OIL CROPS OUTLOOK October 15, 1996 Approved by the World Agricultural Outlook Board -------------------------------------------------------------------------------- OIL CROPS OUTLOOK is issued monthly by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. OCS-1096. -------------------------------------------------------------------------------- SOYBEAN PRICES SAG ON LARGER CARRYIN STOCKS, EXPANDING HARVEST The 1996 soybean harvest is picking up momentum. As of October 6, 17 percent of the Nation's soybean acreage had been harvested, behind the 5-year average of 31 percent. Northern frosts in early October accelerated the dropping of soybean leaves and led to greater harvesting. Many of the vulnerable late- developing areas in the eastern Corn Belt escaped serious damage and continued to increase their pod weights and maturity. Three-fourths of U.S. soybeans had dropped leaves by October 6. Freezes will have little damage beyond this stage. Even with the late plantings and development, the national average yield is projected at 37.0 bushels per acre, the third highest on record. As of October 11, USDA projected total 1996 production at 2,346 million bushels, the second-largest crop on record. The forecast was 76 million bushels higher than the September forecast. Much of this month's production increase is due to improved forecasts for Illinois, Indiana, and Ohio. Western Corn Belt yields are excellent. Nebraska farmers will harvest a record volume of soybeans. Southern soybeans are also yielding well, including a record average yield in Louisiana. The additional supplies pushed up expected 1996/97 ending stocks to 195 million bushels from 160 million a month ago. Soybean prices tumbled in the last month as the crop approached maturity without a serious frost threat. The accelerating harvest and an upward revision in beginning stocks also moved the market lower. A price range for 1996/97 of $6.50-$7.40 per bushel is forecast this month. The plunge in prices has stirred up more export sales, particularly to China. As of October 3, China had already purchased 125,000 metric tons of soybean meal from the United States, compared to 90,000 tons for all of 1995/96. Total U.S. soybean exports were projected higher to 850 million bushels based on larger supplies. The surge of export sales of soybean meal for October-November delivery suggests a robust crushing pace this fall. USDA forecasts 1996/97 domestic crush at 1,375 million bushels, 5 million bushels above last season. But the relatively small old-crop stocks and later-than-average new crop harvest have complicated the operations of several soybean crushers, which should buoy short term prices somewhat, especially if farmers are slow to market the new crop. Smaller world rapeseed, sunflowerseed, and cottonseed crops and the currently slender South American soybean supply may also soon favor a firming of prices. LARGER SUPPLIES, LOWER PRICES MOVE MORE U.S. SOYBEAN MEAL EXPORTS A larger crush lifts 1996/97 soybean meal production to 32.7 million short tons. The greater availability of supplies lowers the expected average price range to $225-$245 per ton, from $245-$265 last month. Exports of U.S. soybean meal are forecast 250,000 short tons higher this month to 6.0 million. Foreign trade is likely to be strong this fall and winter, although attractive oilseed prices should elicit substantial competition from South American producers next year. Despite a 4-percent decline in the September hog inventory from last year, the outlook for U.S. hog feeding is improving. The reduced swine herd, excess packing capacity, enduring pork export demand, and smaller beef supplies are keeping pork prices firm. On the other hand, lower corn prices will help increase feed intakes and raise animal weights, which should also mean greater soybean meal consumption. Producers anticipated reducing their farrowings just 0.5 percent this fall and 1.4 percent for winter from a year ago, but may yet expand them given expectations for good fall feed grain harvests. Poultry production is also expected to resume its growth. Since August, hatching of broiler eggs and placements have risen from a year ago. Rapid export growth to China, Russia, and Mexico is maintaining high broiler prices. Lower corn prices will also increase feed intake (including soybean meal) and produce larger poultry slaughter weights. Forecast 1996/97 domestic disappearance of soybean meal was raised 200,000 short tons from last month to 26.75 million. SUPPLIES OF SOYBEAN OIL ACCUMULATE U.S. soybean oil production for 1996/97 is expected at 15.4 billion pounds, 225 million pounds higher than last month's forecast. Greater supply availability will promote domestic and foreign demand in 1996/97. Projected U.S. export demand was raised to 1,700 million pounds. But the higher use will not be enough to prevent 1996/97 soybean oil ending stocks from building to 2,235 million pounds. Prices for soybean oil continue to weaken as oilseed supplies and oil stocks mount. The September average price dipped below 24 cents per pound. The average price for 1996/97 is expected to range from 22.5 to 24.5 cents per pound, down from the September range of 22.5-25.5 cents. Coupled with rising soybean meal prices, soybean oil has sunk to 30 percent of total soybean value. ACTIVE CHINESE BUYING PROPELS A BULLISH WORLD PROTEIN MEAL MARKET China has recently stepped up its imports of soybean meal, despite just completing its own soybean harvest. A smaller soybean area harvested is expected to slightly reduce production from last year but consumption for animal feeds will soar. Smaller Chinese cottonseed and rapeseed crops will also contribute to higher import needs. USDA projects 1996/97 Chinese soybean meal imports at 1.3 million metric tons, up from 1.1 million in 1995/96 and near zero prior to that. Once a significant exporter, China's meal exports are anticipated to fall to just 300,000 tons this year as domestic needs prevail. Both U.S. and Argentine soybean crush were projected higher this month on account of expanding Chinese meal demand. The business will help Argentina export a record 8.2 million tons of soybean meal this season. Soybean production in Mexico is forecast down from last month to 162,000 tons. A severe drought and declining acreage are yielding the smallest Mexican soybean harvest in almost 30 years. Imports of soybeans by Mexico are projected 100,000 tons higher this month to 2.55 million tons. A larger Mexican cottonseed supply will offset some of the drop in oilseed production, though. Thailand's 1996/97 soybean imports are projected to climb to 500,000 tons. Recent flooding has damaged domestic production. The rapidly growing Thai livestock sector is responsible for rising imports, mostly from the United States. EU rapeseed production is up 200,000 tons from last month, based mostly on an increase in expected French output. Projected French sunflowerseed production is up 120,000 tons this month. Italian soybean and sunflowerseed production are up, as well. A large drop in rapeseed supplies, low vegetable oil prices, and ample oil stocks will reduce EU oilseed crushings in 1996/97, helping to shrink the oil surplus. On the other hand, reduceduced crushings would also exacerbate the EU protein meal situation, keeping prices very high relative to feed wheat. These factors act to reduce the October forecast for 1996/97 EU soybean and soybean meal imports to 13.7 million tons (down 4 percent) and 16.1 million tons (down 1 percent), respectively. More normal weather will also produce a much larger Spanish sunflowerseed harvest, which will sharply cut EU imports of sunflowerseed. SMALLER HARVESTED AREA SCALES BACK U.S. SUNFLOWERSEED HARVEST Although ahead of the very late 1995 pace, a wet spring again delayed Northern Plains sunflower planting. Good growing weather resulted in mostly good to excellent crop conditions throughout the year. The sunflower harvest is lagging, as of October 6, with 5 percent complete in North Dakota and South Dakota, compared to an average for the date of 12 percent. The average yield of 1,255 pounds per acre was up 5 percent from 1995. Given this yield and a 20-percent reduction in acreage harvested (to 2.7 million acres), sunflowerseed production is expected to fall to 3,369 million pounds in 1996. Many producers opted to increase wheat planting at the expense of sunflowers, with the severest cut occurring in Minnesota. The Grain Stocks report found September 1 carryin stocks of sunflowerseed at 447 million pounds. This was nearly twice as high as a year earlier. Total 1996/97 supplies are forecast at 3.9 billion pounds, down from 4.3 billion last season. Slightly lower prices for the vegetable oil sector, including sunflower oil, will trim domestic sunflowerseed crush about 2 percent to 1.9 billion pounds. A much larger sunflowerseed harvest in the EU, the principal export market for the United States, will cut U.S. seed exports to 415 million pounds. Although total seed demand is expected to fall, the larger supply reduction will shrink year ending stocks to 245 million pounds. Sunflowerseed prices should remain relatively stable compared to 1995/96. SOYBEAN PRODUCTION REVISED DOWN FOR 1995/96 BASED ON HIGHER CARRYOUT The recent Grain Stocks report found September 1 U.S. soybean stocks of 183 million bushels, 13 million above last month's forecast. Given the higher than expected carryout, USDA revised 1995/96 soybean production up 25 million bushels to 2,177 million. The U.S. average yield improved from 34.9 bushels per acre to 35.3 bushels. Iowa's average yield, which went from 43 to 44 bushels per acre, represented the largest change in production. With the unexpected increase in supply, soybean prices fell sharply after the Grain Stocks report was released. Crush concluded 1995/96 at 1,370 million bushels and exports are expected to tally 845 million. Total soybean disposition for the season would be 2,334 million bushels, slightly down from the 1994/95 record. A substantial upward revision in soybean oil stocks ending July was a result of changes in the reporting system. The current level of 2.1 billion pounds is the highest since early 1993. The next Oil Crops Outlook is scheduled for 4:00 pm ET Wednesday, November 13. ****************************************************************************** Information Contacts: Mark Ash Soybeans, Minor Oilseeds, Fats and Oils (202) 219-0712 Scott Sanford Peanuts, Cottonseed (202) 219-0835 ****************************************************************************** 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--------------------------- 1994/95 209 6 2,517 2,731 1,405 838 153 2,396 335 1995/96 1/ 335 5 2,177 2,517 1,370 845 119 2,333 183 1996/97 1/ 183 5 2,346 2,535 1,375 850 115 2,340 195 ------------------------------------------------------------------------------ 1/ 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 short tons-------------------------- 1994/95 150 33,265 33,479 26,538 6,717 33,256 223 1995/96 1/ 223 32,557 32,860 26,800 5,860 32,660 200 1996/97 1/ 200 32,685 32,975 26,750 6,000 32,750 225 ------------------------------------------------------------------------------ 1/ 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--------------------------- 1994/95 1,103 15,613 16,733 12,916 2,680 15,596 1,137 1995/96 1/ 1,137 15,263 16,500 13,450 1,040 14,490 2,010 1996/97 1/ 2,010 15,400 17,485 13,550 1,700 15,250 2,235 ------------------------------------------------------------------------------ 1/ 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 1994/95 5.48 101.00 10.70 28.90 4.63 1995/961 6.80 106.00 11.35 29.30 5.25 1994/95 September 5.47 101.00 10.70 30.60 4.55 October 5.30 96.00 10.50 28.60 4.52 November 5.36 107.00 10.60 25.90 4.52 December 5.41 103.00 10.60 25.80 4.72 January 5.47 95.00 10.50 25.50 4.76 February 5.40 70.00 10.80 NA 4.94 March 5.51 NA 10.40 NA 5.13 April 5.55 NA 10.70 NA 5.10 May 5.56 NA 10.60 NA 4.91 June 5.68 NA 10.70 NA 5.03 July 5.90 NA 11.50 NA 5.11 August 5.83 100.00 11.40 30.60 5.21 1995/96 September 5.98 100.00 11.00 29.70 5.11 October 6.15 99.00 11.00 28.60 5.11 November 6.40 114.00 10.80 29.50 5.17 December 6.76 116.00 10.60 28.60 5.03 January 6.77 98.00 11.00 29.80 5.27 February 7.01 120.00 11.50 NA 5.18 March 7.00 NA 11.90 NA 5.28 April 7.43 NA 12.50 NA 5.31 May 7.69 NA 13.60 NA 6.03 June 7.41 NA 14.30 NA 5.88 July 7.62 NA 13.60 NA 6.19 August 7.82 118.00 12.70 NA 6.15 1996/97 September1 7.85 134.00 12.10 28.10 6.28 -------------------------------------------------------- 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 24.10 23.67 45.50 27.50 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 1995/961 24.70 26.53 25.40 40.00 25.55 1994/95 October 27.06 27.81 28.90 46.00 24.73 November 29.84 30.72 29.40 50.88 24.75 December 30.61 31.83 30.63 53.80 24.75 January 29.04 28.70 29.25 50.25 28.01 February 28.15 29.95 27.66 41.83 27.26 March 28.33 27.14 27.97 41.00 28.17 April 26.30 27.61 26.89 41.25 27.30 May 26.00 27.51 26.34 40.25 26.42 June 26.78 30.04 27.30 39.00 26.61 July 27.60 30.63 28.69 39.13 27.38 August 26.56 30.26 27.47 41.50 26.35 September 26.26 28.61 27.41 41.30 25.93 1995/96 October 26.57 27.61 27.49 42.50 26.05 November 25.42 26.27 26.25 41.63 25.54 December 24.76 26.10 25.98 39.20 24.99 January 23.52 24.45 24.65 37.25 24.52 February 23.49 24.35 24.23 36.00 24.30 March 23.60 24.25 24.28 36.60 24.34 April 25.70 26.77 25.63 39.25 26.60 May 26.50 28.46 26.38 42.80 27.98 June 24.95 27.94 25.72 43.00 25.66 July 24.10 28.25 24.58 43.00 25.46 August 24.00 27.81 24.90 42.60 24.33 September1 23.90 26.13 24.95 40.80 ------------------------------------------------------------------------- 1 Preliminary 2 Decatur 3 PBSY Greenwood MS 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 1994/95 162.55 112.02 62.70 128.94 95.85 1995/961 235.90 190.74 123.75 202.70 159.05 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 September 180.99 137.60 NA 142.00 112.50 October 193.90 153.25 82.88 132.50 131.00 November 204.10 165.00 99.00 175.00 151.67 December 223.60 185.80 122.50 204.00 143.75 January 232.00 208.80 135.00 220.00 142.00 February 228.30 202.80 130.00 215.00 143.75 March 226.57 195.60 123.50 210.00 155.00 April 249.30 220.00 133.00 210.00 174.00 May 244.30 191.25 137.00 212.00 177.00 June 238.80 192.20 135.00 210.00 178.75 July 252.50 201.56 135.00 224.25 174.00 August 261.20 193.10 126.25 227.00 170.00 September 1 276.35 193.13 125.60 192.80 167.50 ---------------------------------------------------------------------------- 1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills END-OF-FILE