OIL CROPS OUTLOOK December 13, 2000 December 2000, OCS-1200 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. -------------------------------------------------------------------------------- Stronger Foreign Consumption Outlook Rallies U.S. Soybean Meal Prices Central Illinois prices for high-protein soybean meal leaped from an October average of $171.50 per short ton to about $195 in early December. Much of the price rally is associated with changes in foreign soybean demand, particularly in Europe. U.S. exports of soybean meal to Europe were minimal in 1999/2000, and direct trade may increase only marginally this season. But as expanding European needs are mostly filled by South American processors, U.S. meal exporters will likely gain in Asian markets. U.S. soybean meal exports are expected higher to 7.3 million tons from the November forecast of 7.1 million. The U.S. Department of Agriculture (USDA) raised its forecast of the 2000/01 average price to $170-$195 per ton, compared with $160- $180 last month. Current export sales of U.S. soybeans are slightly ahead of last years record pace. Sales to China have been particularly brisk. Soybean sales to the European Union (EU) are accelerating, as soybean meal demand there has suddenly intensified. U.S. soybean exports for 2000/01 are forecast up 25 million bushels from last month to 975 million. Even before the recent surge in soybean meal interest, domestic soybean crushing had a seasonal boost that coincided with deliveries of the newly harvested crop. Crushing rose from 129 million bushels in September to 149 million in October, although the October crush last year was slightly higher. A modest 5- million-bushel increase from last month puts the 2000/01 domestic crush forecast at 1,605 million. Larger total demand reduces the ending stocks forecast 30 million bushels to 320 million. Central Illinois soybean prices ranged $4.90-$5.00 per bushel in early December, up 40-50 cents from just a month earlier. The tightening supply balance is responsible for a higher forecast of the U.S. season-average farm price, from $4.40-$5.00 per bushel last month to $4.50-$5.10. Yet, soybean oil continues to be a drag on the profitability of soybean processing. The November price average of 13.4 cents per pound remains dormant. The acceleration of crushing is exacerbating the surplus of soybean oil because oil demand is not keeping pace. Ending soybean oil stocks for October were 2,063 million pounds, 68 million more than ending September and 447 million more than October 1999. Season ending stocks are expected to increase further to 2,250 million pounds. USDA forecasts a season-average soybean oil price of 13.5-16.0 cents per pound, down from last months forecast of 14.0-17.0 cents. These low soybean oil prices have not yet brought about any export gains. Current export commitments for U.S. soybean oil are down about one-third from last years similarly sluggish pace. No sales have yet been made to China, one of the largest U.S. customers. With expectations for greater soybean crushing by China and Argentina, and larger palm oil exports by Malaysia, the outlook for U.S. soybean oil exports is less encouraging than a month ago. This month, USDA cut the U.S. 2000/01 export forecast for soybean oil from 1,650 million pounds to 1,550 million. European Ban on Meat Meal Feeding Reverberates in World Soybean Meal Market Recent cases of bovine spongiform encephalopathy (popularly known as mad cow disease) have thrown the European feed market into turmoil. The spread of this disease has been linked to the inclusion of meat meal with infected tissues in cattle feed. Scientists believe it is possible that consuming infected beef can transmit a similarly fatal, brain-damaging disease to humans. The new crisis has caused beef sales to collapse. Among the measures taken to limit the diseases spread and restore consumer confidence in the safety of consuming beef, governments in France, Italy, and Greece imposed a temporary ban on use of meat meal in all livestock feeds. Britain and Portugal already have had such a ban for several years. The EU Farm Commission subsequently adopted the ban to cover all EU countries. Exports of EU meat meal have also been prohibited to prevent their inclusion in feeds in Eastern Europe and elsewhere. No cases of the disease have been found to warrant a similar blanket prohibition in the United States. The extension of the ban on feeding meat meal to EU swine and poultry (cattle and sheep have been excluded since 1994) is estimated to reduce meat meal consumption in Europe by 2.5 million metric tons annually. The immediate beneficiary of the meat meal ban is soybean meal. Meat meal has a high protein content (50-55 percent) compared with soybean meal (44-48 percent). For the remainder of the marketing year, at most, 1.35 million tons of soybean meal-equivalent would be needed to completely replace the meat meal used in European feeds. Based on these circumstances, EU soybean meal consumption in 2000/01 would swell 1.2 million tons from the November forecast to 27.9 million. USDA raised its 2000/01 EU soybean import projection 0.9 million tons to 16.7 million, which would be crushed and would increase soybean meal output by 0.7 million tons. EU imports of soybean meal are expected to rise to 20.1 million tons compared with last months forecast of 19.5 million. The EU Commission exempted animal fats (requiring only that they be completely filtered) from the ban in feeds. But despite a lack of evidence that beef tallow can transmit the disease, France and Germany have adopted their own restrictions. Yet if EU beef production falls and no meat meal can be sold, rendering of tallow may also decline sharply. Less tallow (current EU output is about 1.2 million tons) may favor more imports of U.S. tallow and substitutes such as palm stearin. The situation may also tip import preferences to soybeans versus soybean meal, as the former may better compensate for the loss of fat supplies in feed and food applications. With vegetable oil prices so low, even direct feeding of sunflowerseed may make more sense in Europe. Although the EU ban is for 6 months beginning next January 1, many anticipate that it will become permanent. Over the long term, a significant expansion in EU oilseed production is unlikely to help cover the protein meal deficit. Climate limits the feasible area that soybeans can be grown in Europe. In addition, declining oilseed subsidies and the Blair House agreements area limit on EU oilseeds will blunt an expansion of domestic oilseed meal supplies. However, alternative proteins exempted from the feed ban (such as fishmeal) could also gain in EU livestock rations. Domestic production of other intermediate- protein feeds, such as feed peas, beans, and lupins may increase next summer, but not enough to meet the additional demand. The events in Western Europe have set off a chain reaction in other markets. The subtraction of meat meal supplies from Eastern Europe will raise soybean meal demand there, as well. The December forecast of Eastern Europe soybean meal imports (particularly Poland) is expected to be 50,000 tons higher to 2.6 million. But, higher world soybean meal prices are expected to lift crushing margins in China, which has ample crushing capacity of its own. Chinas 2000/01 soybean imports are forecast 300,000 tons higher this month to 7.8 million. A larger domestic meal output would dampen Chinas need for soybean meal imports, which are forecast down 200,000 tons to 0.8 million. Higher Soybean Demand Boosts South American Export Prospects Soybean planting is nearly finished in Brazil, and considerably earlier than last year when dry weather delayed progress. Growing conditions are nearly ideal in Brazil, with another record crop on the horizon. The timing of the events in Europe currently favors U.S. soybean exporters. But when new crop soybean supplies in Argentina and Brazil arrive in a few months, the United States will have to share its new export opportunities. Brazils 2000/01 soybean exports are seen rising to 10.8 million tons from the November forecast of 10.6 million. Similarly, Brazilian soybean meal exports are projected 100,000 tons higher to 10.1 million. Although at this time of year it is late for the price rally to expand Brazilian soybean area any more, additional Argentine planting (currently about half-finished) is still possible. The relative strengthening of the protein market to the oil market has stifled sunflower and encouraged soybean planting in Argentina. Argentine soybean area is forecast up 400,000 hectares this month to 9.7 million, which would boost production from 23.0 million to 23.5 million tons. The larger crop would enable an expansion in Argentine soybean exports to 4.7 million tons. Improved crushing margins would raise soybean meal output and lift Argentine meal exports to 14.4 million tons. Higher soybean area in Paraguay is also expected, raising 2000/01 production (and consequently soybean exports) by 100,000 tons to 3.1 million. World Vegetable Oil Market Remains Soft In contrast to the recent strength of the oilseed meal market, global supplies of vegetable oil continue to swamp demand. World vegetable oil supplies are seen expanding from 92.1 million tons in 1999/2000 to 94.3 million this year. Global output of soybean oil is expected at 25.9 million tons for 2000/01, which would be up 1.1 million tons from the previous year. However, world soybean oil trade is seen slightly weaker from last month at 7.5 million tons. An expansion of Chinas domestic soybean oil production is anticipated to curtail its 2000/01 soybean oil imports to 650,000 tons, down from the November forecast of 750,000. China has not yet gained accession to the World Trade Organization, and further delays may limit issuance of the countrys oil import quotas. World palm oil production is also contributing to the surplus, which is expected to rise 1.3 million tons in 2000/01 to 22.4 million. Malaysian palm oil production is projected higher this month to 11.4 million tons, compared with the previous forecast of 11.1 million. Consequently, exports of Malaysian palm oil are seen rising to 9.35 million tons. In November, India announced higher import tariffs for vegetable oil. The government raised the basic duty (not including a 10- percent surcharge) on crude palm oil for hydrogenation from 15 to 25 percent, while the duty on all other uses rose from 45 to 55 percent. Tariffs for all other crude vegetable oils (including soybean oil) were increased from 25 to 35 percent. The new tariff regime also maintains the bias for crude over refined oils. Refined palm oil tariffs increased from 35 to 65 percent, while other refined oils were raised from 35 to 45 percent. However, low import prices and poor domestic oilseed crops are likely to nullify the impact of higher Indian oil tariffs. Drought in northwest India is expected to cut the 2000/01 rapeseed crop to 4.4 million tons, down 1.1 million from last year. The resulting loss of rapeseed oil supplies would reduce consumption by 240,000 tons. Thus, Indian imports of palm oil and soybean oil are forecast to compensate for rapeseed oil by rising to 3.5 million tons and 780,000 tons, respectively. The next release of the Oil Crops Outlook is scheduled at 4:00 p.m. ET Friday, January 12, 2001. The report may be accessed at the ERS website at http://www.ers.usda.gov or via http://usda.mannlib.cornell.edu/. Information Contacts: Mark Ash--Soybeans, minor oilseeds, oils (202) 694-5289 mash@ers.usda.gov Robert Skinner--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--------------------------- 1998/99 200 3 2,741 2,944 1,590 805 201 2,595 348 1999/00 1/ 348 4 2,654 3,006 1,579 973 166 2,719 288 2000/01 2/ 288 3 2,777 3,068 1,605 975 167 2,747 320 ------------------------------------------------------------------------------ 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-------------------------- 1998/99 218 99 37,792 38,109 30,657 7,122 37,779 330 1999/00 1/ 330 49 37,623 38,003 30,378 7,331 37,710 293 2000/01 2/ 293 65 38,217 38,575 31,000 7,300 38,300 275 ------------------------------------------------------------------------------ 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--------------------------- 1998/99 1,382 82 18,081 19,546 15,655 2,371 18,027 1,520 1999/00 1/ 1,520 83 17,824 19,427 16,055 1,376 17,431 1,995 2000/01 2/ 1,995 80 18,175 20,250 16,450 1,550 18,000 2,250 ------------------------------------------------------------------------------ 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-------------------------- 1998/99 563 207 5,365 6,135 2,719 68 2,955 5,742 393 1999/00 1/ 393 309 6,354 7,056 3,079 198 3,505 6,782 274 2000/01 2/ 274 258 6,512 7,044 3,000 140 3,604 6,744 300 ------------------------------------------------------------------------------ 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--------------------------- 1998/99 88 0 1,232 1,320 1,174 121 1,295 24 1999/00 1/ 24 0 1,396 1,420 1,296 103 1,399 21 2000/01 2/ 21 0 1,350 1,371 1,250 100 1,350 21 ------------------------------------------------------------------------------ 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--------------------------- 1998/99 79 48.2 832 958 772 111 882 76 1999/00 1/ 76 10.0 943 1,029 845 135 980 49 2000/01 2/ 49 8.3 960 1,017 835 130 965 52 ------------------------------------------------------------------------------ 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--------------------------- 1998/99 848 155 3,963 4,967 2,153 460 401 562 3,575 1,392 1999/00 1/ 1,392 178 3,829 5,400 2,233 713 493 727 4,166 1,233 2000/01 2/ 1,233 179 3,513 4,925 2,240 700 396 590 3,925 1,000 ------------------------------------------------------------------------------ 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 1999/00 4.63 89.00 7.53 25.40 3.79 1999/2000 September 4.57 73.00 8.76 27.00 4.00 October 4.48 79.00 6.99 25.50 3.75 November 4.45 94.00 6.87 24.10 3.66 December 4.43 99.00 7.52 21.80 3.61 January 4.62 100.00 7.34 14.90 3.75 February 4.79 115.00 8.72 NA 3.43 March 4.91 NA 8.53 NA 3.70 April 5.00 NA 7.93 NA 3.66 May 5.19 NA 9.63 NA 3.77 June 4.93 NA 8.09 NA 3.64 July 4.53 NA 8.16 NA 3.25 August 4.45 78.00 7.82 NA 3.05 2000/01 September 4.57 93.00 6.34 27.70 3.10 October 4.45 104.00 5.84 26.50 3.17 November 1/ 4.51 108.00 5.72 24.00 3.20 -------------------------------------------------------- 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 19.90 27.32 20.10 39.74 25.30 1999/00 15.60 21.52 16.68 35.39 17.81 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 15.30 21.25 17.60 35.40 21.68 January 15.63 21.98 17.91 33.00 20.81 February 15.09 22.65 16.85 32.50 20.06 March 16.21 23.70 17.31 31.60 19.28 April 17.52 24.57 18.07 33.00 18.32 May 16.75 22.97 16.93 36.25 16.63 June 15.65 21.54 15.59 36.00 14.57 July 14.70 21.03 14.68 35.63 13.55 August 14.34 20.17 14.64 35.00 13.03 September 14.24 18.52 14.93 34.90 11.85 2000/01 October 13.50 18.16 14.40 34.63 10.52 November 1/ 13.37 17.83 14.25 35.50 10.37 ------------------------------------------------------ 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 84.20 209.60 117.54 1998/99 138.50 109.55 65.20 104.94 84.49 1999/00 167.62 127.43 75.00 108.15 103.42 1999/2000 October 153.57 111.80 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 170.49 130.50 70.20 104.75 92.60 March 175.50 129.38 77.50 110.00 108.75 April 177.45 125.00 78.35 115.00 111.00 May 189.34 123.25 70.20 115.00 101.00 June 177.45 130.63 87.50 119.60 106.25 July 163.38 131.88 87.50 118.00 115.13 August 157.48 130.50 79.00 118.00 106.50 September 174.60 153.12 80.00 118.00 95.67 2000/01 October 171.52 150.00 83.00 118.00 110.00 November 1/ 179.95 141.88 85.00 118.00 113.75 ----------------------------------------------------------------------- 1/ Preliminary 2/ Hi-pro Decatur 3/ 41% Memphis 4/ Minneapolis 5/ 50% SE mills ERS on the World Wide Web Coming soon--A newly designed, newly structured ERS website ERS' newly redesigned and restructured website will provide you with accurate, timely, comprehensive, easy-to-find economic analysis on issues related to agriculture, food, the environment, and rural development. 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