OIL CROPS OUTLOOK                                            February 11, 1999
February 1999, ERS-OCS-1999
             Approved by the World Agricultural Outlook Board
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OIL CROPS OUTLOOK is issued monthly a year by the Economic Research 
Service, U.S. Department of Agriculture, Washington, DC 20036-5831. 
Electronic release only; no published copies are available.   
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Bumper Harvests, Macroeconomics Improve South American Export
Competitiveness

Late last year, Brazil's federal government introduced a fiscal
reform plan aimed at reducing the nation's large budget deficit. 
But resistance in Brazil's Congress and a moratorium on debt
payments by major states to the federal government undermined
investor confidence in the proposed reforms and initiated a
serious flight of capital.  Defending the the country's currency,
the real, had sharply diminished dollar reserves, so on January
13, Brazil's central bank was forced to devalue by 8 percent. 
This limited devaluation was unsuccessful, so the managed
exchange rate was subsequently abandoned and allowed to float
freely.  The real has since depreciated nearly 60 percent against
the value of the U.S. dollar.

For soybeans, the immediate impact of these events will be
modest.  The devaluation has raised Brazil's internal soybean
prices and would spur marketing and export of remaining old crop
supplies.  This does not affect new crop production, but should
accelerate the marketings in 1998/99 at the expense of the next
marketing year.  Carryover supplies for 1999/00 would have been
even greater in the absence of devaluation.  Projected 1998/99
exports by Brazil are raised this month to 9.2 million tons, but
the increase is primarily because of larger expected supplies. 
Ample and timely rains raised the forecast 1999 Brazilian harvest
to 30.5 million metric tons.  The 1998 crop was also revised
higher to 31.5 million tons, lifting the estimate of 1998/99
beginning stocks to 5.6 million tons.  Brazil's domestic crush
was unchanged as higher internal soybean prices and lower product
prices (as a result of greater Argentine crushing) will pressure
Brazilian crush margins.

Higher prices are also expected to cut Brazil's 1998/99 internal
consumption of soybean meal to 5.55 million tons, which would
represent no increase from last season.  However, reduced
domestic use could be largely offset by greater Brazilian meal
exports, which are forecast higher to 10.8 million tons.  If
Brazil's recession worsens, total trade with Latin American
neighbors could drop and may weaken meal demand in those
economies as well.

The devaluation's inflation of domestic soybean prices partially
offsets the global price decline, cushioning the likely decrease
in Brazilian soybean plantings late this year.  Productivity for
the 2000 crop will suffer as imported inputs such as fertilizer,
chemicals, farm equipment, and improved seeds will be much
costlier.  The export competitiveness of Brazil's soybeans would
be very strong next year, provided the government does not
reimpose any export taxes.  For the long term, credit will still
be difficult to obtain because of the very high domestic interest
rates needed to keep capital within Brazil.  Swollen interest
payments on the large public debt may crowd out investment in
crushing facilities and transportation infrastructure.  The
depreciation of assets (in dollar terms) may consolidate
Brazilian crushing capacity among fewer multinational firms.

Continuation of recent rains in February will be a key
determinant of the size of Argentina's 1999 soybean crop, as the
majority of fields will soon be setting and filling pods.  Early
conditions were somewhat dry, particularly in southern Buenos
Aires.  These poorer stands led USDA to shave the estimate of
soybean harvested area from 7.3 million hectares to 7.1 million. 
But based on favorable rains received in recent weeks, USDA
raised forecast Argentine production to 18.0 million tons from
17.5 million last month.  As a consequence, projected 1998/99
crush would soar to a record 15.0 million tons, about double the
1991/92 volume.  Argentine soybean meal exports would swell to
11.75 million tons.  On the other hand, Brazil's devaluation
alters the composition of exports somewhat, so Argentine 1998/99
soybean exports were scaled back to 3.0 million tons. 

As in the United States, large hog herds and cheap protein have
kept EU soybean meal consumption very brisk.  Expected EU imports
of soybeans and soybean meal were raised to 16.0 million and 17.6
million tons, respectively.  Although a great deal of trade has
already occurred, Russia's imposition of a 10-percent export duty
on sunflowerseeds in January will further restrict EU oilseed
supplies.  U.S. exporters of oil-type sunflowerseed are likely to
benefit, although winter closing of the St. Lawrence Seaway and
the upcoming Argentine sunflowerseed harvest will eventually
diminish this opportunity.

Conversely, import demand throughout Asia has stagnated.  With
regional gluts of soybeans and soybean meal, China has placed
greater emphasis on imports of high oil content rapeseed to
satisfy oil needs.  Last year's short Chinese rapeseed crop is
expected to raise rapeseed imports to 1.6 million tons this
season, up from virtually nothing just 2 years ago.  The sluggish
rate of China's year-to-date soybean meal imports reduced the
1998/99 import projection to 3.9 million tons, compared to 4.1
million in 1997/98.  Japan's soybean meal consumption and imports
of soybeans are also seen lower than a year ago.

Outlook for U.S. Exports Deteriorating

Greater foreign supplies have dimmed the potential for U.S.
soybean exports this year.  As of January 28, outstanding U.S.
export sales were nearly even with a year earlier.  But, given
abundant competitor supplies, new U.S. sales will be harder to
make and year-to-date shipments already trail last year's pace by
138 million bushels.  U.S. 1998/99 soybean exports are projected
at 810 million bushels, down 20 million from the January
forecast.

Domestic soybean crushing in the first quarter of 1998/99 was up
4 percent from a year earlier.  But crushing has already slowed,
as December was the first month in more than a year to not set a
monthly record.  Sliding soybean oil prices have compounded
crushers' dilemma of already low returns for soybean meal. 
Consequently, USDA's February forecast for 1998/99 crushings was
reduced 5 million bushels to 1,590 million.  

Slackening demand would push year ending soybean stocks to 410
million bushels.  The stocks-to-use ratio would be 16.1 percent,
the highest since 1990/91.  Unless a significant drought threat
develops this summer, U.S. soybean cash prices are unlikely to
rise much from current levels.  Central Illinois cash prices fell
back below $5.00 per bushel in February, the lowest for this
month since 1987.  USDA forecast the 1998/99 average farm price
at $5.00-$5.40 per bushel, compared to the January forecast of
$5.10-$5.60.

After a brief firming in November and December, soybean meal
prices dropped again in mid-January to less than $135 per ton. 
The 1998/99 average price is now expected to be among the lowest
in three decades, at $130-$145 per ton.  A major reason is the
strengthening of foreign competition for U.S. soybean meal
exports, which were cut to 7.9 million tons from 8.25 million
last month.  With practical limits on the volume of soybean meal
that can consumed by the current global livestock inventory,
additional world supplies will cut protein meal prices and
further scale back crushing.  Domestic disappearance has still
been comparatively robust, and the higher USDA forecast to 29.85
million short tons reflects this.  However, likely cutbacks in
the swine herd portend a dramatic slowdown by next summer, even
at the current bargain prices.

Vegetable Oil Prices Down

A higher forecast for global 1998/99 soybean oil production is
expected this month, to 23.5 million metric tons.  Most of the
increase is due to larger crushing in Argentina and the EU.  For
exports, the U.S. market share declines as Argentine and
Brazilian exports are expected to edge higher to 2.49 million and
1.37 million tons, respectively.

U.S. soybean oil stocks showed an unusual decline for December,
as production slowed while demand accelerated.  Despite this,
soybean oil prices dropped to 22.9 cents per pound in January,
more than 1 cent less than the December average.  February prices
have continued to slide below 21 cents per pound.  The 1998/99
average oil price forecast was trimmed to 23.5-25.0 cents per
pound.  Returns from domestic sunflowerseed crushing have also
suffered due to the tumble in vegetable oil prices.

Year-to-date export shipments have been only modestly behind last
season's pace, but new U.S. export sales have slowed.  At these
prices, Chinese buying should soon increase once new import
licenses are issued.  Yet, there is a narrowing window of
opportunity before the seasonal surge in production of South
American soybean and sunflower oil, Chinese and Indian rapeseed
oil, and Southeast Asian palm oil this spring.  Indonesia's
reduction this month in the export tax on crude palm oil (from 60
percent to 40 percent) should also help place more oil supplies
onto the world market.  U.S. 1998/99 soybean oil exports were
forecast at 2,550 million pounds, down from 2,700 million last
month.  Like soybean meal, domestic disappearance of soybean oil
has remained quite strong.  While the year-to-year increase would
be 336 million pounds to 15,600 million, it still represents a
slowdown from the billion-pound gain registered in 1997/98.

Last year's copra harvest in the Philippines was adjusted upward,
as expected drought damage proved to be premature.  Copra is the
dried kernel of coconuts, which when crushed produces coconut
oil.  More of the weather impact was shifted to the current
season, with coconut oil production anticipated to decline from
1.5 million tons in 1997/98 to 1.1 million in 1998/99.  The
Philippines usually accounts for about 40 percent of world
coconut oil production (3.2 million tons in 1998/99) and 60
percent of world exports (1.5 million tons in 1998/99).

Global olive oil production is expected to drop 15 percent in
1998/99 to 2.2 million tons due to reduced output from the top
three producers (Spain, Italy, and Greece).  Freezing weather
damaged Spanish production.  The three countries are also the
leading consumers, so the impact on world trade will be
comparatively modest.

The next release of the Oil Crops Outlook is scheduled at 4:00
pm. ET Friday, March 12, 1999.  The report is also available on
the ERS website at http://www.econ.ag.gov.

Information Contacts:
Mark Ash--Soybeans, minor oilseeds, oils (202) 694-5289, 
mash@econ.ag.gov
Robert Skinner--Cottonseed, peanuts (202) 694-5313,
skinner@econ.ag.gov

Table 1--Soybeans:  U.S. supply and disappearance
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                   Supply                          Disappearance 
        ------------------------------    ------------------------------------
Year                                                     Seed,  
begin.    Beg.  Im-   Produc-   Total     Crush   Ex-    feed,   Total   End.
Sept. 1  stocks ports  tion                      ports  residual        stocks
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         -------------------------- Million bushels---------------------------

1992/93    278    2    2,190    2,471     1,279    770    130    2,179    292
1993/94    292    6    1,870    2,168     1,276    589     95    1,959    209
1994/95    209    5    2,515    2,729     1,405    838    151    2,395    335
1995/96    335    4    2,174    2,514     1,370    851    109    2,330    183
1996/97    183    9    2,380    2,573     1,436    882    123    2,441    132
1997/98    132    5    2,689    2,826     1,597    870    158    2,626    200
1998/99 2/ 200    6    2,757    2,963     1,590    810    153    2,553    410
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1/ Estimated.  2/ Forecast.

Table 2--Soybean meal:  U.S. supply and disappearance
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                     Supply                           Disappearance 
        --------------------------------  ------------------------------------
Year 
begin.      Beg.   Im-   Produc-   Total    Domestic   Ex-     Total    End.
Oct. 1    stocks  ports   tion                        ports           stocks
------------------------------------------------------------------------------

         ---------------------------1,000 short tons--------------------------

1996/97     212   102    34,211    34,525     27,321   6,994   34,316    210
1997/98     210    56    38,171    38,437     28,889   9,330   38,219    218
1998/99 2/  218    50    37,757    38,025     29,850   7,900   37,750    275
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1/ Estimated.  2/ Forecast.

Table 3--Soybean oil:  U.S. supply and disappearance
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                     Supply                         Disappearance 
           -----------------------------     --------------------------------
Year 
begin.       Beg.   Im-  Produc-   Total     Domestic  Ex-     Total     End.
Oct. 1     stocks  ports  tion                        ports            stocks
------------------------------------------------------------------------------

         -------------------------- Million pounds---------------------------

1996/97     2,015   53   15,752   17,821     14,264   2,037   16,300   1,520
1997/98     1,520   60   18,143   19,724     15,264   3,077   18,341   1,382
1998/99 2/  1,382   63   18,070   19,515     15,600   2,550   18,150   1,365
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1/ Estimated.  2/ Forecast.

Table 4--Cottonseed:  U.S. supply and disappearance
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                   Supply                          Disappearance 
        -------------------------------- ------------------------------------
Year                                                             
begin.     Beg.   Im-   Produc-  Total     Crush   Ex-   Other   Total   End.
Aug. 1   stocks  ports   tion                     ports                 stocks
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         -------------------------- 1,000 Short tons--------------------------

1996/97     517   20    7,144    7,681     3,860    116   3,182   7,158    523
1997/98     523   96    6,935    7,553     3,885    149   2,957   6,990    563
1998/99 2/  563  180    5,182    5,925     2,650     75   3,000   5,725    200
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1/ Estimated.  2/ Forecast.

Table 5--Cottonseed meal:  U.S. supply and disappearance
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                     Supply                           Disappearance 
        --------------------------------  ------------------------------------
Year 
begin.      Beg.   Im-   Produc-   Total    Domestic   Ex-     Total    End.
Oct. 1    stocks  ports   tion                        ports           stocks
------------------------------------------------------------------------------

         -------------------------1,000 Short tons---------------------------

1996/97      51     4     1,752     1,807     1,649     132    1,781     26
1997/98      26     0     1,767     1,793     1,596     109    1,705     88
1998/99 2/   88     0     1,195     1,283     1,250      10    1,260     23
------------------------------------------------------------------------------
1/ Estimated.  2/ Forecast.

Table 6--Cottonseed oil:  U.S. supply and disappearance
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                     Supply                         Disappearance 
           -----------------------------     --------------------------------
Year 
begin.       Beg.   Im-  Produc-   Total     Domestic  Ex-     Total     End.
Oct. 1     stocks  ports  tion                        ports            stocks
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         -------------------------- Million pounds---------------------------

1996/97        94   0.3   1,216    1,310      1,012     232    1,244      66
1997/98        66   0.1   1,223    1,289      1,003     208    1,211      79
1998/99 2/     79  66.4     850      995        850     100      950      45
------------------------------------------------------------------------------
1/ Estimated.  2/ Forecast.

Table 7--Peanuts:  U.S. supply and disappearance
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                     Supply                         Disappearance 
           -------------------------  ----------------------------------------
Year 
begin.     Beg.   Im-  Produc- Total  Dom.   Crush  Seed&  Ex-  Total     End.
Oct. 1     stocks ports tion          Food         resid. ports         stocks
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            ----------------------- Million pounds---------------------------

1996/97       758  127  3,661  4,545   2,029   692   363  666    3,751     795
1997/98       795  141  3,539  4,475   2,099   544   303  681    3,627     848
1998/99 2/    848  152  3,931  4,932   2,125   775   321  685    3,907   1,025
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1/ Estimated.  2/ Forecast.
Table 8--Oilseeds prices received by farmers, U.S.
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Marketing      Soy-  Cotton-  Sun- 
 year         beans   seed   flowers  Peanuts  Flaxseed
--------------------------------------------------------
              $/bu.   $/ton   $/cwt   Cents/lb  $/bu.

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
1995/96        6.72  106.00    11.50    29.30   5.19
1996/97        7.35  126.00    11.70    28.10   6.37
1997/98        6.47  121.00    11.60    28.30   5.81

1997/98
September      6.72  115.00    11.20    29.70   5.73
October        6.49  119.00    10.60    27.90   5.78
November       6.86  124.00    11.10    25.00   5.71
December       6.72  122.00    11.10    26.90   5.72
January        6.69  121.00    11.10    30.70   5.82
February       6.57  107.00    11.80     NA     6.27
March          6.40   NA       12.10     NA     6.26
April          6.26   NA       12.70     NA     6.23
May            6.26   NA       13.80     NA     6.33
June           6.16   NA       14.40     NA     6.17
July           6.14   NA       15.80     NA     6.17
August         5.43  113.00    14.40     NA     5.45

1998/99
September      5.25  113.00    11.40    26.80   5.09
October        5.18  120.00    10.70    26.30   4.86
November       5.40  133.00    10.50    21.50   4.97
December       5.37  138.00    10.80    24.00   5.01
January1        5.22  139.00    10.50    27.90   5.03
--------------------------------------------------------
1 Preliminary.  NA = Not available.
Table 9--Vegetable oil prices
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                      Cotton-  Sun-       
Marketing    Soybean   seed   flower Peanut  Corn  
 year          oil2     oil3    oil4   oil5    oil6 
---------------------------------------------------
                     Cents/lb.

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 
1995/96       24.70    26.53   25.40  40.30  25.24 
1996/97       22.50    25.58   22.64  43.70  24.05 
1997/98       25.80    28.85   27.00  49.00  28.94
                                                   
1997/98
October         24.31    28.47   24.51  49.63  25.20
November      25.73    29.11   26.41  51.00  26.25
December      25.08    26.78   26.36  51.25  26.28
January       25.09    27.69   25.75  51.60  26.04
February      26.51    29.37   25.91  51.00  27.31
March         27.09    30.46   26.51  51.00  28.50
April         28.10    32.47   28.50  50.00  30.93
May           28.28    33.13   31.06  47.20  33.20
June          25.83    30.22   28.40  45.50  32.82
July          24.88    29.40    NA    44.00  31.52
August        23.99    30.11    NA    43.75  29.93
September     25.13    33.26    NA    43.88  29.25

1998/99
October       25.21    33.99   NA     45.40  29.46
November      25.20    34.16   NA     45.00  29.65
December      23.99    33.40  26.70   44.25  29.88
January1       22.88    31.72  23.41   44.00  29.15
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1 Preliminary 2 Decatur 3 PBSY Greenwood MS
4 Minneapolis 5 Southeast mills 6 ChicagoTable 10--Oilseed meal prices
---------------------------------------------------
             Soy-   Cotton   Sun-           
Marketing    bean    seed   flower  Peanut  Linseed
 year        meal2   meal3    meal4   meal5    meal4
---------------------------------------------------
                        $/Short ton
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
1995/96     235.90  190.74  123.75  202.70  159.00
1996/97     262.00  192.00  110.60  232.00  158.75
1997/98     185.30  144.40   84.20  209.60  110.00

1997/98
October     229.30  189.10   96.90  210.00  140.60
November    245.30  189.10   88.10  210.00  161.25
December    222.50  190.50  100.00  210.00  150.50
January     202.85  153.10   90.00  210.00  130.00
February    192.75  139.10   75.87  210.00  121.25
March       174.20  128.70   72.60  210.00  116.25
April       162.50  116.25   64.90  210.00  102.50
May         160.00  105.00   66.90  210.00   96.25
June        168.55  129.40   88.35  210.00  100.00
July        183.40  146.65   97.50  210.00  117.50
August      146.25  130.30   85.00  207.50  101.00
September   135.80  115.60    NA    205.00   90.00

1998/99
October     135.70  106.50   50.00  161.00   83.75
November    144.45  107.90   50.00  100.00   92.50
December    146.40  119.75   80.90  103.75  102.50
January1     138.80  110.60   77.50  105.00   95.00
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1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills

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