OIL CROPS OUTLOOK April 11, 2001 April 2001, OCS-0401 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 2001 will be released on October 24, 2001. Yearbooks are available in print from USDA Order Desk. For the 2001 issue, call 1-800-999-6779 (703-605-6220) and ask for stock #ERS-OCS-2001, $21. ----------------------------------------------------------------------------- Highlights --2001 Soybean Planting To Increase Based on Higher Grain Production Costs --Old Crop Soybean Stocks Trimmed, but Prices Remain Low --Strong Chinese Consumption Soaking Up Global Soybean Glut --Palm Oil Prices Strengthen 2001 Soybean Planting To Increase Based on Higher Grain Production Costs Based on the U.S. Department of Agriculture (USDA) report Prospective Plantings, U.S. farmers intend to plant a record 76.7 million acres of soybeans this year. If realized, soybean acreage would be up 2.2 million from last year and would equal corn for the largest area of any U.S. crop. Planting is expected to increase to records for each of the top 13 soybean producing States, excluding Arkansas and Missouri. Nearly all of the additional soybean acreage comes at the expense of corn, although prospects for lower durum wheat and barley planting contributes to the 500,000-acre increase in North Dakota. However, an expansion of cotton planting will extend the long-term exodus of soybean area in the Lower Mississippi Valley (Mississippi, Louisiana, Arkansas, and Tennessee). New crop corn futures prices are modestly above the corn loan rate, and soybean futures are well below the $5.26 per bushel soybean loan rate. While the soybean-to-corn price ratio (1.9) would be historically favorable to corn, expected loan deficiency payment rates for soybeans of at least $1 per bushel effectively raises the ratio to about 2.5. Yet, the momentum for acreage shifts this year stems from changes in relative costs of production. Expenses to fertilize corn may increase $10-$15 per acre this spring, requiring a higher corn price to maintain its breakeven level with soybeans. Nitrogen is a critical nutrient for achieving optimal corn yields, and anhydrous ammonia is the most widely used source. Tight U.S. supplies for natural gas, the raw material for producing ammonia, have more than doubled prices from a year ago. In contrast, soybean plants can fix their own nitrogen requirements from the atmosphere, so the crop needs little application of this input. Many farmers postponed nitrogen application last fall in hopes of lower ammonia prices this spring but they have remained expensive. Some farmers may be able to ration their fertilizer application on corn somewhat without greatly sacrificing yield potential. And there are some practical limits to the amount of acreage that can be switched from corn to soybeans. Farmers with an established half corn-half soybean rotation are reluctant to plant soybeans in consecutive seasons because of a likely 10- percent reduction in yields. But many regions that have been latecomers in adopting soybeans into the rotation, such as the Northern Plains, are still able to expand soybean acreage in lieu of other crops. Planting costs for soybeans should also rise because last years drought created a tight supply of high quality soybean seed, although it will not offset the impact of much higher fertilizer costs. In fact, some expect that soybean acreage may turn out even larger than the early March intentions. Unlike a year ago, when quite dry conditions spurred a major price rally for grains and soybeans, topsoil moisture this spring is near to above normal in most locations. Ample precipitation over the winter has recharged soil moisture in the regions most affected by drought last year. Given prospects for record plantings and favorable soil moisture, soybean prices have fallen in the last month. If current wetness persists, it could delay corn planting and add more soybean acres. And the poor condition of winter wheat in parts of the Central Plains could lead farmers to abandon some and replant to spring crops, including oilseeds. Any near-term strengthening of corn and spring wheat prices could moderate further oilseed gains, however. Farmers have planted only a small amount of grain so far and will begin seeding soybeans within 2-3 weeks. Acreage of other U.S. oilseeds should remain near or above last years levels. Canola plantings (particularly in North Dakota) are pegged to increase 21 percent to a record 1.9 million acres. Cottonseed output is also expected to expand. Although 2001 cotton plantings are intended to be up only 100,000 acres from last year, more normal weather should help harvested acreage increase by at least 1 million acres. For peanuts, a sharp intended reduction in Texas planting would cut U.S. acreage 5 percent to 1.47 million acres. But like cottonseed, if more normal weather conditions prevail, the 2001 peanut crop could increase substantially from last year. A million-acre reduction in oil-type sunflowers is expected to offset an increase in non- oil-type plantings. Total 2001 sunflower acreage would decline 2 percent to 2.7 million. Old Crop Soybean Stocks Trimmed, but Prices Remain Low The recent Grain Stocks report confirmed record use of soybeans in the first half of 2000/01, which reduced the March 1 inventory to 1,405 million bushels. While USDA forecasts that soybean demand in the second half of 2000/01 will slip below the record pace of the last 2 years, it was increased 30 million bushels from last month. U.S. soybean exports for 2000/01 were forecast up 15 million bushels this month to 990 million based on record February-March shipments. As of March 29, U.S. soybean exports had reached 795 million bushels, or 62 million bushels ahead of last seasons pace. Brisk purchases by China account for virtually all of the export gain this year. To date, U.S. exporters had shipped 5.4 million metric tons (197 million bushels) to China, compared with 3.2 million tons (116 million bushels) a year earlier. In April- August of last year, an additional 2.0 million tons (75 million bushels) were exported to China. Yet, weekly U.S. export shipments are declining as supplies from Brazil accelerate. New export sales to China slowed considerably in March, so U.S. shipments could drop sharply by next summer. Season ending soybean stocks for 2000/01 are expected lower to 300 million bushels this month from the March forecast of 330 million. Despite a smaller expected carryover, the outlook for bumper U.S. and South American crops this year has pressured both old crop and new crop futures prices. The 2000/01 average farm price for soybeans was forecast lower this month to $4.45-$4.55 per bushel. Similarly, soybean meal prices slid to $156 per short ton in March, the lowest level since December 1999. An uncertain outlook for feed demand in Europe, due to incidences of foot and mouth disease in several countries, have weighed on prices. Despite a higher crush pace this season, a lower oil extraction rate is curtailing 2000/01 soybean oil output. Production is now forecast down to 17,800 million pounds compared with 17,824 million in 1999/2000. Reduced oil output and a 50-million-pound increase in the domestic disappearance forecast (to 16,350 million) trims expected season ending stocks to 2,120 million pounds. Stocks would contract from the 2,450 million on hand at the end of February. Seasonal weakening of the crush pace, lower than expected soybean stocks, and a strengthening of Malaysian palm oil prices have buoyed soybean oil prices. Soybean oil prices firmed to a March average of 13.9 cents per pound, up from 12.4 cents in February, although more than 2 cents below a year earlier. The April forecast of the 2000/01 average soybean oil price was up 0.5 cent per pound to 13.25-14.75 cents. Strong Chinese Consumption Soaking Up Global Soybean Glut China imported soybeans heavily again in February (almost exclusively from the United States), with October-February imports nearly 0.8 million metric tons ahead of last seasons pace. Thus, the forecast of Chinas 2000/01 soybean imports increased from 9.3 million to 10.2 million tons. Imports would surpass last seasons record of 10.1 million, yet the forecast still implies a more moderate pace over the next 6 months. As a consequence of Chinas strong domestic soybean crushing, imports of soybean products have been very slow. Imports of soybean meal by China continue to lag, with October 2000-February 2001 receipts down more than 60 percent compared with a year earlier. Meal imports for the entire season are forecast down to 225,000 tons, compared with 633,000 in 1999/2000. For soybean oil, Chinas imports are down 300,000 tons to date from a year ago. Expected oil imports for 2000/01 were reduced to 300,000 tons compared with 556,000 in 1999/2000. Strong soybean demand by China is essential to keep up with this years ever-expanding world supply. Argentine soybean production was forecast 1 million tons higher this month to 26.0 million. Exports of soybeans were anticipated to increase 0.4 million tons from the March forecast to a record 5.5 million tons. Even with ample soybean supplies, Argentine soybean crushers may struggle to expand exports of soybean meal and oil. Although the 2000/01 forecast of Argentine soybean meal exports, at 14.35 million tons, would still be 0.6 million above last year, it was trimmed 200,000 tons from last month. Brazil has already completed nearly 60 percent of its own bumper harvest by early April, while Argentine farmers have gathered only 10 percent. In addition, Brazils depreciating exchange rate (down 15 percent in the last 6 months) makes its crushers exports more competitive against Argentinas, whose peso is pegged to the strong U.S. dollar. Some Brazilian farmers have waited to market their new crop in anticipation of further weakening of the exchange rate. Brazils 2000/01 soybean crush was forecast up to a record 22.25 million tons. Relatively strong demand from Europe should help increase expected soybean meal exports to 10.25 million tons and soybean oil exports to 1.25 million. While March rains were very beneficial for Argentinas second- crop soybeans, they came too late to help sunflowers. A dry spell during a pivotal stage in late February in western Buenos Aires and La Pampa (the provinces where the majority of Argentinas sunflowers are raised) hurt yields. More showers threaten further damage and have substantially delayed harvest progress of sunflowers. Argentine harvested area was also estimated 200,000 hectares lower, reducing the 2000/01 sunflowerseed production estimate from 4.0 million to 3.5 million tons and well below last years crop of 6.1 million. With less seed to crush, Argentine exports of sunflowerseed oil are seen plunging to 0.8 million tons. Palm Oil Prices Strengthen Based on strong year to date gains, Malaysian palm oil production for 2000/01 was forecast up from 11.7 million tons to 11.9 million. However, Malaysian palm oil stocks may have already peaked in February at 1.5 million tons. The normal seasonal decline in production is now occurring. Traders are also optimistic about new government schemes to subsidize replanting of 200,000 hectares of older palm trees and burn 600,000 tons of palm oil in electric power plants. These measures are intended to support short-term prices by reducing annual supplies more than 1 million tons, although there is some question whether the utility has the capacity to use that much palm oil in its diesel fueled electric generators. Malaysian crude palm oil prices rose from $193 per metric ton in February to $230 in March, although still well below the March 2000 price of $319. Indonesia has pledged cooperation with this effort and recently announced plans for a higher export tax on crude palm oil to help develop its domestic refining industry. Malaysias largest customer, India, also buoyed current palm oil prices by a surge of stock building in advance of its April 1 tariff hikes. Thus, Indian 2000/01 palm oil imports were forecast 0.2 million tons higher to 4.0 million. India raised import tariffs on crude palm oil and crude sunflowerseed oil to 75 percent. But lower available sunflowerseed oil supplies from Argentina will make Indian imports even less price competitive. USDA reduced its 2000/01 forecast of Indian sunflowerseed oil imports to 250,000 tons, from 300,000 last month, and 1999/2000 imports of 570,000. In contrast, India has a preferential 45 percent tariff for crude soybean oil. Negligible growth in domestic oil output and increasing substitution for other oil imports is expected to boost Indian soybean oil imports to 1.0 million tons in 2000/01, from 790,000 the previous year. The next release of the Oil Crops Outlook is scheduled at 4:00 p.m. ET Friday, May 11, 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 1,579 973 164 2,716 290 2000/01 2/ 290 3 2,770 3,063 1,590 990 183 2,763 300 ----------------------------------------------------------------------------- - 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 50 38,032 38,375 31,350 6,750 38,100 275 ----------------------------------------------------------------------------- - 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 75 17,800 19,870 16,350 1,400 17,750 2,120 ----------------------------------------------------------------------------- - 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 7,055 3,079 198 3,505 6,781 274 2000/01 2/ 274 298 6,439 7,010 2,850 200 3,700 6,750 260 ----------------------------------------------------------------------------- - 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 1,295 104 1,399 21 2000/01 2/ 21 0 1,300 1,321 1,180 120 1,300 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 8.1 943 1,027 837 141 978 49 2000/01 2/ 49 8.3 885 942 730 130 860 82 ----------------------------------------------------------------------------- - 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 3,253 4,665 2,175 565 340 600 3,680 985 ----------------------------------------------------------------------------- - 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 4.55 108.00 6.09 23.10 3.42 December 4.78 110.00 6.44 25.30 3.47 January 4.68 109.00 6.94 29.60 3.47 February 4.46 114.00 7.38 NA 3.40 March 1/ 4.29 NA 7.86 NA 3.66 -------------------------------------------------------- 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 13.37 17.83 14.25 35.50 10.37 December 13.12 17.25 14.54 36.40 10.54 January 12.53 16.24 14.44 37.25 10.25 February 12.38 15.20 14.52 37.00 11.06 March 1/ 13.91 15.53 15.76 35.90 11.91 ------------------------------------------------------ 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 179.95 141.88 85.00 118.00 113.75 December 195.65 160.83 88.75 118.00 121.25 January 183.17 184.00 106.00 142.50 140.00 February 166.08 148.75 110.00 120.00 130.00 March 1/ 156.31 138.13 98.75 118.00 121.88 ----------------------------------------------------------------------- 1/ Preliminary 2/ Hi-pro Decatur 3/ 41% Memphis 4/ Minneapolis 5/ 50% SE mills ERS on the World Wide Web ERS' newly redesigned and restructured website provides 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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