OIL CROPS OUTLOOK                                              April 10, 1998
April 1998, OCS-0298
             Approved by the World Agricultural Outlook Board
------------------------------------------------------------------------------
OIL CROPS OUTLOOK is issued six times a year by the Economic Research Service,
U.S. Department of Agriculture, Washington, DC 20036-5831.  Electronic release
only; no printed copies are available.   
------------------------------------------------------------------------------

U.S Farmers To Plant Record Soybean Acreage This Year

On March 31, the Prospective Plantings report indicated that U.S. farmers
intend to plant a record 72.0 million acres of soybeans in 1998, up from 70.85
million last year. In spite of declining prices, soybeans have remained
relatively attractive compared with other crops. For the second consecutive
year, U.S. soybean area will exceed wheat. If grain prices decline more or if
wet weather delays planting, soybean acreage may still increase from the March
intentions, as it has in 8 out of the last 10 years. There may be room for more
oilseeds expansion, particularly in the Northern Plains, if farmers plant as
much total area to field crops as they did in 1997.

It appears that much of the additional area to be planted to soybeans will be
shifted from wheat, with smaller amounts coming from corn or sorghum. Some of
the acreage disenrolled from the Conservation Reserve Program this year may
also be raising soybean acreage. Record soybean planting is expected in 1998
for all of the top five producing States as well as several others that have
markedly expanded soybean area in recent years. The regions that are increasing
acreage also tend to have the highest average yields per acre, while the lower
yielding regions are reducing acreage.

Surge in Minor Oilseed Acreage Expected

World wheat production reached a record in 1997/98 and is expected to increase
again, which has cut U.S. wheat prices again this spring. With the elimination
of planting requirements for grains in 1996, many Northern Plains farmers have
since sought to add oilseeds to their rotations. This would help them break the
cycle of wheat diseases that have plagued them for several years. Spring wheat
planting this year in North Dakota and Minnesota would decline 1.1 million and
0.6 million acres, respectively. Consequently, these farmers are intending to
expand plantings of sunflowers, flax, and canola. This spring, escalating
vegetable oil prices have especially favored producing these high oil content
oilseeds.

Intended sunflower area in 1998 is 3.1 million acres, up 200,000 acres from
1997. North Dakota (the top producing State) acreage would increase 280,000
acres, with nearly all of the increase coming from oil-type varieties.

A resurgence in flaxseed production is also expected. U.S. flax acres in 1998
will jump to 280,000 acres. This is almost double last year's area and is the
largest since 1991.

Slowdown in U.S. Soybean Demand Underway

Last year's sharp seasonal descent occurred when U.S. soybean supplies became
very short. This year, stocks are more abundant, but competitor supplies will
be much greater. After 6 months of robust growth, the impending wave of South
American soybean supplies is showing its effects on the U.S. market. Based on
strong year to date crushings, the 1997/98 domestic soybean crush forecast was
raised 5 million bushels this month to 1,525 million bushels. However, weekly
crush rates have recently slipped as declining soybean meal prices have
weakened crush margins.

Weekly export shipments for soybeans have also fallen, and current outstanding
sales are only 60 percent of their year-earlier level. Soybean trade is being
overshadowed by strong exports of soybean meal and oil. The U.S. Department of
Agriculture (USDA) forecast U.S. 1997/98 soybean exports down to 945 million
bushels this month from the March forecast of 950 million. Current outstanding
U.S. export sales are just 56 percent of a year earlier, with Japan, Mexico,
and South Korea accounting for more than half of the remaining sales.

USDA's Grain Stocks report indicated that total soybean stocks on hand as of
March 1 were 1,203 million bushels. This quantity is 147 million bushels higher
than a year earlier, despite a record soybean offtake in the first half of the
marketing year. Based on this stocks level and year to date use data, a larger
residual demand for 1997/98 was implied, which was forecast up this month to 79
million bushels. Forecast use of soybeans for seed, based on large intended
plantings this spring, was raised slightly to 81 million bushels. By increasing
these uses, 1997/98 ending stocks are anticipated to decline to 235 million
bushels. USDA's forecast of the 1997/98 average soybean farm price is $6.35-$6.65 per bushel.

Record U.S. Soybean Oil Exports Forecast

Responding to a global shortfall in vegetable oil, U.S. crushers will produce a
record 17.1 billion pounds of soybean oil. Exporters are projected to ship 2.9
billion pounds of soybean oil abroad, surpassing the previous high of 2.7
billion set in 1979/80. As of April 2, exports to the major markets of China
and Hong Kong were 75 percent above a year earlier. Exports of other U.S.
vegetable oils are also faring well this season. Shipments of sunflowerseed
oil, corn oil, and cottonseed oil are up 70, 46, and 17 percent, respectively,
from a year ago.

Despite no increase in soybean oil consumption for oil products, cumulative
domestic disappearance is currently about 6 percent higher than a year ago.
This implies that end users may be increasing their own storage of vegetable
oil supplies to insulate themselves from higher anticipated prices. Domestic
disappearance is projected higher to 14.6 billion pounds, which is up from 14.5
billion last month and 14.2 billion last season.

This expected spike in demand would cut 1997/98 U.S. soybean oil ending stocks
to 1,170 million pounds, which stood at 1,719 million at the end of February.
The decline in U.S. soybean oil stocks would depress 1997/98 global stocks to
the lowest level since 1994. In March, the soybean oil price averaged 27.1
cents per pound, exceeding the year earlier price by more than 4 cents. The
average price for soybean oil is forecast higher to 26.5-27.5 cents per pound.

Brisk Crush Sends Soybean Meal Prices Down

When demand for vegetable oils is stronger than protein meal demand, prices for
soybean oil and soybean meal go in opposite directions. Soybeans are
comparatively inefficient at producing oil, so the more that are crushed to
satisfy the world oil market, proportionately greater supplies of soybean meal
are created. Unlike oil, meal cannot be stored very long, so meal prices must
fall to clear the market of excess supplies. This is the situation that applies
for the current marketing year. Quite ample stocks of corn and wheat are also
keeping a lid on feed prices. Cash soybean meal prices in central Illinois
dropped to a March average of $174 per short ton and have continued to fall
below $165 in early April. This month, USDA again reduced its 1997/98 average
price forecast, to $185-$195 per ton.

U.S. exports of soybean meal have been a very bright spot this year. Total
1997/98 meal exports are forecast to 7.9 million short tons, rivalling the
1979/80 record. But this U.S. predominance should last only for a few more
weeks until South American crushers make new crop production available. Asian
meal imports are also being rationed by a serious economic recession.

While the March Hogs and Pigs report confirmed a still large U.S. swine herd,
actual winter farrowings were less than December intentions. The expansion in
hog numbers is slowing down, with more moderate increases in the breeding herd
and farrowing intentions for this spring and summer. A mild winter also curbed
soybean meal consumption. USDA projected 1997/98 domestic disappearance of
soybean meal down 200,000 tons from the March estimate to 28.15 million short
tons.

Advancing South American Soybean Harvest Pressures Market

A principal reason for the sharp slide in soybean meal prices is the
development of new crop supplies from South America. Continuing a weather
pattern that has largely prevailed over the last 6 months, frequent showers
have hampered early harvest progress. As of April 9, the Brazilian soybean
harvest was 57 percent finished, compared with 70 percent last year. After
ideal harvest conditions in early April, the pace has picked up. Despite the
delays, the ample moisture will enable Brazilian soybean farmers to harvest an
expected record 30.0 million metric tons in 1998. 

Likewise, Argentine soybeans are in excellent condition but will need drier
weather to aid the harvest. Yields are better because of a greater proportion
of first crop soybeans, but ample late season moisture is also benefitting
double-cropped yields. USDA projects an impressive rebound from the drought
stricken 1997 soybean harvest, with a bumper 1998 crop of 16.0 million tons.
Argentine peanut production is also expected to reach a record output of 0.75
million tons. This will enable Argentina to export about three-fourths of the
crop and become the world's leading peanut exporter this year. However,
excessive rain has damaged the country's production and quality of
sunflowerseed, forcing farmers to abandon 0.2 million hectares this year. The
optimistic early season forecast for record sunflowerseed output has given way
to a less exceptional forecast of 5.2 million tons. Consequently, Argentine
exports will suffer, especially to European Union countries, where high quality
oil-type sunflowerseed has been in great demand recently. Late plantings and
weather problems have also plagued the Argentine cotton crop, which will scale
back cottonseed production and domestic crush.

After years of pressure from Indian oilseed processors, India's Government has
approved the import of 1 million tons of soybeans. To address phytosanitary
concerns, importers are mandated to split the beans upon arrival so that the
seed cannot be planted by farmers. Allowing such imports will utilize more idle
crushing capacity, reduce oil imports, and expand meal exports. While current
crush margins for imported soybeans may not favor significant imports this
year, the precedent may be quite meaningful for international trade in the
future.

Tight Global Vegetable Oil Supplies Boost Prices

While world production of vegetable oils will slow this year, world consumption
is steadily growing. This is largely because 1997/98 world palm oil production
is projected to grow just 0.7 percent, compared with 8 percent last year. A
prolonged drought has reduced yields throughout the major Southeast Asian
producing countries. Assuming the same 8 percent growth this year, the loss in
palm oil would be about 1.3 million metric tons. In terms of soybean oil, this
would be equivalent to losing 7 million acres of soybeans, or one-tenth of U.S.
acreage. Competing oilseeds and vegetable oils have had to pick up the slack,
reflected by escalating world trade and prices.

Indonesia, the world's second largest producer of crude palm oil, also
tightened the world oil market by instituting a ban on exports that was to last
through the end of March. The government extended the export ban indefinitely,
however. Malaysia became the focal point for world demand, and the steady
depletion of palm oil stocks hiked prices to $645 per ton in March from less
than $500 last year. Since January, palm oil prices for domestic Indonesian
consumption have stabilized. The government has now indicated that the ban may
be lifted April 22. When the ban ends, international palm oil prices may
temporarily ease, but persistence of the drought or another collapse of the
currency could further unsettle the situation. Any price decline would be
moderated by an increase in Indonesia's export tax on crude palm oil from 5 to
40 percent, as well as higher tax rates on refined palm oil and palm kernel
oil. The government may also implement an export quota to prevent a flood of
exports that would drive up domestic oil prices. Indonesia is expected to
produce 5.5 million tons of palm oil in 1997/98 and export 2.2 million tons,
compared with 5.3 million and 2.4 million, respectively, the previous year.

Current world supplies of rapeseed and sunflowerseed oil are in short supply as
well, as a brisk crushing pace has depleted seed stocks. While the Indian
rapeseed harvest will soon commence, new crop production from Europe, Canada,
and China is several months away. Global 1997/98 sunflowerseed production is
estimated down nearly 0.3 million tons. Exports of U.S. sunflowerseed and oil
have been uncommonly strong as a result. Argentina's disappointing
sunflowerseed harvest will not ease the situation much. On the demand side,
declining stocks and widening vegetable oil deficits in China, India, and
Pakistan are raising import needs.

U.S. 1997/98 Cottonseed Crush Pace Weakens, Forecast Lowered

After a torrid January cottonseed crush of 428,447 short tons, U.S. cottonseed
crush in February declined to a seasonally-weak 352,278 tons. Despite a total
crush for the first 5 months of the season that exceeds same period year-ago
crush by 83,000 tons, the crush through February is well short of the pace
needed to attain a 4-million-ton crush forecast this season. Consequently, USDA
this month reduces the 1997/98 U.S. cottonseed crush forecast by 100,000 short
tons to 3.9 million tons.

For the first 3 months of the October-September season, the price of cottonseed
meal held very steady at $189-$190 per month. In January, the monthly average
price fell to $153.10 per ton and in February to $139.10 per ton. A building of
stocks of meal has accompanied the weaker prices. Even with higher cottonseed
oil prices thus far this season versus last season, the weaker meal prices have
dropped the oil-and-meal value of products in January and February well below
their levels of a year ago. Continued weak meal prices will likely reduce
crushing incentives in the remainder of the season.

U.S. 1997/98 Peanut Food Use Estimate Edges Higher

USDA's 1997/98 peanut supply and use estimates for April indicate minor
adjustments from last month. U.S. peanut food use is estimated slightly higher
at 2.095 billion pounds, in-shell, up 5 million from last month's estimate and
66 million above last season. For the season through January, U.S. peanut food
use is 1.106 billion pounds, in-shell, up 56 million from the same period a
year ago. The strength reflects strong growth in primary product use and a
slight rise in roasting stock use.

Among individual categories of primary product use, peanut butter use is up
about 6.5 percent for the season through February. Use in peanut butter
production this season has benefitted from larger government purchases, up 29
percent for the first half of the season, and 2.7-percent growth in commercial
purchases of peanut butter. Monthly peanut butter prices thus far in calendar
1998 are little changed from prices in early 1997. The expected bumper
Argentine harvest will curtail U.S. peanut exports.

U.S. peanut farmers indicated that they would plant 1.47 million acres of
peanuts in 1998, up 3 percent from 1997. Georgia and Texas, the top 2 peanut
producing States, account for 79 percent of the acreage gain.

The next release of the Oil Crops Outlook is scheduled for 4:00 p.m. ET
Wednesday May 13, 1998.

Information Contact:
Mark Ash     Soybeans, minor oilseeds, oils      (202) 694-5289

This report is also available electronically at the ERS website
http://www.econ.ag.gov


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  residual        stocks
------------------------------------------------------------------------------
         -------------------------- Million bushels---------------------------

1995/96     335    4    2,177    2,516     1,370    851    112    2,333    183
1996/97 1/  183    9    2,382    2,575     1,436    882    125    2,443    132
1997/98 2/  132    6    2,727    2,865     1,525    945    160    2,630    235
------------------------------------------------------------------------------
1/ Estimated. 2/ Forecast.

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

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

1995/96     223    75    32,527    32,825     26,611   6,002   32,613    212
1996/97 1/  212   102    34,209    34,523     27,322   6,994   34,316    207
1997/98 2/  207    75    36,018    36,300     28,150   7,900   36,050    250
------------------------------------------------------------------------------
1/ Estimated. 2/ Forecast.

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

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

1995/96     1,137   95   15,240   16,472     13,465     992   14,457   2,015
1996/97 1/  2,015   53   15,743   17,811     14,247   2,045   16,291   1,520
1997/98 2/  1,520   65   17,085   18,670     14,600   2,900   17,500   1,170
------------------------------------------------------------------------------
1/ Estimated. 2/ Forecast.

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

1995/96     551    0    6,849    7,399     3,882    114   2,886   6,882    517
1996/97     517    0    7,144    7,661     3,860    116   3,162   7,138    523
1997/98 2/  523    0    7,278    7,801     3,900    200   3,201   7,301    500
------------------------------------------------------------------------------
1/ Estimated. 2/ Forecast.

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

         ------------------------------Short tons---------------------------

1995/96      47     0     1,748     1,795     1,632     111    1,744     51
1996/97 1/   51     4     1,752     1,807     1,649     132    1,781     26
1997/98 2/   26     0     1,755     1,781     1,595     150    1,745     36
------------------------------------------------------------------------------
1/ Estimated. 2/ Forecast.

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

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

1995/96        82   0.3   1,229    1,311        996     221    1,217      94
1996/97 1/     94   0.3   1,216    1,310      1,012     232    1,244      66
1997/98 2/     66   0.3   1,250    1,317      1,000     250    1,250      67
------------------------------------------------------------------------------
1/ Estimated. 2/ Forecast.

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

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

1995/96     1,198  153  3,461  4,812   1,993   999   238  824    4,054     758
1996/97 1/    758  127  3,661  4,545   2,029   692   363  666    3,751     795
1997/98 2/    795  139  3,537  4,470   2,095   599   311  700    3,705     765
------------------------------------------------------------------------------
1/ Estimated. 2/ Forecast.

 Table 8--Oilseeds prices received by farmers, U.S.
--------------------------------------------------------
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 1/     7.35  126.00    11.70    28.50   6.37

1996/97
September      7.79  129.00    12.00    27.70   5.89
October        6.94  123.00    11.70    25.80   6.49
November       6.90  117.00    11.90    25.00   6.50
December       6.91  136.00    11.60    25.60   6.79
January        7.13  132.00    11.80    24.30   6.42
February       7.38  128.00    12.20     NA     6.30
March          7.97   NA       12.20     NA     6.66
April          8.23   NA       12.40     NA     6.49
May            8.40   NA       12.10     NA     6.50
June           8.16   NA       11.90     NA     6.03
July           7.52   NA       10.70     NA     6.07
August         7.25  112.00    10.70     NA     5.53

1997/98
September      6.72  113.00    11.30    27.10   5.72
October        6.50  119.00    10.60    25.40   5.81
November       6.85  124.00    11.00    23.60   5.71
December       6.71  122.00    11.00    26.90   5.72
January        6.69  122.00    11.10    28.40   5.86
February       6.57  108.00    11.90     NA     6.27
March 1/       6.42   NA       11.90     NA     5.64
--------------------------------------------------------
1/ Preliminary. NA = Not available.

Table 9--Vegetable oil prices
---------------------------------------------------
                    Cotton-  Sun-       
Marketing  Soybean   seed   flower Peanut  Corn  
 year      oil 2/   oil 3/  oil 4  oil 5/  oil 6/ 
---------------------------------------------------
                     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 1/    22.50    25.58   22.64  43.70  24.05 

1996/97
October       21.95    24.55   22.80  41.50  22.67
November      21.80    24.28   22.50  39.20  22.96
December      21.60    24.29   22.30  40.75  22.27
January       22.45    25.21   22.65  43.50  23.39
February      22.41    25.44   23.07  43.88  23.97
March         23.29    26.18   22.70  44.75  24.38
April         23.17    25.10   23.50  45.00  24.60
May           23.68    25.19   23.20  46.20  24.66
June          22.97    25.01   22.33  47.88  24.82
July          21.89    26.53   21.73  48.06  25.34
August        22.06    27.11   22.02  48.00  25.36
September     22.88    28.03   22.90  47.25  25.15

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 1/      27.09    30.46   26.51  51.00  28.50
------------------------------------------------------
1/ Preliminary 2/ Decatur 3/ PBSY Greenwood MS
4/ Minneapolis 5/ Southeast mills 6/ Chicago

Table 10--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
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
1996/971    262.00  192.00  110.60  232.00  158.75

1996/97
October     248.50  183.25  116.00  170.00  167.50
November    251.50  196.60  105.00  146.13  168.30
December    250.60  224.50  113.35  172.67  170.00
January     249.20  207.20  125.00  221.00  165.00
February    262.40  183.75  137.50  228.13  156.25
March       280.50  189.10  121.70  225.00  163.30
April       288.60  197.25  124.00  233.75  168.00
May         306.40  193.75  120.00  222.00  188.30
June        287.90  188.44  106.25  235.00  171.25
July        273.60  170.75   84.00  220.00  124.00
August      273.30  176.25   85.00  213.00  126.25
September   278.30  192.00   89.20  210.00  136.70

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   76.40  210.00  121.25
March 1/    174.20  128.65   73.25  210.00  118.35
-----------------------------------------------------------------------
1/ Preliminary 2/ Hi-pro Decatur 3/ 41% Memphis 4/ Minneapolis 5/ 50% SE mills

END_OF_FILE