HDR1011800201401012951600 OIL CROPS OUTLOOK October 12, 1995 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- OIL CROPS OUTLOOK is published monthly (except January) by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. OCS--1095. ----------------------------------------------------------------------------- Oil Crops Outlook OCS-1095 United States Department of Agriculture Economic Research Service ------------------------------------------------------------------------------ Approved by the World Agricultural Outlook Board October 12, 1995 ------------------------------------------------------------------------------ HARVEST FOR 1995 IS UNDERWAY Like a veteran boxer, the 1995 U.S. soybean crop keeps absorbing punishment yet manages to stand upright. With a late start, extreme summer heat, and an early killing frost, this year's projected production is 2,191 million bushels. The national average yield would be 35.5 bushels per acre, down from last month's forecast of 37.0 bushels. But even with a relatively large cut of 94 million bushels from the September forecast, this year's harvest would still edge out 1992 as the third-largest crop on record. In the week of September 17-23, freezing weather ended the growing season for soybeans in much of the northern Midwest. This is a normal frost date for soybeans in Minnesota and the Dakotas. These areas were generally planted on time so there were few fields that had not reached maturity. By October 8, harvesting was 31 percent completed, compared with the 36-percent average for the previous 5 years. Early planted fields were generally yielding very well. However, the frost descended farther south, setting several new record low temperatures for that time of year and freezing about 2 weeks earlier than normal. Many soybean fields in this area had been planted late or double- cropped and were not yet mature. Temperatures below 28 degrees Fahrenheit for more than 2 hours can severely damage soybeans that have not dropped leaves. By September 24, only 26 percent of soybeans in Nebraska had dropped leaves, compared with the 5-year average of 68 percent. So, parts of Nebraska and South Dakota sustained severe frost damage. The average expected Nebraska soybean yield declined to 31.0 bushels per acre, down from 34.0 bushels in September. Farther east, other at-risk areas, such as Missouri, Illinois, Indiana, and Ohio, escaped with scattered frost damage. But yields in these States, particularly Indiana, were lower than last month as the adverse effects of the summer heat became better known. Also, projected yields in the Delta declined as the consequences of dryness and high temperatures became apparent. The average Arkansas yield declined to 28.0 bushels per acre, down from 30.0 bushels last month and 33.0 in 1994/95. Louisiana and Mississippi yields also fell, causing the region's production to drop 17 million bushels from last month. CARRYOUT SOYBEAN STOCKS FOR 1995/96 TIGHTEN ON SMALLER YIELDS, ROBUST DEMAND With lower carryin stocks and production, total supplies in 1995/96 will be 200 million bushels less than 1994/95's record of 2,731 million. Despite lower supply, U.S. soybean crush and exports are unchanged from the September forecasts of 1,395 million and 800 million bushels, respectively. Healthy U.S. soybean exports are expected to continue for 1995/96, although they are projected to fall 5-percent from last year, when they wer the third largest on record. Steady demand for soybean meal will keep crush relatively unchanged, so that smaller U.S. supplies will reduce availability for soybean exports. Brazil is not expected to repeat economic conditions that triggered soybean imports from the U.S. of 710,000 metric tons last year. On the other hand, Brazil's supplies are forecast to decline, implying less competition for U.S. exports. Higher soybean prices and sinking soybean oil prices will likely reduce gross crush margins, especially in importing countries. Major importing countries--such as the European Union, Japan, Korea, and Taiwan-- could boost soybean meal imports at the expense of soybeans, or reduce overall imports. The latter scenario is less likely given current feed grain prices. But soybean imports by major importing countries will fall negligibly because the projected decline in crush margins follows a year of near-record margins. Given this steady demand, projected U.S. ending stocks in 1995/96 would plunge by one-third to 220 million bushels. If realized, this would be the leanest carryout, as a percentage of use, since 1978/79. The tighter supply-to-use situation will substantially raise prices. The 1995/96 U.S. season average price was increased 75 cents per bushel this month, to $6.25-$7.25 per bushel. The improved price outlook makes planting soybeans in 1996 more attractive, thus raising this year's estimated seed use by 1 million bushels. The sharply higher soybean price also pulls up the soybean meal price, which is now expected to average $30 per ton higher than in September, to $195-$220 per ton. Rising feed prices will also throttle the rate for domestic disappearance of soybean meal. This year's projected U.S. disappearance is 27.0 million tons, down 100,000 from September and just 1.1 percent higher than 1994/95. Despite a significant drop in U.S. soybean production and higher meal prices, the 1995/96 soybean meal export forecast rose to 6.1 million tons this month in response to keen world demand and smaller expected Brazilian meal exports. U.S. soybean oil exports for 1995/96 are projected at 1,950 million pounds, down nearly 30 percent from the 1994/95 record. U.S. soybean oil exports to China accounted for nearly 50 percent of all U.S. soybean oil exports during 1994/95. The importance of China's soybean oil imports, which are anticipated to fall 30 percent in 1995/96, suggests the potential for significantly smaller exports from the United States. Strong domestic oilseed production and the considerable amounts of edible oil already imported during 1994/95 will likely reduce the volume of Chinese edible oil imports for 1995/96. The amount of China's soybean oil imports relative to other oils will likely depend on their relative prices. The steady production of U.S. soybean oil and the decline in export demand should lower its price, which averaged 27.6 cents per pound last season. U.S. average soybean oil prices this year are expected to range from 24.0 to 28.5 cents per pound, down 0.5 cent from the previous forecast. A lower price should provide a small boost for domestic disappearance of soybean oil, which is now 50 million pounds higher, at 13.1 billion pounds. SOYBEAN PRODUCTION REVISED DOWN FOR 1994/95 BASED ON LOWER ENDING STOCKS The recent Grain Stocks report found September 1 U.S. soybean stocks of 335 million bushels, which is 20 million bushels below last month's forecast. Given the lower than expected carryout, USDA revised 1994/95 soybean production down 41 million bushels to 2,517 million. The U.S. average yield declined from 41.9 bushels per acre to 41.4 bushels. Despite the reduction, production and yield remained record high. Acreage harvested also fell 270,000 acres to 60.9 million, based on lower area in Illinois, Indiana, Mississippi, and South Dakota. There were 19 States with lower average yields, with the largest production changes occurring in Illinois (-9.3 million bushels), Minnesota (-5.6 million), and Indiana (-4.7 million). Although still larger than ever, the residual use category declined to a more normal 74 million bushels. With crush finishing at 1,405 million bushels and exports expected to tally 845 million, total use for 1994/95 would be 2,396 million bushels, more than 200 million bushels greater than the previous high. Higher crush raised domestic soybean oil production 55 million pounds to 15,632 million. Based on outstanding sales and shipments, U.S. soybean oil exports will be record high in 1994/95, estimated at 2,750 million pounds, up 25 million from last month. Domestic use is seen 25 million pounds higher than the September forecast of 13,000 million. SMALLER U.S., BRAZILIAN SOYBEAN HARVESTS CUT 1995/96 WORLD EXPORTS Foreign oilseed production in 1995/96 is expected to remain nearly unchanged from last month, but fall 2 percent from the 1994/95 estimate. Brazil's soybean production is projected down 1 million metric tons, which more than offset small increases in Chinese peanut, Argentine sunflowerseed, and European rapeseed production. The projected fall in Brazil's soybean production resulted from lower domestic prices and rising interest rates, which caused Brazilian farmers to lose significant income during the 1994/95 crop year. Furthermore, the Brazilian government has announced that soybean farmers will not receive either a minimum price or subsidized credit during the upcoming 1995/96 marketing year. Therefore, despite potentially higher international prices, the dim domestic prospects will likely discourage Brazilian soybean plantings. Swelling world prices for rice, cotton, and corn also invite farmers to plant these crops. In Argentina, the 1994/95 sunflower production estimate was raised to 5.65 million tons, reflecting substantial increases in crush, exports, and stocks. Prospective production for 1995/96 was also raised based on excellent returns for farmers during the past 2 years. The extended drought in Argentina has also aided the planting of sunflowers at the expense of wheat. China's peanut production is projected up 3 percent from last month in response to excellent growing conditions. Superb profits obtained by rapeseed farmers in Poland during 1994/95 motivated those farmers to raise rapeseed area planted by 62 percent from last year. Likewise, French farmers responded to favorable edible oil prices and a larger set-aside that encourage rapeseed plantings for biodiesel production. Global soybean exports are expected to fall 1 percent from a month ago and 3 percent from 1994/95. Reduced supplies in the United States and Brazil and below-average crush margins suggest greater soybean meal trade. The 1995/96 world soybean crush is predicted up slightly from last year's estimate as crush margins (although down from last year's near-record levels) remain relatively profitable, especially in producing countries. However, reduced supplies in Brazil and Mexico this month brought global crush down 1 percent. World soybean meal production, trade, and use is forecast to reach a record for the third consecutive year. Rising meat production and high grain prices are driving soybean meal demand in the United States, the European Union, Asia, and Latin America. Nevertheless, reduced supplies expected in Brazil accounted for roughly all the decline in global soybean meal exports compared with the September estimate. The 1994/95 world soybean and soybean meal exports were lowered this month to reflect slower shipments from Brazil and Argentina. In China, soybean exports were also reduced as provincial policies discourage interprovincial commerce and overseas exports of soybeans. Despite larger U.S. soybean exports to Mexico during September-August 1994/95, a significant drop in Argentine exports to Mexico contributed to a 9-percent decline in overall Mexican imports. Both Brazilian and Chinese trade in soybean oil have reached remarkable records in 1994/95. The tight situation in the world vegetable oil markets and China's large demand for soybean oil imports pushed Brazilian shipments. On the other hand, China's soybean oil imports were realized on the heels of rapid economic growth and less government intervention of imports. ANOTHER LARGE U.S. SUNFLOWER HARVEST FUELS A BANNER YEAR FOR CRUSH AND EXPORTS Harvested area of all sunflower types in 1995 will be nearly 3.5 million acres. Although harvested area is 54,000 acres higher, 1995's sunflower yield will not come close to the bumper yields of the previous year. This is not to disparage this year's good fortune; the U.S. average sunflowerseed yield is projected at a very respectable 1,313 pounds per acre. As a result, 1995 sunflowerseed production is projected at 4,574 million pounds. The Grain Stocks report finds September 1 carryin stocks of 219 million pounds. This was up 41 percent from a year earlier but considerably lower than the September forecast due to unexpectedly high nonoil use in 1994/95. With such ample supplies, crush will likely again exceed 2.8 billion pounds this season. While down 23 million pounds from 1994/95, U.S. exports of sunflowerseed will also remain strong at 540 million pounds. Total demand will be 275 million pounds less than last year, so carryout stocks will likely build to about 273 million pounds. A still favorable price outlook for sunflower oil compared to sunflowerseed prices will keep crushing plants active. Production of sunflower oil for 1995/96, at 1,131 million pounds, will rank just behind last year's record. U.S. sunflower oil exports are expected to drop little, from 893 million pounds to about 805 million this season. 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 & resid. stocks ------------------------------------------------------------------------------ -------------------------- Million bushels--------------------------- 1993/94 292 6 1,871 2,170 1,276 589 96 1,961 209 1994/95 1/ 209 6 2,517 2,731 1,405 845 146 2,396 335 1995/96 2/ 335 5 2,191 2,531 1,395 800 116 2,311 220 ------------------------------------------------------------------------------ 1/ Estimated. 2/ Forecast. Table 2--Soybean meal: U.S. supply and disappearance ------------------------------------------------------------------------------ Supply Disappearance ---------------------------- ------------------------------------ Year begin. Beg. Produc- Total Domestic Ex- Total End. Oct. 1 stocks tion ports stocks ------------------------------------------------------------------------------ ------------------------------1,000 tons----------------------------- 1993/94 204 30,514 30,788 25,283 5,356 30,638 150 1994/95 1/ 150 33,335 33,550 26,700 6,600 33,300 250 1995/96 2/ 250 33,040 33,350 27,000 6,100 33,100 250 ------------------------------------------------------------------------------ 1/ Estimated. 2/ Forecast. Table 3--Soybean oil: U.S. supply and disappearance ------------------------------------------------------------------------------ Supply Disappearance ---------------------------- ------------------------------------ Year begin. Beg. Produc- Total Domestic Ex- Total End. Oct. 1 stocks tion ports stocks ------------------------------------------------------------------------------ -------------------------- Million pounds--------------------------- 1993/94 1,555 13,951 15,574 12,941 1,529 14,471 1,103 1994/95 1/ 1,103 15,632 16,750 13,025 2,750 15,775 975 1995/96 2/ 975 15,695 16,680 13,100 1,950 15,050 1,630 ------------------------------------------------------------------------------ 1/ Estimated. 2/ Forecast. Table 4--Oilseeds prices received by farmers, U.S. -------------------------------------------------------- Marketing Soy- Cotton- Sun- year beans seed flowers Peanuts Flaxseed -------------------------------------------------------- $/bu. $/ton $/cwt Cents/lb $/bu. 1990/91 5.74 121.00 10.80 34.70 5.27 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 1993/94: September 6.21 104.00 14.20 32.00 4.24 October 6.01 112.00 11.20 30.00 4.09 November 6.32 122.00 11.60 29.50 4.05 December 6.64 123.00 13.00 29.70 4.18 January 6.72 126.00 13.60 36.10 4.38 February 6.71 97.00 15.10 NA 4.61 March 6.73 NA 15.00 NA 4.64 April 6.57 NA 15.00 NA 4.60 May 6.77 NA 15.60 NA 4.43 June 6.72 NA 14.20 NA 4.25 July 5.92 NA 12.40 NA 4.28 August 5.58 89.00 12.60 NA 4.52 1994/95 September 5.47 101.00 10.70 30.60 4.54 October 5.30 96.00 10.80 28.60 4.49 November 5.36 107.00 10.60 25.90 4.51 December 5.41 104.00 10.30 25.80 4.71 January 5.47 101.00 10.60 25.70 4.75 February 5.40 97.00 10.80 NA 4.94 March 5.51 NA 10.40 NA 5.15 April 5.55 NA 10.70 NA 5.10 May 5.56 NA 10.50 NA 4.93 June 5.68 NA 10.50 NA 5.13 July 5.90 NA 11.50 NA 5.10 August 5.83 100.00 11.40 30.70 5.16 September1 5.92 99.00 11.30 30.50 5.15 -------------------------------------------------------- 1 Preliminary. Table 5--Vegetable oil prices --------------------------------------------------- Cotton- Sun- Marketing Soybean seed flower Peanut Corn year oil2 oil3 oil4 oil5 oil6 --------------------------------------------------- Cents/lb. 1990/91 21.00 22.30 23.60 45.50 27.50 1991/92 19.10 20.10 21.60 27.30 25.82 1992/93 21.40 25.00 25.30 27.40 20.90 1993/94 27.09 27.78 31.00 43.20 26.38 1993/94: October 22.96 24.79 26.33 40.20 22.25 November 25.43 26.69 28.20 43.33 23.06 December 28.27 30.39 32.11 43.17 26.93 January 29.91 33.16 35.08 46.10 28.00 February 28.85 29.96 33.68 46.12 29.89 March 29.03 29.60 33.48 44.50 30.30 April 27.90 29.06 33.00 43.40 29.63 May 29.10 29.66 33.50 44.25 29.48 June 27.60 27.55 31.34 43.75 29.43 July 24.53 24.20 28.89 44.00 27.20 August 25.38 23.71 28.13 45.00 25.02 September 26.12 24.51 29.28 43.10 24.87 1994/95 October 27.06 23.64 28.90 46.00 24.73 November 29.84 24.85 29.40 50.88 24.75 December 30.61 25.50 30.63 53.80 24.75 January 29.04 26.41 29.25 50.25 28.01 February 28.15 25.63 27.66 41.83 27.26 March 28.33 26.41 27.97 41.00 28.17 April 26.30 24.00 26.89 41.25 27.30 May 26.00 24.24 26.34 40.25 26.42 June 26.78 26.72 27.30 39.00 26.61 July 27.60 28.25 28.69 39.13 27.38 August 26.56 27.09 27.50 41.50 26.35 September1 26.26 26.50 27.13 41.30 25.93 ------------------------------------------------------------------------- 1 Preliminary 2 Decatur 3 Valley points 4 Minneapolis 5 Southeast mills 6 Chicago Table 6--Oilseed meal prices --------------------------------------------------- Soy- Cotton Sun- Marketing bean seed flower Peanut Linseed year meal2 meal3 meal4 meal5 meal4 --------------------------------------------------- $/Short ton 1990/91 181.40 130.75 88.00 193.00 130.10 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 1993/94: October 194.50 173.10 90.00 196.00 147.50 November 209.40 181.00 90.00 197.00 161.80 December 206.00 180.00 89.40 200.00 155.25 January 198.30 170.30 97.00 209.00 140.25 February 198.40 173.10 98.75 207.50 136.25 March 195.40 174.00 N/Q 198.75 127.20 April 188.90 166.25 N/Q 191.00 125.50 May 193.75 157.75 105.00 187.50 125.00 June 195.50 154.10 102.50 163.75 111.90 July 181.10 152.50 97.50 164.00 114.90 August 178.60 144.50 90.75 153.75 111.60 September 174.50 145.00 85.00 114.80 NA 1994/95 October 168.50 134.40 75.00 151.25 122.50 November 161.00 120.50 69.50 147.50 110.00 December 156.90 114.20 52.50 127.00 95.60 January 156.40 106.75 50.00 105.00 82.40 February 151.30 97.50 46.88 107.50 85.25 March 156.90 100.30 52.50 119.00 90.00 April 161.90 98.10 62.50 125.00 94.40 May 159.10 92.75 60.90 123.75 85.00 June 160.40 108.75 62.38 134.00 85.00 July 170.45 116.90 73.75 138.75 92.50 August 166.70 116.50 83.75 136.25 95.00 September1 180.99 137.55 NA 142.00 106.25 ---------------------------------------------------------------------------- 1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills The next release of the Oil Crops Outlook is scheduled for 4:00 p.m. ET Monday, November 13. ***************************************************************************** Information Contacts: Mark Ash Soybeans, Minor Oilseeds, Fats and Oils (202) 219-0838 Scott Sanford Peanuts, Cottonseed (202) 219-0835 Jaime Castaneda World Oilseeds (202) 219-0826 ****************************************************************************** END-END-END