OIL CROPS OUTLOOK                                              April 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-0496.  
------------------------------------------------------------------------------
 
U.S. SOYBEAN CRUSH TO WANE
 
Projected soybean crush for 1995/96 was lowered 10 million bushels this month
to 1,360 million.  This season's cumulative crush (through February) was 710
million bushels.  This was just below last year's record of 718 million
bushels, but the strong export boom of 1995 for soybean oil and meal had not
yet occurred.  With few signs of a pickup in U.S. soybean product exports and
a new harvest of South American supplies imminent, domestic soybean crush may
be hard to revive this season.  Weekly March crush data from the industry were
down about 13 percent from March 1995.  Domestic use also increased from
relatively large prospective plantings that raised expected seed use to 70
million bushels.
 
U.S. 1995/96 SOYBEAN EXPORTS ESTIMATE RAISED AGAIN
 
U.S. soybean exports are expected to reach 825 million bushels (22.4 million
metric tons), up 2 percent from last month, but down 2 percent from last
year's estimate.  This would cut 1995/96 ending stocks to 190 million bushels. 
As of March 28, U.S. export shipments of soybeans for 1995/96 totaled 600
million bushels, and were running 1 percent ahead of last year's pace.  On the
other hand, outstanding export sales were 21 percent below the same date a
year earlier.  U.S. soybean exports are benefiting from an anticipated sharp
decline in South American production and exports, and an increase in China's
imports.  Higher than average second crop planting for the new Brazilian and
Argentine crops could also delay shipments and extend U.S. exports.  Greater
Asian investment in crushing facilities, increased consumption of food
soybeans, and a gradual reduction of import duties have also aided U.S.
soybean export prospects for 1995/96.
 
Brazil soybean exports are expected to fall 300,000 tons this month to 3.1
million metric tons.  This is contingent on production of 23.0 million tons
and the continuation of a newly implemented value-added (ICMS) tax for Rio
Grande do Sul and Santa Catarina.  Any additional reduction in Brazil's
supplies and the potential reduction of the ICMS in the State of Parana would
further shorten Brazil's export forecast.  The state legislature of Rio Grande
do Sul (Brazil's largest soybean and product exporter) authorized a
modification of the state value-added tax on exports of soybean meal and
soybean oil to 5 percent from 8 and 11.1.  Because this reduction gave Rio
Grande do Sul crushers a significant advantage over their neighbors, the
crushing industries of Santa Catarina and Parana have followed with lawsuits
against their own state governments requesting equal treatment for ICMS taxes.
 
The new ICMS has the potential to dramatically alter Brazil's soybean exports. 
The differential export tax is expected to climb from 2 and 5 percent for meal
and oil, respectively, to 8 percent for both meal and oil.  Given the large
idle capacity in the Brazilian crushing industry, the lower cost of domestic
soybeans will likely encourage an expansion in soybean crush, while depressing
soybean exports.  Furthermore, this year's anticipated lower production and
the increasing differential export tax could lead to a substantial reduction
in Brazil's soybean exports, while increasing soybean product trade.
 
China is projected to become a net importer of soybeans for the first time
since 1981.  China's soybean production forecast was lowered 500,000 tons to
14 million tons this month.  The decline, along with increasing demand for
soybean meal, has pushed expected soybean imports to 600,000 tons for 1995/96. 
The United States is projected to ship approximately 300,000 tons, while the
remainder will be supplied by Canada, South America, and Russia.  The
magnitude of China's soybean imports will heavily depend on how much soybean
meal is imported in 1995/96.
 
Soybean imports by Indonesia, Malaysia, Vietnam, and Thailand are projected to
rise due to policy reforms, and economic and population growth.  While in
1993/94 China exported more than 1 million tons of soybeans, Chinese soybean
exports to Asian markets are expected to drastically decline in 1995/96 to
only 300,000 tons.  Several of these markets have switched to the United
States for soybeans, while exports from India and South America will likely
replace Chinese soybean meal exports.
 
TIGHT CORN SUPPLY HELPS CARRY SOYBEAN MEAL PRICE HIGHER
 
Despite a plunging hog-corn price ratio, USDA's Hogs and Pigs report indicated
that the total U.S. swine population on March 1 was still slightly above a
year earlier.  Strong pork exports to Japan have helped buoy hog prices.  Yet,
signs of smaller herds in the future (hence smaller protein meal consumption)
are starting to appear.  The fall pig crop and December 1 inventory were
revised downward.  March 1 breeding animals were down from last year and the
previous quarter.  Weekly hog slaughter data in March suggest that a slight
increase in sow slaughter may be beginning.  March-May 1996 farrowing
intentions are 1 percent below last year and June-August farrowing intentions
are the same as a year earlier.
 
The slowdown in soybean meal consumption also could show up soon in the
poultry sector.  But, hatching data through February are still above a year
ago, indicating that any contraction has not yet started.
 
USDA's Grain Stocks report indicated that soybean stocks as of March 1 were
180 million bushels below last year's ample amount.  Total use for the first
half of 1995/96 was just 60 million bushels less than the first half of
1994/95.  The report also confirmed a substantial reduction in stocks of corn
and other feed grains since last year, suggesting significant rationing and
scrounging for substitutes are needed for the last half of the season.  Old
crop futures prices for corn, soybeans, and soybean meal surged soon after
this report was released.  With a reduction in crush, even shorter (down
250,000 tons) soybean meal supplies are anticipated from last month.  So,
given no change in domestic use from the March forecast, USDA raised its
projected 1995/96 price range for soybean meal to $215-$235 per ton.
 
SHARPER COMPETITION DAMPENS U.S. SOYBEAN MEAL TRADE
 
U.S. soybean meal exports are down 200,000 tons from the March projection to
5.4 million short tons and 1.3 million tons less than 1994/95.  Although
soybean meal demand from China and other Asian countries is projected up,
strong competition from South American soybean meal and lower U.S. soybean
meal production are expected to limit U.S. soybean meal exports in 1995/96. 
As in 1993/94, another strong meal market year, relatively low carryout stocks
of meal at mills (150,000 tons) are anticipated. 
 
Normally, South American soybean meal exports gradually dip during the
October-March.  However, extremely low prices at harvest (April-July 1995) in
Brazil and Argentina led farmers and the government to store more soybeans
than usual.  Rising soybean prices by late October 1995 and intentions by
Brazil's Rio Grande do Sul to reduce the ICMS tax for soybean meal and oil
pushed South American soybean farm sales and soybean crush to levels above the
average for October 1995-March 1996.
 
Projected 1995/96 soybean imports into the EU were lowered this month to 14.5
million tons, down 300,000 tons from March.  While the year-to-date U.S.
shipments to the EU are just slightly below last year, soybean imports from
South America are expected to fall during April-September.  Reduced crush
margins and a large rapeseed crop are the primary reasons for this decline. 
Although the EU program to counteract the Mad Cow disease will dramatically
reduce the number of cattle in the UK, the overall effect on meat consumption
and meat and bone meal use is unclear.  UK beef consumption will undoubtedly
fall in 1995/96.  However, the extent of this decline and the prospects for an
increase in consumption of other meats such as pork and poultry are yet
uncertain.  
 
The effects of the ban on meat and bone meal on EU soybean meal consumption
and imports is clouded by the fact that meat and bone meal consumption will be
permitted if the meal receives a treatment process.  This process is already
in place in several EU countries.  In addition, rapeseed meal is primarily
used in the UK dairy industry, and these and other feedstuffs will compete
with soybean meal for any increase in demand for protein meals.
 
China is projected to become a net importer of soybean meal for the first time
ever.  Factors affecting China's soybean meal imports include falling domestic
soybean meal production, rising production of meat, reduced import tariffs,
and a projected decline in fish meal use for calendar year 1996.  Despite an
increase in soybean imports, a large drop in soybean production will likely
reduce China's soybean meal production by more than 10 percent from the
1994/95 record.  A rapid increase in fish meal prices relative to soybean meal
prices, and a reduction in soybean meal import tariffs from 20 percent to
equal the 5-percent fish meal tariff, are expected to displace fish meal in
favor of soybean meal imports during January-September 1996.  China imports
about 90 percent of its fish meal from Peru.  A significant drop in the
Peruvian fish catch during the last quarter of 1995, and a fishing ban since
February 1, 1996, have crippled that country's flow of fish meal exports and
pushed fish meal prices to record levels.
 
GROWTH IN DOMESTIC SOYBEAN OIL SUPPLY SLOWS 
 
Projected soybean oil production in 1995/96 was adjusted downward again this
month because of lower crush and a lower oil extraction rate.  The
October-September expected crush of 1,360 million bushels times the
11.15-pounds-per-bushel extraction rate would produce 15,180 million pounds of
oil.  This would
be down 165 million pounds from the March forecast.  Falling production also
slowed accumulation of oil stocks at mills and warehouses.  March 1 stocks
increased only 9 million pounds from the beginning of February.  Even so, oil
stocks were 35 percent above a year earlier.  The slowdown in crush has firmed
soybean oil prices, which averaged 23.5 cents per pound in March.  The
projected 1995/96 price was raised slightly this month to 23.5-25.0 cents per
pound.
 
WINDOW NARROWS FOR U.S. VEGETABLE OIL EXPORTS
 
U.S. soybean oil exports are projected to fall again this month to 1,550
million pounds (703,000 metric tons), 6 and 42 percent lower than the previous
month and year, respectively.  The dimmer U.S. soybean oil outlook stems from
a remote possibility of any surge in Chinese imports of U.S. soybean oil,
large foreign shipments of sunflower and rapeseed oil to formerly
U.S.-subsidized markets, and heavy selling of soybean oil by South American
exporters during October-March 1996.
 
China's ample supplies of domestic rapeseed and peanut oils, coupled with a
boost in soybean oil imports from South America during October-January, have
built up vegetable oil supplies.  This has eased prices and limited China's
import requirements.  The difference between Chinese and international soybean
oil prices is an indicator for potential imports.  Currently, this gap is the
narrowest since early 1994.  By this time last year, China had taken 906
million pounds of U.S. soybean oil.  This season, just 277 million pounds have
been shipped to China.
 
Global soybean oil import demand is projected down as competition from
rapeseed, sunflower, and palm oils put pressure on vegetable oil prices. 
Countries in North Africa and the Middle East that have a consumer preference
for sunflower oil are enjoying sunflower oil prices below those for soybean
oil.  Soaring supplies of European rapeseed and sunflowerseed from Argentina,
Ukraine, and Russia will prevent any significant rebound in global and U.S.
exports of soybean and sunflower oil during 1995/96.  This may cause U.S.
sunflowerseed crush and oil production to tumble about one-fifth from the
1994/95 record.
 
U.S. SOYBEAN ACREAGE TO HOLD ITS GROUND IN 1996
 
Based on farmers' intentions as of early March, USDA projects soybean area
planted at 62.5 million acres, nearly unchanged from 62.6 million a year ago. 
Most States indicate little change from last year, with acreage reductions in
Indiana, Ohio, Arkansas, and Louisiana being almost fully offset by increases
in Iowa, the Lake States, and the Great Plains.  Iowa, Minnesota, Wisconsin,
Nebraska, Illinois, South Dakota, and North Dakota farmers will plant record
or near-record soybean acreage this spring.  States that had larger soybean
area generally dropped cotton, oats, and sunflower acreage.  New-crop soybean
prices that now exceed $7 per bushel may prompt an increase in double cropping
with wheat in the South and are bidding some land away from cotton.  However,
if dryness in winter wheat areas persists, it may hold back some double
cropping of soybeans.
 
States that had smaller soybean area generally had more corn, barley, and
wheat acres.  Despite higher soybean prices, even tighter wheat and corn
markets are pulling up grain acreage at the expense of soybeans.  With the
price ratio of November soybeans futures to December corn futures being
slightly favorable to corn, soybeans will be less competitive this year in the
major producing regions.  New-crop futures (November 1996) prices sharply
increased after the Prospective Plantings report was issued, reflecting the
market's desire for more corn acreage without reducing soybean acreage to less
than 62.5 million.
 
U.S. SUNFLOWER, FLAXSEED AREA TO DROP
 
Attractive prices for barley, spring wheat, and corn are curtailing farmers'
plans to plant sunflowers this spring.  And a flat vegetable oil market this
year will depress returns for high oil-yielding crops more than for soybeans. 
The intended acreage for sunflowers is 3.0 million acres, down 13 percent from
1995.  Farmers in North Dakota (the largest producing State) reported a
2-percent increase in intended acreage, most of which is for the non-oil
variety.  Despite favorable prices, persistent disease problems in wheat may
have induced North Dakota farmers to consider more oilseeds in their rotations
this year.  But reductions in all other producing States (for both oil and
non-oil types) result in a net decline in U.S. sunflower area.
 
Flaxseed acreage would continue its downward trend, falling 4 percent from
1995 to 158,000 acres.  North and South Dakota account for all of this year's
decline.
 
NEW FARM POLICIES AFFECTING OILSEEDS
 
On April 4, President Clinton signed the Federal Agricultural Improvement and
Reform Act, which establishes farm policy for the next 7 years.  The new law
eliminates annual acreage reduction programs, which sometimes held down
acreage planted to oilseeds.  Producers' payments will now be made on 85
percent of a farm's contract acreage and program yield.  Farmers are allowed
to plant any crop (excluding fruits and vegetables) on this acreage without
risking future government payments.  The 0-85/92 program, which permitted
planting of minor oilseeds on program acres, is eliminated.  However, the new
flexibility provisions give farmers the same freedom to idle land or plant
alternative crops, including soybeans.  High grain and soybean prices this
spring will likely bring more acreage into production that was idled under the
0-85/92 program last year.  Greater planting flexibility is apt to replace
continuous corn production with a half corn-half soybean rotation.  It may
also shift more rice acres in the Delta to production of soybeans.
 
Loan rates for oilseeds were set at 85 percent of the average price for the
preceding 5 years (excluding the high and low years).  This change makes loan
rate determination for oilseeds on the same basis as other program crops. 
However, the rates cannot fall below $4.92 per bushel for soybeans or exceed
$5.26.  Under the new formula, the 1996 rate would be about $4.97 per bushel
and with high prices again in 1996, the loan rate could be near $5.26 by 1997. 
The loan rate for 1995 was $4.92.  This change adds greater security to some
farmers and may marginally increase soybean acreage, most likely in the South. 
Similarly, the minimum and maximum loan rates are $8.90 and $9.30 per
hundredweight, respectively, for sunflowerseed, canola, rapeseed,
safflowerseed, flaxseed, and mustard seed.
 
In another influential provision for oilseeds, the new farm legislation
reauthorizes the Conservation Reserve Program (CRP).  The act caps CRP
enrollment at 36.4 million acres. It also permits, with 60 days notice to
USDA, withdrawal of less environmentally sensitive acreage that has been
enrolled in the program for at least 5 years.  Previously, USDA announced that
it would only grant early release for CRP acres that would have expired in
September 1996 and that are not highly erodible or otherwise environmentally
sensitive.  For contracts expiring this year, farmers also have the option to
extend for 1 year.  Farmers can sign up for the early out option through May
31 to make the land eligible for production flexibility contract payments in
1996.
 
Given the compressed period available to complete the paperwork and the extra
preparation necessary to return the land to crop production, USDA analysts
estimate that only about 1 million acres may be freed up for crop production
this year, with just a small boost to soybean acreage.  Beyond 1996, the
impact will undoubtedly increase net soybean acreage.  Potential increases in
plantings are subject to how farmers evaluate their expected future returns
from farming the land eligible for early out versus the rental rates, which
are to be based on the land's fair market value.
 
Programs for export credit guarantees, foreign food assistance (PL-480), and
the Export Enhancement Program (which includes vegetable oils) were also
extended.  Funding rates for EEP are set just below the amount permitted under
the recently reformed General Agreement on Tariffs and Trade (GATT).  The law
also establishes the National Canola and Rapeseed Board, an organization
formed to fund research and promote food and industrial uses of canola and
rapeseed, which is to be funded by assessments on producers' marketings.
 
******************************************************************************
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 Oil Crops Outlook is scheduled for 4:00 pm ET Monday, May 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     209    6    2,517    2,731     1,405    838    153    2,396    335
1995/96 1/  335    5    2,152    2,492     1,360    825    117    2,302    190
------------------------------------------------------------------------------
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 tons-----------------------------
 
1993/94     204     30,514    30,788       25,283   5,356   30,638    150
1994/95     150     33,265    33,479       26,538   6,717   33,256    223
1995/96 1/  223     32,407    32,700       27,150   5,400   32,550    150
------------------------------------------------------------------------------
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---------------------------
 
1993/94     1,555   13,951   15,574       12,941   1,529   14,471   1,103
1994/95     1,103   15,613   16,733       12,916   2,680   15,596   1,137
1995/96 1/  1,137   15,180   16,360       13,150   1,550   14,700   1,660
------------------------------------------------------------------------------
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        5.45  101.00    10.60    29.00   4.65
 
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  103.00    10.30    25.80   4.71
January        5.47   95.00    10.60    25.70   4.76
February       5.40   70.00    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         5.84  100.00    11.70    30.70   5.16
 
1995/96
September      5.99  100.00    11.00    29.70   5.11
October        6.15   99.00    11.00    28.80   5.11
November       6.39  114.00    10.80    29.50   5.13
December       6.76  116.00    10.90    28.30   5.03
January        6.78   98.00    11.00    29.80   5.27
February       7.01  120.00    11.50     NA     5.18
March1         6.97    NA      11.70     NA     5.30
--------------------------------------------------------
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 
                                                   
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
March1        23.60    24.25   24.28  36.60  24.34
-------------------------------------------------------------------------
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        meal/2  meal/3  meal/4  meal/5  meal/4
---------------------------------------------------
                        $/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
 
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
March1      226.57  195.63  123.50  210.00  155.00
----------------------------------------------------------------------------
1/ Preliminary. 2/ Hi-pro Decatur. 3/ 41% Memphis. 4/ Minneapolis. 5/ 50% SE
mills.
 
                                   END-END-END