OIL CROPS OUTLOOK                                                May 13, 1996
            Approved by the World Agricultural Outlook Board
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OIL CROPS OUTLOOK is published monthly by the Economic Research Service, U.S.
Department of Agriculture, Washington, DC 20005-4788.  OCS--0596.  
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Little Easing Expected in 1996/97 Soybean Market 
 
As of May 5, spring grain planting was generally on schedule in the Corn Belt
and well ahead of the 1995 pace, but was behind normal in the Northern Plains
because fields were still too wet and cold.  Soybean planting, which normally
follows grains, has only just begun in most States (4 percent planted
nationwide).  Poor conditions are causing farmers in Illinois and Indiana to
evaluate abandoning failed soft red winter wheat acreage and replanting with
soybeans or corn.  With adequate rainfall, many would have double-cropped
soybeans after wheat anyway, so it is unclear whether this would represent a
net increase from intended soybean plantings.
 
The first forecast for 1996/97 assumes a soybean yield of 37 bushels per acre,
based on a weighted average of regional trend yields (1974-95).  Projected
soybean harvested area is 61.5 million acres, virtually unchanged from
1995/96.  Production would equal 2,275 million bushels and rank as the
second-largest U.S. soybean crop ever.  Although production is forecast nearly
6 percent above this season's output, an expected lower carryin would put total
supplies for 1996/97 slightly below this year's level.  Carryin stocks in
September are projected at 190 million bushels, down sharply from the 335
million bushels carried into 1995/96.  The reduced stocks leave a relatively
small cushion in the case of adverse growing weather this summer.
 
Although a comparatively large crop is expected next fall, the tight market
going into the 1996 crop year is not likely to loosen much.  This is because
total soybean demand should remain robust.  Domestic crush is forecast up 10
million bushels from this season to 1,370 million.  Soybean exports, while
projected down 35 million bushels from the previous year, would still be a
relatively healthy 790 million bushels.  Attractive soybean prices this fall
may prompt record planting in Brazil, where higher production would curb U.S.
soybean exports next spring.  Carryout stocks are projected to increase only 5
million bushels, to 195 million.  The 1996/97 season average farm price for
soybeans is expected to range between $5.75 and $8.00 per bushel, compared to
$6.80 for 1995/96.
 
Supply and demand for soybean meal are expected to keep an even pace next
season.  Domestic disappearance is projected to rise a modest 1 percent to
27.3 million short tons.  U.S. exports are seen falling again in 1996/97, to
5.25 million tons, down 100,000 from this season.  This would be the smallest
volume traded since the 4.9 million tons exported in 1984/85, as soybean
imports are favored over meal and availability of meal supplies from
competitors increases.  The relative equilibrium between supply and demand
should ease the price for soybean meal only marginally from the $230 per ton
estimated for 1995/96.
 
The crush for meal markets in 1996/97 should increase soybean oil supplies and
place additional pressure on U.S. oil prices.  USDA forecasts soybean oil
prices to range from 22 to 26 cents per pound next season, compared with the
25.0 cents this year.  With ample carryin stocks of 1.6 billion pounds and an
outturn of 15.4 billion pounds, total supplies will reach a record 17 billion
pounds.  Nevertheless, oil stocks may rise only modestly as domestic use
climbs and exports rebound, helped by reduced foreign supplies of high
oil-content seeds, particularly rapeseed. 
 
World Oilseed Supplies To Decline Slightly for 1996/97
 
Lower carryin stocks but slightly higher production are expected to leave
world oilseed supplies at nearly 280 million metric tons down slightly from
1995/96.  Projected foreign oilseed production is virtually unchanged from
this year's 186 million tons.  Higher grain prices and lower vegetable oil
prices are reducing output of high oil-content seeds, such as rapeseed and
sunflowerseed.  In contrast, the robust increases in soybean meal prices
during 1995/96 are expected to significantly boost global and foreign soybean
production.  Therefore, protein meal availabilities are expected to grow
faster than vegetable oil, leading to keen competition in the meal market, but
improving opportunities for U.S. soybean oil exports.  
 
Supply and demand for feed grains could be the largest uncertainty for the
oilseed market in 1996/97. Tight feed grain supplies have driven grain prices
to record levels, thus leading to greater competition for land, but also
inducing higher protein meal use in feed rations.   China's vegetable oil
imports will also add to uncertainty due to expected lower supplies of
oilseeds and slow growth in China's palm oil imports. Although China is
expected to remain the world's largest vegetable oil importer, the relative
mix of palm and soybean oil imports is unclear.  The mix will largely depend
on global supplies of each oil in 1996/97, and internal Chinese policies such
as import licenses, import tariffs, and domestic oilseed production
incentives. 
 
Continued strong feed grain prices in 1996/97 could lead to gains in protein
meal consumption and prices.  However, high feed costs could weaken growth in
foreign soybean meal and feed grain consumption that would otherwise be
generated by rising livestock inventories and feed usage. Moreover, the extent
to which feed grain supplies and stocks recover in 1996/97 could add pressure
to feed grain prices, and limit protein meal demand as the price ratio turns
favorable to feed grains.  The latter could be achieved because of prospects
for a large expansion in grain production throughout the world.
 
Feed Market Stretching 1995/96 Protein Supplies
 
Prices for soybean meal spurted up in April, with the monthly average
increasing to $249 per ton, 10 percent above the March price.  Cash and
futures prices reacted strongly to USDA reports that indicated tight grain
stocks, less than expected planting intentions for corn, and only modest
changes in the swine inventory and slaughter.  This plateau is expected to
prevail for the remainder of 1995/96, and the season average price for soybean
meal was revised up to $230 per ton this month.
 
Rising prices for feed grains and soybean meal this year have accelerated for
alternative feedstuffs.  Corn gluten meal prices have increased about 60
percent over a year ago, with similar increases for meals produced from
processing cottonseed, sunflower, linseed, and fish and animal byproducts. 
But demand for meat and bone meal has recently suffered from adverse publicity
of the British BSE situation.  Feeding of meat and bone meal to ruminants may
be banned and some U.S. poultry producers have announced that they would
voluntarily stop feeding it to reassure consumers of their meat's
wholesomeness.  The hog and pet food sectors will likely absorb more of the
meat and bone meal supply.  Other feedstuffs, such as soybean meal and feather
meal, may stand to gain from these developments.
 
Expected soybean meal supplies for 1995/96 were shaved further this month as
the October-September crush was reduced 5 million bushels to 1,355 million. 
This reduced estimated soybean meal output to 32.3 million tons.
 
Domestic soybean meal disappearance for 1995/96 was reduced to 27.05 million
short tons, down 100,000 from last month.  Since early April, weekly data show
a modest slowing from the previous year for broiler eggs set and broiler
chicks placed.  This is the first sign that a cutback in the poultry sector
has begun.  Hogs producers are marketing at lighter weights, up to 10 pounds
per head less than a year ago.  This implies less feed consumption per animal. 
Gilt retention (for breeding) has also dropped recently, as hog producers have
sent more gilts to slaughter.  However, by itself, this latter item should
have less impact on 1995/96 soybean meal consumption and more consequences for
1996/97.
 
U.S. Exports of Soybean Products Projected To Fall Again 
 
U.S. soybean meal exports are expected to fall to 5.350 million short tons,
down 50,000 tons from last month's estimate. Sluggish global demand due to
high soybean meal prices, shrinking U.S. domestic production, and greater
competition from South America are supporting the lower estimate. 
 
The absence of China, the Middle East, and North Africa from the U.S. soybean
oil market is directly responsible for the reduction in 1995/96 exports,
projected down this month to 1,450 million pounds.  This year, China increased
domestic oilseed production and crush, raised oilseed imports, and bought a
myriad of Brazilian soybean oil, rationing oil imports from the United States. 
On the other hand, U.S. domestic oil disappearance has risen more than
expected, and is forecast up 150 million pounds this month to 13.3 billion. 
Ending stocks of soybean oil dropped slightly as a result to 1.6 billion
pounds.  
 
Cash soybean oil prices have strengthened recently, rising from 23.6 cents per
pound in March to 25.8 cents in April.  Sunflower oil prices have been rising
as well, which have helped boost sunflowerseed prices to $12.40 per
hundredweight in April.  The 1995/96 projected sunflowerseed price was raised
to $11.40 per cwt this month, largely based on the resurgence in oil prices.
 
Foreign Soybean Supplies Improved in 1995/96 
 
This month, soybean production are projected up 300,000 tons each in Argentina
and Paraguay to 12.6 and 2.3 million tons.  Larger area than previously
anticipated, timely rains, and good harvesting conditions boosted soybean
output in both countries.  The supply gains are expected to support additional
soybean exports of 200,000 and 300,000 tons for Argentina and Paraguay, with
soybean exports reaching 2.8 and 1.5 million tons, respectively.  Also, sharp
gains in Brazilian soybean exports during March and April have bolstered
Brazil's projected exports for 1995/96 (Oct.-Sept.) to 3.4 million tons. 
However, Brazil's anticipated smaller crop likely will be insufficient to fill
the demand needs, so Brazil will probably boost soybean imports, especially
from Paraguay and Argentina.  The latter are supported by the newly
implemented differential export tax for Rio Grande do Sul, which provides an
advantage to crushers in that state to purchase soybeans from Argentina and
Paraguay and re-export the products.  
 
Although China's total vegetable oil imports are unchanged from last month,
the import mix among soybean, rapeseed, and palm oils varied substantially. 
Steep soybean oil imports by China during October-March have raised China's
projected soybean oil imports to 1.3 million tons, up 150,000 tons from last
month, while other oil imports were cut by 150,000 tons.  Hefty declines in
rapeseed oil imports during the same period and large supplies of domestic
rapeseed oil are expected to dampen China's rapeseed oil imports.  Likewise,
China's  palm oil imports are projected to fall slightly in response to high
prices and less favorable import policy compared with soybean oil.      
 
The next Oil Crops Outlook is scheduled for 4:00 p.m. ET Thursday, June 13.
 
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 & resid.         stocks
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         -------------------------- Million bushels---------------------------
 
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
1996/97 1/  190    5    2,275    2,470     1,370    790    120    2,280    190
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1/ Forecast.
 
Table 2--Soybean meal:  U.S. supply and disappearance
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                 Supply                           Disappearance 
        ----------------------------     -------------------------------------
Year 
begin.      Beg.    Produc-   Total      Domestic   Ex-     Total    End.
Oct. 1    stocks     tion                           ports           stocks
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         ------------------------------1,000 tons-----------------------------
 
1994/95     150     33,265    33,479       26,538   6,717   33,256    223
1995/96 1/  223     32,332    32,625       27,050   5,350   32,400    225
1996/97 1/  225     32,480    32,775       27,300   5,250   32,550    225
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1/ Forecast.
 
Table 3--Soybean oil:  U.S. supply and disappearance
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                 Supply                           Disappearance 
        ----------------------------     ------------------------------------
Year 
begin.       Beg.   Produc-   Total     Domestic  Ex-     Total     End.
Oct. 1     stocks    tion                         ports            stocks
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         -------------------------- Million pounds---------------------------
 
1994/95     1,103   15,613   16,733       12,916   2,680   15,596   1,137
1995/96 1/  1,137   15,155   16,355       13,300   1,450   14,750   1,605
1996/97 1/  1,605   15,380   17,025       13,500   1,700   15,200   1,825
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1/ Forecast.
 
Table 4--Oilseeds prices received by farmers, U.S.
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Marketing      Soy-  Cotton-  Sun- 
 year         beans   seed   flowers  Peanuts  Flaxseed
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              $/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
March          7.00    NA      11.90     NA     5.28
April 1        7.51    NA      12.40     NA     5.40
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1 Preliminary.
 
Table 5--Vegetable oil prices
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                      Cotton-  Sun-       
Marketing    Soybean   seed   flower Peanut  Corn  
 year          oil2     oil3    oil4  oil5    oil6 
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                     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
March         23.60    24.25   24.28  36.60  24.34
April1        25.82    26.77   25.63  39.25  26.60
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1 Preliminary 2 Decatur 3 PBSY Greenwood MS
4 Minneapolis 5 Southeast mills 6 Chicago
 
Table 6--Oilseed meal prices
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             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   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
March       226.57  195.60  123.50  210.00  155.00
April1      249.30  220.00  132.00  210.00  172.00
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1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 4 Minneapolis 5 50% SE mills
.
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