OIL CROPS OUTLOOK December 13, 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-1295. ----------------------------------------------------------------------------- SOUTH AMERICAN SITUATION AFFECTS U.S. MARKET OUTLOOK The current pace of soybean exports for 1995/96 is slightly ahead of a year earlier, but higher prices are expected to slow foreign use later in the crop year. Recent EU initiatives are adding to grain availability that will substitute for EU soybean imports and soybean meal consumption. Slow marketings by Brazil earlier this year helped 1994/95 U.S. exports to a strong finish. But rising prices since last summer will help bring the seasonally large Brazilian stocks to market, competing head-to-head with this fall's marketings from the United States. And unlike last season, when Brazil imported 26 million bushels of soybeans from the United States, little such trade is expected this year. Brazil's imports from all sources are projected 1 million metric tons lower than in 1994/95. SOYBEAN MEAL PRICE CONTINUES CLIMBING Uncertainty regarding the prospects for Brazilian acreage and production is supporting U.S. soybean meal and soybean prices. U.S. farm prices rose significantly in November, to $6.43 per bushel, up from $6.15 in October. The Decatur, Ill., high-protein meal price reached $204 per ton in November, $37 higher than just 3 months earlier. Credit difficulties for farmers are expected to reduce Brazilian soybean production from last year as fewer inputs are applied. And if the current dry spell in southern Brazil persists, world prices could soar early in 1996. The dryness has already prevented farmers from planting at their usual rate. Continuing dryness could cause poor seed germination and weak plant establishment. U.S. export sales of soybean meal are trailing last year's pace, but could soon pick up. Soybean meal stocks at U.S. mills plunged in October, indicating a strong offtake during the month. Larger rapeseed crops in Europe this year help reduce the need to crush as many imported soybeans to satisfy oil requirements. SOYBEAN OIL TAKES A BACK SEAT AGAIN With global tightness of vegetable oils easing and protein meal demand strengthening, the oil market again returns to a secondary role for determining soybean product value. Rising input prices and falling oil prices are squeezing crush margins from a year ago. End-of-month stocks of soybean oil rose in October to the highest level since August 1994 as production rebounded. Total use of soybean oil in October was down markedly from October 1994, which also contributed to higher stocks. Export sales and shipments of U.S. soybean oil are significantly below this time last year. But lower U.S. prices should soon perk up exports. U.S. soybean oil prices have fallen steadily throughout 1995, from 29.0 cents in January to 25.4 cents in November. Concerns about South American production should keep prices from sinking much further, however. China remains the key player in the world oil market. However, China is currently taking much of its soybean oil imports from South America, so U.S. oil exports likely will not pick up for several more months. FOREIGN OILSEED PRODUCTION STILL PROJECTED DOWN FROM LAST YEAR Despite increases this month for Argentina, China, India, and Europe, 1995/96 foreign oilseed production remains substantially below last year's record. Rain returned to most of Argentina's soybean and sunflowerseed producing areas, providing relief from the severe drought. Both Argentine sunflowerseed and soybean yields were raised this month, boosting soybean and sunflowerseed production to 12.7 and 5.8 million metric tons, respectively. Although growing conditions for soybeans have deteriorated in southern Brazil, Brazil's estimated 1995/96 soybean output remains unchanged from the November forecast because the window of opportunity for planting remains ample and weather could turn favorable. Corn that has already been planted in Brazil is in poor condition, so an improvement in moisture conditions could shift some acreage to soybeans through replanting. Signs of larger area and yields are driving crop prospects for rapeseed in India to a near-record 6 million tons. Foreign soybean trade for 1995/96 is unchanged from last month, while soybean meal trade is projected to fall 1 percent to 31.6 million tons. All of this month's decline in meal trade is in imports by the EU, where consumption is projected to drop 1 percent to 23.9 million tons. Strong world soybean meal prices, increasing EU sorghum imports, and a current EU tax on wheat exports, should favor consumption of grains over soybean meal. Global economic conditions favor imports of soybeans over soybean meal by the EU. Crush margins remain favorable and have risen since May, while the soybean-soybean meal price ratio is down 11 percent since June 1995. In Brazil, projected soybean meal consumption is 4.95 million tons, up 150,000 from last month but unchanged from 1994/95. Extremely low soybean meal prices pushed Brazil's domestic consumption to a record high during 1994/95. Strong corn prices and robust poultry production in Brazil are expected to maintain soybean meal consumption at last year's level. Global soybean oil exports climbed slightly in response to gains in the Argentine soybean crush. Soybean oil imports were raised this month in Iran, Chile, Colombia, and Peru. Falling soybean oil prices are expected to boost consumption in these countries to levels obtained in 1994/95. ****************************************************************************** Information Contacts: Mark Ash Soybeans, Minor Oilseeds, Fats and Oils (202) 219-0712 Scott Sanford Peanuts, Cottonseed (202) 219-0835 Jaime Castaneda World Oilseeds (202) 219-0826 ****************************************************************************** The next release of the OIL CROPS OUTLOOK is scheduled for 4:00 p.m. ET Friday, January 12. 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 1,405 838 153 2,396 335 1995/96 2/ 335 5 2,183 2,523 1,395 800 113 2,308 215 ------------------------------------------------------------------------------ 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 33,265 33,479 26,538 6,717 33,256 223 1995/96 2/ 223 33,042 33,325 27,000 6,100 33,100 225 ------------------------------------------------------------------------------ 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 15,613 16,733 12,916 2,680 15,596 1,137 1995/96 2/ 1,137 15,695 16,845 13,050 1,950 15,000 1,845 ------------------------------------------------------------------------------ 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 1994/95 5.45 101.00 10.60 29.00 4.65 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 10.50 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 1995/96 September 5.99 99.00 11.00 29.70 5.11 October 6.15 97.00 11.00 28.80 5.11 November1 6.43 114.00 10.70 28.70 5.04 -------------------------------------------------------- 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 23.67 45.50 27.50 1991/92 19.10 20.10 21.63 27.30 25.82 1992/93 21.40 25.00 25.37 27.40 20.90 1993/94 27.09 27.78 31.08 43.20 26.38 1994/95 27.55 25.80 28.10 44.30 26.47 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 27.16 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 27.47 41.50 26.35 September 26.21 26.50 27.41 41.30 25.93 1995/96 October 26.57 28.12 27.49 42.50 26.05 November1 25.41 26.88 26.48 41.63 25.54 ------------------------------------------------------------------------- 1 Preliminary 2 Decatur 3 Beginning Oct 1995, 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 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 September 180.99 137.60 NA 142.00 112.50 October 193.90 153.25 82.88 132.50 131.00 November1 204.07 165.00 95.50 175.00 144.00 ---------------------------------------------------------------------------- 1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills END-END-END