OIL CROPS OUTLOOK                                           February 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-0296.  
-----------------------------------------------------------------------------
 
UPWARD MARCH IN SOYBEAN PRICE STALLS
 
Ample rainfall in formerly parched soybean areas in southern Brazil has
arrested the ascent in soybean prices.  The central Illinois cash price has
fallen about 20 cents per bushel from early January.  Yet, this relative calm
is unlikely to last long.  The short term trend for prices may become better
known after March 29 when USDA's Prospective Plantings and Grain Stocks
reports are issued.  The latter will indicate whether current prices are high
enough to ration feed use through the rest of the crop year, while the former
will suggest how large crop supplies will be in 1996/97.  But farm prices in
the first 5 months (which typically account for about 60 percent of
marketings) of 1995/96 warrant a reduction of 5 cents per bushel in the season
average, to $6.50-$7.50.
 
USDA lowered its projected 1995/96 U.S. soybean crush this month to 1,380
million bushels, down 10 million from January.  While the year-to-date crush
is only slightly below last year, crushings in recent weeks have declined from
last winter's torrid pace.  Gross crush margins have dramatically slumped from
a year ago.  Because of the unusually high carryover from Brazil's previous
soybean crop, a proportionately larger share of U.S. crushing activity likely
will be sandwiched between the spring and summer months before the new South
American crop becomes available.  A pickup in the export market for soybean
products (particularly soybean oil) would be necessary to revive domestic
crushing.
 
On the other hand, current U.S. soybean export commitments are running just
below a year earlier.  Based on the better than expected pace and a projected
cut in Argentine production, 1995/96 exports were forecast 10 million bushels
higher this month to 810 million.  
 
FRIGID WEATHER AFFECTS U.S. FEED MARKET
 
Domestic disappearance of soybean meal during October-November 1995 was nearly
8 percent above a year earlier, helped by a strong October.  This vigorous
start may reflect some feedlot inventory building.  Extremely cold
temperatures in the Midwest this winter may further exacerbate the tight feed
supply situation.  Much of the U.S. winter wheat crop was poorly established
before becoming dormant and an inadequate snowcover exposed it to a serious
winterkill threat.  Not only would the cold potentially reduce feed wheat
supplies (which could increase soybean meal demand next summer), but it may
require greater feed consumption, including soybean meal, to maintain animal
weights.  Many livestock producers also slowed their marketings for slaughter
during the cold spell.  
 
Ice has also frozen over parts of the Illinois River and the upper Mississippi
River, temporarily blocking barge traffic on these important passageways for
soybean and soybean product exports.  This has helped raise export prices for
soybeans at the Gulf to about $7.85 per bushel in early February, the highest
since 1988/89.  And, stocks of soybean oil and meal began to accumulate at the
mills, partly because of weather-related shipping delays.
 
This season, the average price for soybean meal is expected to exceed the
1993/94 average by more than $20 per ton, even though meal production is
projected 2.3 million short tons higher.  The explanation for this phenomenon
is that total soybean meal disappearance is expected to increase by an
equivalent amount.  The average price in central Illinois for January reached
$232 per ton, near the top of the forecast range of $210-$235.
 
Soybean exports are now expected slightly higher than last month's forecast,
and are offset by smaller exports of soybean meal.  U.S. meal trade for
1995/96 was reduced to 5.8 million tons, from 6.0 million last month.  A
corresponding cutback in projected crush would reduce soybean meal production
200,000 tons from last month, to 32.8 million tons.
 
CONFRONTED WITH MOUNTING OIL SUPPLIES, SOYBEAN OIL PRICE SLIPS
 
Soybean oil prices remain under pressure from ample supplies of European
rapeseed and sunflowerseed oil and South American sunflowerseed and soybean
oil.  The robust demand for soybean meal also buttresses crush and weighs down
oil prices.  The average monthly soybean oil price slid from 24.7 cents per
pound in December to 23.5 cents in January, sagging to its lowest level in
more than 2 years.  USDA reduced its projected 1995/96 price range 0.5 cent
per pound to 23.0-26.0 cents.
 
There is some hope on the horizon, however, that the price slide may be
bottoming out.  A seasonal downswing in palm oil production and South American
soybean oil output is expected soon.  This should steer China to import more
U.S. soybean oil, as previously thought.  But U.S. oil exports were forecast
marginally lower in February to 1.8 billion pounds, based on reduced prospects
for shipments to North Africa.
 
This month's reduction in 1995/96 crush cuts soybean oil production to 15.5
billion pounds.  This forecast, combined with lower exports, lowers projected
ending stocks from 1,915 million pounds to 1,825 million.  After disappointing
demand in December, end-of-month oil stocks posted a large gain toward that
season-ending total.  The buildup in December ending stocks to 1,411 million
pounds made them the largest since July 1994.
 
ADVERSE WEATHER CLOUDS ARGENTINE OILSEED PRODUCTION
 
Argentine oilseed production is expected down 500,000 metric tons this month,
as unfavorable weather and late planting of first-crop soybeans clouds the
outlook for soybeans and sunflowerseed.  On the other hand, recent heavy
rainfall in Brazil's leading producing states of Rio Grande do Sul and Parana
has been beneficial for crop prospects.  Projected soybean production for
Brazil remains at 23 million tons, while Argentine soybean and sunflowerseed
output drop to 12.3 and 5.5 million tons, respectively.  Nevertheless, the
South American oilseed outlook remains blurry due to the dramatic changes in
weather patterns, and uncertainty over total oilseed area planted in the
region.
 
Despite expected declines in Argentine oilseed output, foreign oilseed
supplies are projected to rise 1 million tons this month to 203 million. 
Increases in sunflowerseed production in Ukraine and the Republic of South
Africa account for most of the expansion.  World soybean supplies and stocks 
are also expected to increase this month, reflecting larger soybean production
in Paraguay and an upward revision of Brazil's 1994/95 soybean crop.
 
Global soybean trade is projected slightly higher this month as increases in
the United States, Brazil, and Paraguay more than offset lower exports in
Argentina.  U.S. soybean exports are projected up this month to 810 million
bushels in response to stronger than anticipated buying from Western Europe,
Korea, Japan, China, and Mexico.  Despite thin global crush margins, risk-
averse soybean importers are increasing demand for U.S. soybeans on
expectations that the smaller South American crop is likely to limit export
availabilities.  Besides limited soybean exports from Brazil and Argentina,
uncertainties over China's total soybean imports add pressure to an already
tight soybean market. 
 
Soybean prices reached a 7-year high in response to the tight market. 
International prices are projected steady to slightly higher from current
levels.  Factors supporting prices are the current tight world soybean
supplies, China's large potential for imports of soybean and soybean products,
and uncertainty over the South American crop.  On the other hand, factors
putting pressure on world prices are prospects for higher than expected
production in Paraguay and Bolivia, weaker demand for protein meal (as high
feed prices begin rationing), and rising U.S. soybean oil stocks.
 
World prices are heavily influenced by the overall level of U.S. prices. 
About 40 percent of U.S. soybeans are exported and the United States has a
large share (more than 65 percent) of world soybean trade.  However, U.S.
prices are increasingly reflecting conditions beyond the U.S. market due to a
greater substitutability among vegetable oils, a larger impact to world trade
from China, and a greater role played by South American production in price
determination.
 
GLOBAL SOYBEAN OIL TRADE DOWN
 
Despite lower soybean oil prices, 1995/96 U.S. soybean oil exports are
expected to decline to 816,000 tons.  Foreign demand for U.S. soybean oil is
projected to slow down, primarily in response to keen competition from other
vegetable oils.  Additional pressure also comes from a sharp expansion in the
production of high-oil content seed in several countries, and larger than
anticipated soybean oil exports from South America.  U.S. soybean oil prices
(fob Gulf) were selling at a premium of nearly $20 per metric ton over South
American soybean oil.  Also, Brazilian and U.S. soybean oil were sold at a
premium to sunflower oil from Argentina.  Likewise, Dutch rapeseed oil in
January was sold on average about $6 per metric ton less than soybean oil. 
Additional discouragement to buyers comes from current market conditions of
unsubsidized soybean oil trade.
 
Although there have been significant soybean oil imports from South America,
China's soybean oil imports are expected to slow considerably and remain
unchanged from last month at 1.15 million tons.  China is expected to wind
down over built stocks in the next few months and resume heavy buying late in
the marketing year.  Factors affecting China's soybean oil import outlook
include relative vegetable oil prices, trade policies (such as licenses and
import duties), and prospects for soybean imports.  Although expectations for
U.S. soybean oil exports to China are significantly below last year's level,
the window of opportunity for U.S. exports will remain viable during the next
few months as South American supplies are at their lowest.
 
The next Oil Crops Outlook is scheduled for 4:00 pm ET Wednesday, March 13.
 
******************************************************************************
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
******************************************************************************
 
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    2,517    2,731     1,405    838    153    2,396    335
1995/96 2/  335    5    2,152    2,492     1,380    810    112    2,302    190
------------------------------------------------------------------------------
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     33,265    33,479       26,538   6,717   33,256    223
1995/96 2/  223     32,867    33,150       27,150   5,800   32,950    200
------------------------------------------------------------------------------
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   15,613   16,733       12,916   2,680   15,596   1,137
1995/96 2/  1,137   15,525   16,675       13,050   1,800   14,850   1,825
--------------------------------------------------------------------------
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
1994/95        5.45  101.00    10.60    29.00   4.65
 
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    10.50    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 1      6.95   98.00    10.70    29.30   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    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       27.09    30.30   31.08  43.20  26.38 
1994/95       27.55    29.23   28.10  44.30  26.47 
                                                   
1993/94:                                           
October       22.96    27.94   26.33  40.20  22.25 
November      25.43    31.86   28.20  43.33  23.06 
December      28.27    36.00   32.11  43.17  26.93 
January       29.91    34.75   35.08  46.10  28.00 
February      28.85    31.91   33.68  46.12  29.89 
March         29.03    32.27   33.48  44.50  30.30 
April         27.90    31.69   33.00  43.40  29.63 
May           29.10    31.07   33.50  44.25  29.48 
June          27.60    28.56   31.34  43.75  29.43 
July          24.53    25.54   28.89  44.00  27.20 
August        25.38    26.23   28.13  45.00  25.02 
September     26.12    25.81   29.28  43.10  24.87 
                                                   
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         27.16    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     26.21    28.61   27.41  41.30  25.93 
 
1995/96
October       26.57    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 1      23.69    24.45   24.65  37.25  24.52
---------------------------------------------------
1 Preliminary 2 Decatur 3 PBS Greenwood MS
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
1994/95     162.55  112.02   62.70  128.94   95.85
 
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
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
January1    232.00  208.80  135.00  220.00  142.00
----------------------------------------------------
1 Preliminary 2 Hi-pro Decatur 3 41% Memphis 
4 Minneapolis 5 50% SE mills
 
 
                                   END-END-END