybean meal and soybean oil. Sluggish foreign import demand, especially for oil, has stifled these product prices and caused poor domestic crushing margins. The September 1999-January 2000 soybean crush was 19 million bushels larger than a year earlier, but most of that gain occurred in the first 2 months. Several soybean crushing mills have recently announced an indefinite cessation of operations. Consequently, soybean meal prices have firmed somewhat, rising to a February average of $171 per short ton. This month's increase in the 1999/2000 average price forecast to $150-$170 per ton reflects this crush outlook. Yet, soybean oil prices have continued to sink even further. The February average price fell to 15.1 cents per pound, the lowest since December 1986. With the crushing slowdown, the slide in soybean oil prices may soon bottom out. USDA reduced its 1999/2000 average price forecast in March to 14.5-16.5 cents per pound. Despite the bargain prices, strong export competition and weaker import demand are expected to reduce U.S. soybean oil exports to 1,550 million pounds. To date, 1999/2000 commercial export shipments of soybean oil are down 674 million pounds from a year ago. In most countries, crushing margins for high oil-content oilseeds have been even less profitable than for soybeans. As of March 8, season cumulative Canadian rapeseed crushing has declined 13 percent from a year earlier. U.S. imports of rapeseed oil from Canada are now expected little higher than 1998/99 imports of 1,068 million pounds. In addition, while cottonseed oil has a larger than normal premium relative to soybean oil, the outlook for domestic cottonseed crushing should also moderate. The 1999/2000 forecasts of U.S. cottonseed oil output and disappearance were reduced 30 million and 60 million pounds, respectively, this month. Soybean oil supplies are more than ample to fill the void of these competing oils, so 1999/2000 domestic disappearance of soybean oil was forecast 100 million pounds higher this month to 16,000 million. Record Argentine Soybean Output Predicted Based on indications of a record large soybean area of 8.2 million hectares, USDA projected a record 20.0-million-metric-ton Argentine crop, up from the February forecast of 19.5 million. Although about one-third of the Argentine soybean acreage is double cropped, it does not appear that this will have a big impairment on yields this year. Ample February rains have generated very good moisture conditions in most of the principal producing areas. Despite the growth in domestic oilseed supplies, Argentine oilseed crushers, like most of their foreign counterparts, are finding it difficult to expand output because of weak product prices. Argentine soybean crushing is expected to rise modestly in the October-September season, but the new-crop local marketing year (April 2000-May 2001) volume is seen declining. More Argentine trade will come in the form of unprocessed soybeans, which are forecast to rise to 3.7 million tons, second only to the 1990/91 record. Soybean oil exports are anticipated to increase only modestly to 3.1 million tons in 1999/2000. Given earlier drought fears, most of the Brazilian soybean crop appears to have avoided major yield problems. The soybean crop is ready for harvest in the center-west Brazilian states, but frequent rains have delayed collection. Fields in the more southern states are well into the pod filling stage, and timely February rains were very beneficial for their development. Because of the rains and delayed maturity, farmers have harvested just 6 percent of the Brazilian soybean crop as of March 3. The March forecast of 1999/2000 production remains unchanged from 30.5 million tons. No changes were made to expected Brazilian domestic use and exports. Although several vessels are now waiting at port of Paranagua for the first deliveries of soybeans that usually arrive this time of year, a negligible volume has been exported so far. The delays can only aggravate port congestion when the remainder of the harvest arrives. Chinese Oilseed Demand Accelerating Global soybean imports are projected up almost 7 percent in 1999/2000, to 42.3 million tons. Nearly half of the world's expansion in soybean trade this year is due to China. The latest soybean import projection for China was raised from 4.8 million to 5.0 million tons, which would be 30 percent above its 1998/99 imports. Likewise, global rapeseed imports are nearly-one fourth higher in 1999/2000, with Chinese imports accounting for 1 million out of the 2-million-ton expansion in world trade. Based on recent large sales by Australian exporters, Chinese rapeseed imports were forecast higher this month to 3.2 million tons. The contraction in world trade for soybean meal and soybean oil is also partially related to Chinese trade. Global soybean meal imports are forecast down 2 percent while 1999/2000 soybean oil imports would decline 5 percent. The large recent purchases of soybeans and the impending domestic rapeseed harvest will further curb China's import requirements of these products. Chinese 1999/2000 soybean meal imports are expected to fall to 0.5 million tons (with likely none coming from the United States). Even with the increase in domestically produced soybean meal, Chinese 1999/2000 consumption is expected down 5 percent. Rapeseed meal and fish meal account for nearly all of this year's modest gains in Chinese total protein meal consumption. Prices for protein meal are rising in China, which suggests that domestic oilseed surpluses have been trimmed and feed demand is strengthening. Combined with chronically high Chinese vegetable oil prices relative to world prices, there is a substantial incentive to import oilseeds versus either meal or oil. The shortages prompted China's soybean buying spree in February and signals an expansion in next season's consumption, as well. Similarly, China's soybean oil imports are seen dropping to no more than 725,000 tons this year. For 1999/2000, Chinese consumption of soybean oil is anticipated down 9 percent to 2.8 million tons. Yet, total vegetable oil consumption is forecast 5 percent higher because of offsetting increases of 20 percent and 12 percent for rapeseed oil and palm oil, respectively. Reports from India confirmed the severity of last year's drought on domestic oilseed production. The 1999 soybean harvest was pegged at 5.2 million tons, down 0.3 million from the previous estimate. According to Indian industry members, the shortage of supplies has curtailed crushing to only one-third of capacity. Consequently, projected 1999/2000 crush was reduced and expected soybean meal exports were cut to 2.1 million tons. In February, India's government raised the import tariff on crude palm oil from 16.5 to 38.5 percent (with an exemption for hydrogenated oil producers), following the hike on refined oils adopted earlier this year. Many importers anticipated the higher duties and booked their purchases early. Indian imports (October-January) of palm oil and soybean oil have increased 87 and 30 percent, respectively, from a year ago. The robust import pace, particularly for palm oil, should slow in coming months as new sales are subjected to the higher duty. Yet, the problems of the Indian oilseed sector respecting adverse weather, poor efficiency, and low farm returns make it difficult to ensure adequate domestic oil output. Given a strong consumption response to the low world prices, large Indian oil imports have been unavoidable. The smaller domestic output raised the forecast of Indian soybean oil imports slightly to 788,000 tons. The next release of the Oil Crops Outlook is scheduled at 4:00 p.m. ET Wednesday, April 12, 2000. The report may be accessed at http://usda.mannlib.cornell.edu/ or via the ERS website at http://www.ers.usda.gov. Information Contacts: Mark Ash--Soybeans, minor oilseeds, oils (202) 694-5289 mash@ers.usda.gov Robert Skinner--Cottonseed, peanuts (202) 694-5313 skinner@ers.usda.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 1998/99 200 3 2,741 2,944 1,590 801 205 2,596 348 1999/00 2/ 348 3 2,643 2,994 1,600 910 159 2,669 325 ------------------------------------------------------------------------------ 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 1998/99 218 100 37,792 38,110 30,662 7,117 37,780 330 1999/00 2/ 330 50 38,045 38,425 31,150 7,000 38,150 275 ------------------------------------------------------------------------------ 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 1,382 82 18,081 19,546 15,655 2,372 18,027 1,520 1999/00 2/ 1,520 80 18,080 19,680 16,000 1,550 17,550 2,130 ------------------------------------------------------------------------------ 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 1998/99 563 207 5,365 6,135 2,719 68 2,955 5,742 393 1999/00 2/ 393 100 6,422 6,916 3,100 150 3,241 6,491 425 ------------------------------------------------------------------------------ 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 88 0 1,232 1,320 1,175 121 1,295 24 1999/00 2/ 24 0 1,395 1,464 1,270 115 1,385 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 79 48.2 832 958 772 111 882 76 1999/00 2/ 76 9.0 980 1,065 790 200 990 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 1998/99 848 155 3,963 4,967 2,153 460 401 562 3,575 1,392 1999/00 2/ 1,392 169 3,870 5,431 2,240 700 366 750 4,056 1,375 ------------------------------------------------------------------------------ 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 4.93 129.00 10.60 28.40 5.05 1998/99 September 5.25 120.00 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 4.80 136.00 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 4.45 94.00 6.85 23.90 3.66 December 4.44 99.00 7.08 21.60 3.61 January 4.62 101.00 7.28 14.60 3.75 February 1/ 4.75 108.00 7.42 NA 3.50 -------------------------------------------------------- 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 15.63 19.69 17.91 41.00 21.96 December 15.33 21.25 17.60 35.40 21.68 January 15.56 21.98 17.67 33.00 20.81 February 1/ 15.09 22.65 16.98 32.50 20.06 ------------------------------------------------------ 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 154.70 112.00 65.00 103.00 119.50 December 154.00 124.20 68.10 103.00 105.00 January 163.41 126.88 73.75 104.00 91.75 February 1/ 170.51 131.88 69.00 104.75 90.75 ----------------------------------------------------------------------- 1/ Preliminary 2/ Hi-pro Decatur 3/ 41% Memphis 4/ Minneapolis 5/ 50% SE mills END_OF_FILE