OIL CROPS OUTLOOK September 12, 1996 Approved by the World Agricultural Outlook Board ------------------------------------------------------------------------------ OIL CROPS OUTLOOK is published monthly by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. OCS-0996. Note: Tables in this report will not be properly formatted unless printed or displayed with both a fixed-pitch font, such as Courier, and an 80-character line width. ------------------------------------------------------------------------------ LAGGING DEVELOPMENT AND FROST FEARS TRIGGER HIGHER SOYBEAN PRICES Beneficial rains in August and early September fell on Midwestern soybean fields during the critical pod filling stage. However, below normal temperatures this summer have persisted, preventing development of the late-planted fields from catching up. Yield potential has been lost even if all fields reach maturity prior to frost. The vulnerability in some States to a September or early October frost has driven November futures prices up toward $8.00 per bushel. USDA's September soybean yield forecast is 35.8 bushels per acre, down from 36.2 bushels last month. Less auspicious yields in the eastern Corn Belt have brought down the forecast. The Ohio average yield, reduced 3 bushels per acre from the August forecast to 32 bushels, would be the poorest since 1989. Yield prospects were also downgraded in Minnesota, Illinois, Iowa, Michigan, and Wisconsin. September pod counts in these States were well below recent years. On the other hand, Nebraska and Kansas appear to have bounced back from disappointing 1995 yields with an excellent current outlook. Near record yields throughout the Delta and Southeast are also buoying output. Forecast soybean production for 1996 totals 2,270 million bushels, down 30 million from August and up 118 million from 1995. However, given much lower beginning stocks, this year's increase will not be enough to allow for growth in offtake. Although soybean oil demand should rebound somewhat from a lackluster 1995/96, soybean crush will be hampered by weaker soybean meal demand. Crush for 1996/97 is expected to drop slightly to 1,355 million bushels from 1,365 million last season. Carryover stocks for this crop year will further tighten to 160 million bushels, compared to 170 million ending the 1995/96 crop year. The forecast range for the 1996/97 average farm price is $7.00-$8.00 per bushel, compared with $6.76 last season. These lofty prices will eventually ration soybean export demand, which is forecast down 5 million bushels this month to 815 million bushels and down from 840 million bushels in 1995/96. The early U.S. export pace should be vigorous but will likely stall later as attractive prices encourage a greater acreage response from South American producers. Already high-priced soybean meal will become even more costly next season, ranging from $245 to $265 per ton, versus $235 in 1995/96. Shorter supplies are the chief reason. Meal production is expected to drop nearly 400,000 short tons to 32.2 million based on a lower crush and meal extraction rate. Higher meal prices and minimal growth in livestock populations will pare domestic meal disappearance about 1 percent to 26.6 million tons. Although Asian demand for U.S. soybean meal is anticipated to stay robust, imports by the EU (still the largest import market) are likely to substantially decline. This would shave next season's U.S. soybean meal exports 50,000 tons from the 5.8 million tons forecast for 1995/96. Despite smaller crushings that would cut 1996/97 soybean oil production 1 percent, the huge inventory carried over from 1995/96 will swell projected total supply to a record 17.3 billion pounds. Projected demand probably will not be able to grow fast enough to shrink the glut, so that the ample oil inventory will remain above 2 billion pounds. The outlook for U.S. exports has dimmed as Chinese import demand for vegetable oil has been scaled back from earlier projections. The forecast for U.S. soybean oil exports was reduced from 1,750 million pounds to 1,650 million this month. This year's increase in domestic disappearance of soybean oil will not repeat the substantial 1995/96 gains, which were due to an accumulation of invisible stocks. WORLD OILSEED SUPPLIES TO TIGHTEN Projected world production of all oilseeds for 1996/97 declined 1.4 million metric tons from last month and 0.9 million tons from 1995/96. Expected 1996/97 world soybean production declined nearly 1 million tons because of smaller U.S. and Indian harvests. India's soybean crop was reduced 300,000 tons to 4.2 million as a later than normal monsoon has taken a toll on yield potential. Despite improved prospects for Canadian and Hungarian rapeseed yields, this month's net decrease in projected 1996/97 world rapeseed production was 275,000 tons. This decline was based on much lower yields in Germany that cut the anticipated harvest by 600,000 tons. The 6.7-million-ton EU crop would be the smallest since 1993. World cottonseed production is expected down 286,000 tons this month due to smaller Chinese and U.S. output, which were partially offset by a production increase from higher Indian cotton area and yields. Partly offsetting these other reductions is global sunflowerseed output, which is expected 180,000 tons larger given higher yields in Hungary and Yugoslavia. Argentina could raise its 1996/97 soybean crush to a record high 10.1 million tons by reducing soybean exports and stocks. The additional supplies of meal and oil (also at record levels) likely would be exported. Mexico is projected to import a record quantity of soybeans in 1996/97, up 7 percent from a large 1995/96 trade volume. The strengthening Mexican economy is maintaining an active crush rate to accommodate rapid livestock feed demand. Because of the drop in EU rapeseed output, crush and production of rapeseed meal and oil will plummet. But a large EU grain harvest and higher world soybean prices will constrain imports of soybeans and soybean meal. Lower supplies and higher prices for EU rapeseed oil are forecast to reduce Chinese imports of EU rapeseed oil by 50,000 tons. Prospects for smaller Chinese oilseed harvests and incessant demand growth are initiating greater trade opportunities in 1996/97. The Chinese government is more likely to favor palm oil versus other vegetable oils, however, when implementing import quotas and tariff rates. While the forecast for palm oil imports was trimmed 100,000 tons this month, 1996/97 imports would still be up 39 percent from 1995/96. Smaller Indian soybean supplies and crushing would also slow the rapid growth of Indian soybean meal exports of recent years. Expanding domestic poultry production is also limiting available supplies for export. As India's supplies of domestic vegetable oils stagnate, imports (principally palm oil) are anticipated to reach a record volume (800,000 tons) to satisfy booming demand. Population growth and rising living standards, as well as lower import duties on edible oils, have contributed to this surge. 1995/96 SEASON FINISHING STRONG FOR MEAL, WEAK FOR OIL The U.S. soybean crush set a record for July at 111.9 million bushels. This seasonally late spurt in crush portends a brisk processing pace this fall. Domestic disappearance of soybean oil was forecast 50 million pounds higher to 13,450 million pounds. U.S. soybean oil imports were raised to 110 million pounds for the season and a slight increase in the oil extraction rate raised total supplies to 16,535 million pounds. Given the relative inactivity in foreign demand, USDA revised down its 1995/96 soybean oil export forecast to 1,075 million pounds from 1,200 million in August. U.S. exports of soybean oil slowed to a crawl in June at 16 million pounds, just slightly above June imports of 10 million pounds. Consequently, total domestic oil stocks at the end of July swelled to over 2 billion pounds. Oil stocks may stay near this higher level through the end of the marketing year. A modest reduction in the meal extraction rate reduced forecast 1995/96 soybean meal production 50,000 tons to 32.6 million tons. This change was balanced by a parallel reduction in carryout stocks. The August average soybean meal price jumped to $261 per ton from $252 in July. This helped raise the average 1995/96 soybean meal price forecast from $230 to $235 per ton. ****************************************************************************** Information Contacts: Mark Ash Soybeans, Minor Oilseeds, Fats and Oils (202) 219-0712 Scott Sanford Peanuts, Cottonseed (202) 219-0835 ****************************************************************************** The next Oil Crops Outlook will be released at 4:00 pm ET, October 15, 1996. 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 2,152 2,492 1,365 840 117 2,322 170 1996/97 1/ 170 5 2,270 2,445 1,355 815 115 2,285 160 ------------------------------------------------------------------------------ 1/ Forecast. Table 2--Soybean meal: U.S. supply and 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 32,572 32,875 26,850 5,800 32,650 225 1996/97 1/ 225 32,185 32,500 26,550 5,750 32,300 200 ------------------------------------------------------------------------------ 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 15,288 16,535 13,450 1,075 14,525 2,010 1996/97 1/ 2,010 15,175 17,260 13,550 1,650 15,200 2,060 ------------------------------------------------------------------------------ 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 August1 7.71 118.00 12.70 NA 5.91 -------------------------------------------------------- 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 25.00 26.24 25.50 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 26.56 27.61 27.49 42.50 26.05 November 25.41 26.27 26.25 41.63 25.54 December 24.76 26.10 25.98 39.20 24.99 January 23.69 24.45 24.65 37.25 24.52 February 23.65 24.35 24.23 36.00 24.30 March 23.60 24.25 24.28 36.60 24.34 April 25.82 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 August1 24.00 27.81 24.78 42.60 24.33 ------------------------------------------------------------------------- 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 1995/961 230.00 189.38 130.00 190.00 133.60 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 August1 261.20 192.83 126.25 227.00 170.00 ---------------------------------------------------------------------------- 1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills END-OF-FILE