OIL CROPS OUTLOOK August 14, 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-0895. ----------------------------------------------------------------------------- SOYBEANS TAKE THE HEAT A high pressure system paused over the Midwest in July, swelling temperatures above normal for several weeks. While the heat has increased stress and water demand on the soybean plant at a critical reproductive period, soil moisture remains adequate. Rains in late July and early August have improved crop conditions. Reports indicate that late-planted soybeans in Illinois, Missouri, Kansas, Nebraska, and Indiana have been stunted by the hot weather and are well behind in blooming and pod formation. Another extended hot spell in August without accompanying rainfall would be detrimental for good pod development throughout the Midwest. Short plants also make soybeans more difficult to harvest, which could result in higher field losses this fall. While conditions in the northern production area (Minnesota and Iowa) are generally better than in the central part, crop conditions and projected yields in nearly every major producing State are well below 1994. For instance, in Illinois, 53 percent of the soybean crop is in good-to-excellent condition as of August 6, compared to 73 percent last year. Only 21 percent of the Illinois acreage had formed pods by this date, compared to the 58- percent average. Despite these concerns, the August Crop Production report indicated a relatively normal 1995/96 national average soybean yield of 36.4 bushels per acre, based on surveys conducted through August 1. However, due to the lateness of this year's development in some States, the estimate will be tentative until the September production report, when a more reliable pod count can be made in these States. Better weather in late June allowed U.S. farmers to plant 62.6 million acres, just 520,000 less than initial intentions. Fewer acres were seeded than intended in South Dakota, Illinois, and Missouri, but farmers in Nebraska and Indiana partly compensated with more late planting. Harvested area is estimated about a half million acres lower than last month at 61.7 million acres, reflecting reduced plantings. Based on the expected yield estimate, U.S. soybean production 1995/96 is forecast at 2,246 million bushels. The 1995/96 supply and use forecasts for July and August are nearly identical. Smaller soybean supplies and weaker export demand for U.S. soybean meal in 1995/96 are still expected to trim crush and meal production from 1994/95. Larger inventories of meal held by protein meal buyers, who are taking advantage of this year's favorable prices, should also hold down 1995/96 soybean meal production. Early in the marketing year, higher prices and a smaller pig crop in the third calendar quarter should scale back protein meal use in feed rations. But based on expected farrowings, hog feeding will likely rebound to a record high in the fourth quarter of 1995. This should keep domestic disappearance little changed from 1994/95's rapid pace. U.S. soybean oil exports for 1995/96 are still anticipated to slip, from 2.6 billion pounds to 2.2 billion. Given an abundant South American carryover and robust crush this fall, the U.S. world market share should shrink from 22 to 19 percent in 1995/96 as smaller available supplies of soybeans and soybean oil are anticipated in the United States. Domestic disappearance should continue to grow slowly. The expected dropoff in demand should permit ending stocks of soybean oil to rebuild and prices to ease a little. STRONG FINISH FOR 1994/95 U.S. SOYBEAN AND SOYBEAN OIL EXPORTS EXPECTED Ending stocks of soybeans for 1994/95 are estimated 5 million bushels lower this month to 380 million, based on a higher export forecast. U.S. soybean and soybean oil exports are estimated higher this month, to 825 million bushels and 2,625 million pounds, respectively, reflecting the heady pace of shipments. Although U.S. soybean exports are still declining from month to month, soybean sales have exhibited seasonal strength due to buoyant world demand and slow shipments from South America. Brazilian and Argentine 1994/95 season total soybean exports are estimated down 200,000 and 150,000 metric tons this month, because of sluggish sales to Europe and unusual stock holding by farmers and the central government in Brazil. WORLD OILSEED PRODUCTION PROJECTED DOWN IN 1995/96 World oilseed production, though projected marginally higher this month to 254.4 million metric tons, is still down almost 6 million tons from 1994/95. Small increases in soybeans, rapeseed, sunflowerseed, and peanuts more than offset small declines in copra, cottonseed, and palm kernel. Global rapeseed output is projected up to 32.5 million tons based on sharp expansion of European Union and Chinese production. Excellent conditions at harvest for France and the U.K. boosted yields in both countries to the largest levels since 1990. Reports following China's harvest of winter rapeseed show higher area and improved yields. Canada's rapeseed (canola) production is projected lower by 200,000 tons to 6.4 million, due to growing conditions that have damaged yield prospects. Argentine sunflowerseed outturn is expected up by 200,000 tons in response to a severe drought in southern Buenos Aires and Cordoba provinces that curtailed wheat plantings. Hungary's sunflowerseed output is forecast at a record 900,000 tons, up 100,000 tons from last month's projection. Area and yields are benefiting from last year's striking returns for sunflowerseed and fair growing conditions in 1995/96. U.S. SOYBEAN AND SOYBEAN MEAL EXPORTS UNCHANGED IN 1995/96 This month's negligible change in total supplies left the export forecasts for U.S. soybeans and soybean meal unchanged, at 21.8 and 5.3 million metric tons. However, larger Argentine and Brazilian soybean carryover in 1994/95 will likely push their total crush and soybean meal exports to a record in 1995/96. CHINA'S EDIBLE OIL DEMAND CLOUDS VEGETABLE OIL PROSPECTS FOR 1995/96 China remains the largest source of uncertainty for 1995/96, with rapeseed oil imports shrinking 200,000 tons to 450,000 this month. Flat demand in China and keen domestic offtake in the EU will likely drive EU rapeseed exports down almost 200,000 tons to 1.6 million (including intra-trade). The large expansion in industrial EU oilseed area last year reflects the attractiveness of the different pilot programs for biodiesel within Europe. EU farmers have used the flexibility of the programs to increase production and consumption. Malaysian palm oil exports are projected down from last month to 6.9 million tons, based on less than anticipated production for 1994/95 and 1995/96. Palm oil imports in India are projected at 525,000 tons, up 100,000 from last month, based on expected declining supplies of peanut oil and a substantial demand for vegetable oil. Global copra exports are also projected down, reflecting expectations for lower output in the Philippines. SUMMER WEATHER GENERATES PRICE RALLIES FOR SOYBEAN OIL AND MEAL The price spread for soybeans between Gulf ports and Illinois processors was about 40 cents in July, which is unusually strong for this time of year. While some of the price rise may be due to higher barge rates on the Mississippi River, it also suggests that soybean export demand is seasonally good. Soybean crush is also experiencing a seasonal slowing, but is still high for this time of year. This June was the first time that June crush (105.6 million bushels) had ever exceeded 100 million bushels. The remaining 208 million bushels needed to reach USDA's 1994/95 crush projection of 1,395 million bushels suggests record monthly crush for July and August. Stocks of soybean oil dropped again, falling to 1,107 million pounds at the end of June. This implies better than expected domestic disappearance in 1994/95, which was raised 50 million pounds to 12,950 million this month. Cumulative soybean oil exports through May increased to 2.24 billion pounds, up from 996 million last season. A slightly more promising sales outlook caused USDA's 1994/95 export projection to rise by 25 million pounds. End-of- September stocks are now projected to fall to 1,025 million pounds, below last season's very low carryout. U.S. soybean oil prices rallied to average 27.6 cents per pound in July as high temperatures stressed crops. The world market also watched the weather situation in India, the world's second-largest consumer of vegetable oils. The late monsoon threatened groundnut production (the source of India's principal cooking oil) and delayed the seeding of soybeans and rapeseed. Daily soybean oil prices receded to nearly 26 cents per pound after rains in the Midwest and after the monsoon rains finally arrived in the parched areas of India's northwestern oilseed growing region, allowing planting to commence. In July, the price for high-protein soybean meal averaged $170.45 per ton, its highest level of 1995. Daily prices dropped late in the month as some growing areas received much needed rain. The estimated average price for 1994/95 increased this month to $160 per ton. SUNFLOWER PRODUCTION APPEARS HEALTHY Warm weather has accelerated sunflower development, although progress is still behind normal. In early August, 32 percent of the sunflower crop in North Dakota had reached the bloom stage, compared to the 43-percent average. Though trailing in development, 81 percent was rated in good to excellent condition. ****************************************************************************** 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 ****************************************************************************** The next release of the Oil Crops Outlook is scheduled for 4:00 p.m. ET Wednesday, September 13. 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 2,558 2,773 1,395 825 173 2,393 380 1995/96 2/ 380 5 2,246 2,631 1,385 800 121 2,306 325 ------------------------------------------------------------------------------ 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 33,015 33,225 26,725 6,250 32,975 250 1995/96 2/ 250 32,920 33,235 27,100 5,885 32,985 250 ------------------------------------------------------------------------------ 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 15,487 16,600 12,950 2,625 15,575 1,025 1995/96 2/ 1,025 15,510 16,545 13,000 2,205 15,205 1,340 ------------------------------------------------------------------------------ 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 July1 5.93 NA 11.50 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 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 July1 27.60 28.26 28.69 39.13 27.38 ------------------------------------------------------------------------- 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 July1 173.25 116.25 73.75 138.75 92.50 ---------------------------------------------------------------------------- 1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills END-END-END