OIL CROPS OUTLOOK May 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--0595. ----------------------------------------------------------------------------- DESPITE DROP IN 1995 PRODUCTION, AMPLE OILSEED SUPPLIES ARE EXPECTED Planting of full-season soybeans has commenced in the southern States. But a wet, cool spring has put grain planting behind schedule in the upper Midwest. As of May 7, corn had been 20 percent planted compared to the 43-percent average, while spring wheat was 23 percent seeded, compared to the average 67 percent by this date. The delays are weighing on soybean prices, as chances increase that farmers will substitute more soybean acreage. In early March, farmers intended to plant 61.5 million acres of soybeans, down 1 percent from 1994. USDA's first 1995/96 supply and demand forecast assumes the U.S. soybean yield will be at the trend level of 36.5 bushels per acre. The U.S. trend yield is based on a weighted (by acres) average of regional trend yields. With projected harvested area of 60.3 million acres, 1995 soybean production is figured to total 2.2 billion bushels. While this is more than 300 million bushels less than last year, it would still rank as the third-largest U.S. harvest. Soybean crush is projected to drop slightly, to 1,375 million bushels. Exports are also expected to slip to 760 million bushels based on lower available U.S. supplies, reduced demand in Mexico, and a moderate decline in crush margins in the EU. Total demand will exceed production so that ending stocks will decline from this year. But the relatively large 380-million- bushel carryover does not leave much room for a price gain next year. The 1995/96 average price range is $5.10-$6.10 per bushel, compared to $5.40 forecast for 1994/95. Production of soybean oil, at 15.4 billion pounds, should top 1994/95's record output. The heavy soybean crush will allow for a healthy oil export picture and a rebuilding of carryover soybean oil stocks. However, oil exports will sink to 1.9 billion pounds, off 550 million from this year's boom. Abundant sunflower and soybean oil in South America, and a sharp increase (6.7 percent) in palm oil output means more competition for U.S. soybean oil exports. And after 3 years of falling oil stocks, next year's carryover will rise to about 1.4 billion pounds. This suggests soybean oil prices will ease from this year's average of 27 cents per pound to 24.0-27.0 cents per pound in 1995/96. Projected soybean meal production next year is slightly larger (by 35,000 tons) based on a trend extraction rate that is greater than the estimated 1994/95 rate. Like oil, U.S. meal exports are expected to drop, to 5.5 million tons. A much larger carryover of Brazilian soybeans dampens the prospects for U.S. meal exports next year. Soybean meal imports by the EU also are expected to slip. EU grain prices will be further reduced under CAP reform, thus increasing grains' competitiveness against protein meal. U.S. domestic meal disappearance rises 1.6 percent to 27.2 million tons, significantly down from this year's estimated 5.8-percent growth rate. Meal prices should slightly firm in 1995/96, ranging from $155-$175 per ton, compared to $155 per ton this season. OUTLOOK FOR SUNFLOWERSEED PRICES APPEARS WEAKER IN 1995/96 U.S. sunflower production for 1995/96 is forecast down to 4.3 billion pounds. The forecast is based on 3.4 million acres harvested, which represents a normal acreage abandonment from 3.5 million acres of intended plantings. The projected 1995 yield for sunflowers is 1,274 pounds per acre and is well below the 1994 yield of 1,410 pounds per acre. The trend yield is a weighted average of oil-type and confectionery sunflowers. The yield of each type of sunflower is the regional trend yield for 1978-1994, weighted by the prospective regional acreage. Crush in 1995/96 will exceed this year's expected record of 2.55 billion pounds by 15 million. Seed exports will show larger growth, from 551 million pounds to 625 million. So, while total demand rises and production falls, yearend sunflowerseed stocks dip to 675 million pounds, which is still historically large. The expected higher crush and slightly lower prices will sustain solid export demand (750 million pounds) for U.S. sunflowerseed oil, although less than 1994/95 exports. Price reductions in the entire vegetable oil complex next year will depress prices for sunflowerseed oil, and ultimately sunflowerseed. SLIGHT GAIN IN WORLD OILSEED SUPPLIES FOR 1995/96 Larger carryin stocks of oilseeds but smaller world production is seen for 1995/96, resulting in projected world oilseed supplies of nearly 280 million metric tons, up 0.4 percent. Total foreign oilseed production is projected up 1 percent from 1994/95. Except for soybeans, world oilseeds production is rising in response to higher prices. The relative prices of oil and meal favor the production of high oil-content seeds (rapeseed, sunflowerseed). In addition, rising world prices for cotton support higher cottonseed production. Supply and demand for vegetable oils will be the largest uncertainty in 1995/96. Tight palm oil supplies and continued strong vegetable oil demand (from China and other developing countries) have prevented any significant decline in vegetable oil prices. Although palm oil production is expected to sharply increase in 1995/96, the total vegetable oil stocks-to-use ratio will likely remain below average. Slowed growth in protein meal supplies are likely to support slight gains in protein meal prices in 1995/96. Global consumption growth may slow because of weaker demand in developed country markets. Relatively low prices for protein meal, especially soybean meal, will likely continue to support import demand in developing countries and higher consumption in producing countries. EU demand for soybean meal in 1995/96 is likely to slightly drop as grain prices drop relative to soybean meal. SOYBEAN CRUSH FOR 1994/95 UP ON OIL AND MEAL EXPORT GAINS Total U.S. crush for this marketing year was raised to 1,380 million bushels in response to persistent vigor in soybean product exports. Cumulative crush through March was 848 million bushels, or over 10 percent higher than the same period last season. The increase in domestic use lowers ending stocks 10 million bushels, to 425 million. The May forecast for 1994/95 soybean oil production rose because of the higher expected crush. Total output is now forecast at 15.3 billion pounds. Domestic soybean oil disappearance was slightly reduced for 1994/95 based on a year-to-date total that is below last year. The increase in 1994/95 soybean meal production is divided between increases in both domestic use and exports. Domestic disappearance, up nearly 9 percent through February, is forecast up 160,000 tons from last month's forecast, to 26.8 million tons. U.S. SOYBEAN AND PRODUCT EXPORTS REMAIN BRISK IN 1994/95 U.S. soybean meal exports for 1994/95 are expected up from last month to 5.9 million short tons, while U.S. soybean exports remain unchanged at 800 million bushels. Cumulative U.S. meal exports (Oct.-Feb.) of just over 3 million tons are 14 percent larger than last year. U.S. exports continue strong in 1994/95, primarily due to an expected slowing of Brazilian and Argentine soybean exports. In Brazil, expected soybean exports are down 300,000 metric tons, as credit uncertainty and extremely low prices during harvest ($4 a bushel in Matto Grosso), combined with port delays and higher freight costs have significantly diminished the export window for the October-September year. In Argentina, farmer and export sales are sluggish. The harvest pace is significantly below the average level, mainly because of the unusually large second soybean crop (planted in late December). U.S. soybean meal exports have also benefited from a drop in India's expected exports. India's soybean meal export prospects were cut by 444,000 metric tons from last month. Higher domestic use, and a 200,000-metric-ton cut in soybean imports account for lower Indian soybean meal exports. The Government of India (GOI) declared a temporary restriction on soybean imports until after planting (importers were told to import soybeans only between July 15 and September 30). The GOI indicated its concerns that some farmers could use imported soybeans for seeding, with the potential of spreading plant diseases. Indian soybean crushers are unlikely to purchase additional soybeans, as the first of September usually marks the end of their crushing season. U.S. SOYBEAN OIL EXPORTS IN 1994/95 PROJECTED AS THE SECOND LARGEST Continued high palm oil prices and strong vegetable oil demand by China, are expected to push U.S. soybean oil exports in 1994/95 to 2.45 billion pounds, second only to the 2.69 billion pounds of 1979. Cumulative U.S. soybean oil exports from October 1994 through February 1995 were 1.3 billion pounds, with China importing directly 584 million pounds. The 1994/95 total also signifies the first year since 1991/92 that U.S. soybean oil exports have exceeded Brazil's, although both countries still trail Argentina by a wide margin. MEXICO'S PESO DEVALUATION REDUCES OILSEED DEMAND FOR 1994/95 Three months after the peso devaluation, Mexico's oilseed demand is showing the first signs of significant contraction. Cumulative shipments of U.S. soybeans from September 1994 through April 1995 were 1 million metric tons, unchanged from last year. After the peso devaluation, U.S. shipments to Mexico from January through April totaled 686,000 metric tons, compared with 952,000 tons during the same period in 1994. U.S. soybean exports accounted for 90 percent of all Mexican soybean imports in 1993/94. Mexican edible oil and oilseed imports are projected down 22 and 13 percent, while protein meal imports are up 15 percent. Crushing in Mexico remains more profitable than refining oil. But smaller demand for oils and significantly lower prices for protein meals support a reduction in oil and seed imports, but greater meal imports. The outlook for Mexico's 1994/95 oilseed demand remains unclear, as the effect of higher inflation, lower real wages, and rising interest rates continues depressing the domestic market. SMALLER U.S. SUNFLOWERSEED OIL EXPORTS CURB DOMESTIC SEED CRUSH U.S. sunflowerseed and oil exports to Mexico are expected up from 1993/94. Mexico has a preference for sunflower oil, and currently sunflowerseed and oil prices are highly competitive. Slower-than-expected oil exports to Mexico through February lowered projected 1994/95 U.S. sunflowerseed oil exports this month to 772 million pounds, which is still 72 percent above 1993/94. The diminished export prospects have reduced 1994/95 U.S. sunflowerseed crush this month to 2.5 billion pounds, which raised ending seed stocks to over 800 million pounds. CORN OIL EXPORTS ALSO SURGE As with other vegetable oils, U.S. corn oil exports are forecast to climb this year. Record exports of 815 million pounds are expected in 1994/95, up from 705 million in 1993/94. Through February, corn oil exports (see ERS Autofax document #2370) were up nearly 12 percent versus a year ago. Much of the trade expansion has been to the European Union countries. A global shortage in cooking oils has run up prices, generating record production of corn oil in the United States. Outturn for 1994/95 is forecast at 2,150 million pounds, which is nearly 13 percent above the 1993/94 level. A high quality corn crop in 1994 also helped increase oil yields well above those from the poor quality crop of 1993. Growth in domestic disappearance has been sluggish, however, as total use of oils for margarine (a major corn oil market) has dipped. Estimated 1994/95 U.S. disappearance was reduced this month to 1,265 million pounds, which is up from 1,239 million last year. With higher supplies, the lackluster U.S. market is expected to hike ending stocks of corn oil to a relatively high 190 million pounds. The next release of the Oil Crops Outlook is scheduled for 4:00 p.m. ET Tuesday, June 13. ****************************************************************************** Information Contacts: Mark Ash Soybeans, Minor Oilseeds, Fats and Oils (202) 219-0838 Scott Sanford Peanuts, Cottonseed (202) 219-0835 Jaime Casteneda World Oilseeds (202) 219-0826 ****************************************************************************** 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 8 2,558 2,775 1,380 800 171 2,351 425 1995/96 2/ 425 5 2,200 2,630 1,375 760 116 2,250 380 ------------------------------------------------------------------------------ 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 30,417 30,691 25,185 5,356 30,541 150 1994/95 1/ 150 32,650 32,860 26,600 5,900 32,660 200 1995/96 2/ 200 32,685 32,950 27,200 5,500 32,700 250 ------------------------------------------------------------------------------ 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 15,317 16,430 12,950 2,450 15,350 1,030 1995/96 2/ 1,030 15,400 16,440 13,100 1,900 15,000 1,490 ------------------------------------------------------------------------------ 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 86.00 12.60 NA 4.52 1994/95 September 5.47 101.00 10.70 30.30 4.54 October 5.30 96.00 10.80 28.80 4.49 November 5.36 106.00 10.60 25.60 4.51 December 5.41 119.00 10.30 25.40 4.71 January 5.47 120.00 10.60 25.70 4.75 February 5.40 103.00 10.80 NA 4.94 March 5.51 NA 10.40 NA 5.15 April1 5.57 NA 10.40 NA 5.20 -------------------------------------------------------- 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 April1 27.16 24.00 26.90 41.25 27.30 ------------------------------------------------------------------------- 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 April1 160.16 98.13 62.50 125.00 94.38 ---------------------------------------------------------------------------- 1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills END-END-END