Oil Crops Outlook                                                     OCS-0395
United States Department of Agriculture              Economic Research Service
------------------------------------------------------------------------------
Approved by the World Agricultural Outlook Board                March 13, 1995
------------------------------------------------------------------------------
 
WORLD OILSEED PRODUCTION RISES TO NEW RECORD
 
World oilseed production for 1994/95 is projected up 13 percent from last
season to 257.5 million metric tons, which is an all-time high.  This month,
the 1994/95 soybean production forecast for China surged 2.5-million tons
higher to 16.3 million metric tons.  Farmers in China have raised soybean area
at the expense of cotton, coarse grains, and minor oilseeds.  Less government
intervention in soybeans compared to other crops, high prices for vegetable
oil, and strong demand for protein meal support the increase in area.  Also,
China's peanut production is estimated at a record 8.9 million metric tons, up
700,000 tons from the previous forecast.
 
Another month of better than normal weather in Brazil has again boosted their
1994/95 soybean production forecast to 25.1 million metric tons, up 200,000
tons from last month and 400,000 tons from last year.  Good weather should
make this the second consecutive record crop in Brazil, where harvesting has
begun in some areas.  Brazilian soybean exports are forecast down, however, as
more production will be crushed at Brazilian mills.
 
The Central Bank of Brazil (CBB) put in place a currency band that prompted a
slight devaluation of the Brazilian real.  Brazil's devaluation of its
currency and a weaker U.S. dollar have improved prospects for the dollar-
denominated Brazilian soybean exports.  In addition, the CBB's intention to
further devaluate the real this year is expected to have a positive effect on
Brazil's soybean and product exports by late summer and early fall.
 
U.S. crush plants are still operating at a high level, processing 126.8
million bushels of soybeans in January.  While the gross crush margin dipped
from December, January 1995 margins were still well above a year earlier.  The
robust year-to-date export market for soybean oil and meal, and a strong
showing for domestic meal demand, have buttressed crushing activity.  Without
the increase in domestic crush, prices would be much lower than they now are.
 
The strength of the export market has been another factor in sustaining U.S.
soybean prices to around $5.40 per bushel.  But without further vegetable oil
buying by China, U.S. farm prices are likely to drop this spring.  Since
October, the difference between Rotterdam and central Illinois soybean prices
has ranged between $37-$43 per metric ton, compared to the $25-$30 a year
earlier.  Thus, when South American supplies begin to be shipped abroad in
large quantities (around May-June), U.S. export sales should begin their
seasonal decline along with U.S. soybean prices.  Brazilian farmers regularly
sell most of their crop before or soon after harvest because of a shortage of
cash and storage.  These factors are likely to put pressure on domestic
prices, thus relaxing the potential for the Brazilian government to purchase a
large quantity of soybeans from farmers.
 
U.S. selling interest may also pick up as planting nears, tax bills become
due, and the upper Mississippi River reopens to barge traffic.  More stocks
should begin moving off farms and toward terminal elevators.  If U.S. soybean
planting intentions are higher than expected, a lower price band could be
precipitated.
 
ECONOMIC POLICIES OF IMPORTING COUNTRIES AFFECT OILSEED TRADE
 
Further devaluation of the Mexican peso is likely to drop imports of oilseed
and oilseed products.  Price ratios among substitutable commodities and credit
availability for importers are expected to be the main factors determining
consumption and imports of oilseeds and products in Mexico.  Current price
ratios support lower imports of rapeseed, cottonseed, and most vegetable oils
with the exception of sunflowerseed oil.  The GSM credit situation for Mexico
remains unclear, with a significant part of the debt due at the new exchange
rate.  But the potential for additional credit and refinancing of the earlier
loans could positively affect imports for the remainder of the 1994/95
marketing year.  Lower soybean production in Mexico, continued demand for
poultry meat, and smaller soybean oil imports are expected to support soybean
imports at current levels.  Mexican rapeseed and cottonseed imports are
projected lower.
 
India's 1994/95 soybean production is down 0.7 million metric tons from 4
million in 1993/94.  Indian rapeseed production is also below last year's
level, so that domestic edible oil supplies will lag consumption growth.  The
Government of India (GOI), in an attempt to curtail inflation and ease
pressure from soybean processors, has reduced duty levels and liberalized
trade in the vegetable oil market.  The GOI is also allowing soybean imports
for the first time under a re-export scheme to alleviate a deficit of
vegetable oil supplies and provide raw material for soybean processors. 
Although licenses given by the Ministry of Commerce could allow 500,000 metric
tons of soybean imports, India is currently expected to only import 300,000
metric tons.  Larger vegetable oil and soybean imports will likely drive down
vegetable oil prices, reduce crush margins, and limit additional soybean
imports.  Palm olein and soybean oil are expected to benefit the most from the
reduction of duty levels and opening of the vegetable oil market.
 
GLOBAL VEGETABLE OIL DEMAND IS STRONG, BUT SUPPLIES QUICKLY INCREASE
 
China's growing vegetable oil needs in 1994/95 will be satisfied by greater
vegetable oil imports and domestic production and crush of soybeans and
peanuts.  Consequently, smaller soybean and rapeseed imports are expected. 
Chinese vegetable oil production is estimated at 5.7 million metric tons,
while domestic consumption is projected at 8.6 million metric tons.
 
Despite record supplies of oilseeds in China, vegetable oil imports will reach
another record at 3.2 million metric tons.  Palm, soybean, and rapeseed oil
imports at 1.5, 0.95, and 0.65 million tons, respectively, are expected to
account for nearly all imports of vegetable oil in China.  The Government of
China, in an attempt to slow down inflation and increase supplies and stocks
of food (especially vegetable oils), has provided additional import licenses
for vegetable oil.  This will allow private traders to complement state agency
(CEROILS) imports of vegetable oil.  However, for the remainder of the year,
more of the imports will consist of palm and rapeseed oils than soybean oil.
 
While U.S. soybean oil exports to China are robust, the outlook for other
importing countries has deteriorated.  Since September 1994, U.S. soybean oil
stocks have been less than total monthly use.  This signals the unusually
severe tightness in this year's soybean oil market.  But as monthly production
has increased, total use has dipped, resulting in a small rise in U.S. stocks
(to 1.1 billion pounds) at the end of January.
 
Swelling sunflowerseed oil supplies from the United States and the new
Argentine crop could begin to take foreign markets at the expense of soybean
oil, especially in Middle Eastern countries that have a preference for
sunflowerseed oil.  Projected U.S. sunflowerseed oil exports were raised
30,000 metric tons in March to 320,000 metric tons for 1994/95.  Sunflowerseed
oil, which generally has a price premium relative to soybean oil, currently
has a slight discount.  Cottonseed oil and corn oil also are priced below
soybean oil.
 
Production of Indonesian palm oil for 1994/95 is forecast higher this month,
to 4 million metric tons.  Exports are expected to increase 200,000 metric
tons.  World palm oil output for 1994/95 is projected to reach a record 14.25
million metric tons.
 
COMPETITION IN WORLD SOYBEAN MEAL MARKET FIRMS UP
 
With larger Brazilian soybean production, more crush and soybean meal
production are expected.  Brazil's projected 1994/95 soybean meal production
will increase 700,000 metric tons and exports are anticipated 200,000 metric
tons higher than the previous year (Oct.-Sep.).
 
While India imports soybeans to satisfy its expanding crushing capacity, most
of the additional soybean meal production will be exported.  By contrast,
China's higher meal outturn will be mostly consumed domestically, with a
modest increase in exports.
 
The likelihood of stiffer competition from Brazil, India, and China has dimmed
the U.S. export outlook in the world oilseed meal market for 1994/95. 
Projected U.S. soybean meal exports are down 150,000 short tons from last
month, to 5.85 million.  Greater U.S. domestic disappearance should partially
offset the lower exports.  Domestic meal disappearance for 1994/95 is forecast
at 26.5 million short tons.  Not all of the disappearance will be immediately
consumed, though.  Low U.S. soybean meal prices should encourage larger
pipeline stocks carried into next season by domestic meal buyers.
 
OUTLOOK FOR 1995 U.S. SOYBEAN ACREAGE
 
February's Oil Crops Outlook overstated how much the diammonium phosphate
fertilizer price has increased since last year.  The correct figure is closer
to a 20-percent jump, as opposed to the 100 percent reported last month. 
Nevertheless, this does not change the implication that higher fertilizer
prices would curb corn plantings relative to soybeans and other crops for
farmers who have not yet purchased fertilizer supplies.  Currently, booming
cotton prices also favor planting more cotton acres, which could switch acres
away from soybeans and feed grains in the South.
 
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---------------------------
 
1992/93     278    2    2,190    2,471     1,279    770    130    2,179    292
1993/94 1/  292    6    1,871    2,170     1,272    589    100    1,961    209
1994/95 2/  209    8    2,558    2,775     1,365    785    115    2,265    510
------------------------------------------------------------------------------
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-----------------------------
 
1992/93     230     30,364    30,687       24,251   6,232   30,483    204
1993/94 1/  204     30,417    30,691       25,185   5,356   30,541    150
1994/95 2/  150     32,340    32,550       26,500   5,800   32,300    250
------------------------------------------------------------------------------
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---------------------------
 
1992/93     2,239   13,778   16,027       13,054   1,419   14,473   1,555
1993/94 1/  1,555   13,906   15,528       12,896   1,529   14,425   1,103
1994/95 2/  1,103   15,162   16,280       13,000   2,050   15,050   1,230
------------------------------------------------------------------------------
1/ Estimated.  2/ Forecast.
 
Table 4--Oilseeds prices
--------------------------------------------------------
                                              
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   4.20
                                     
1992/93:                             
October        5.26   94.00     9.12    29.80   4.09
November       5.36  105.00     8.73    28.10   4.08
December       5.46  105.00     9.37    27.20   4.24
January        5.58  111.00    10.00    29.50   4.11
February       5.56  115.00    10.50     NA     4.46
March          5.65    NA      11.00     NA     4.52
April          5.73    NA      10.80     NA     4.40
May            5.81    NA      11.10     NA     4.42
June           5.90    NA      10.80     NA     4.45
July           6.56    NA      12.00     NA     4.29
August         6.56  111.00    13.30     NA     3.79
September      6.21  104.00    14.20    32.00   4.24
                                     
1993/94:                             
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 1/ 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   86.00    12.60     NA     4.52
September      5.47  101.00    10.70    30.30   4.54
                                       
1994/95                                
October        5.30   96.00    10.80    28.80   4.49
November       5.36  106.00    10.60    25.60   4.51
December       5.41  119.00    10.30    25.40   4.71
January        5.47  120.00    10.60    25.70   4.75
February 1/    5.40  103.00    10.20     NA     4.90
--------------------------------------------------------
1/ Preliminary.
 
Table 5--Vegetable oil prices
---------------------------------------------------
                      Cotton-  Sun-       
Marketing    Soybean   seed   flower Peanut  Corn  
 year          oil      oil     oil   oil     oil  
---------------------------------------------------
                          Cents/lb.
                                                   
1990/91       21.00    22.30   23.60  45.50  27.50 
1991/92       19.10    20.10   21.60  27.30  25.82 
1992/93       21.40    25.00   25.30  27.40  20.90 
1993/94       27.09    27.78   31.00  43.20  26.38 
                                                   
1992/93:                                           
October       18.36    22.17   22.03  23.63  20.43 
November      20.10    22.96   23.47  25.58  20.60 
December      20.52    23.91   24.33  30.30  20.75 
January       21.23    24.09   24.58  31.00  20.75 
February      20.72    22.03   24.47  27.17  20.87 
March         21.00    22.24   24.69  26.00  20.79 
April         21.24    22.55   24.94  27.40  20.80 
May           21.15    22.70   24.84  30.00  20.75 
June          21.30    26.76   25.50  30.13  20.60 
July          24.13    30.74   28.72  31.70  20.67 
August        23.46    30.45   28.83  39.50  21.50 
September     23.61    28.98   28.00  39.63  22.23 
                                                   
1993/94:                                           
October       22.96    24.79   26.33  40.20  22.25 
November      25.43    26.69   28.20  43.33  23.06 
December      28.27    30.39   32.11  43.17  26.93 
January       29.91    33.16   35.08  46.10  28.00 
February      28.85    29.96   33.68  46.12  29.89 
March         29.03    29.60   33.48  44.50  30.30 
April         27.90    29.06   33.00  43.40  29.63 
May           29.10    29.66   33.50  44.25  29.48 
June          27.60    27.55   31.34  43.75  29.43 
July          24.53    24.20   28.89  44.00  27.20 
August        25.38    23.71   28.13  45.00  25.02 
September     26.12    24.51   29.28  43.10  24.87 
                                                   
1994/95                                            
October       27.06    23.64   28.90  46.00  24.73 
November      29.84    24.85   29.40  50.88  24.75 
December      30.61    25.50   30.63  53.80  24.75 
January       29.07    26.41   29.25  50.25  28.01 
February 1/   28.15    25.63   27.82  41.83  27.26 
---------------------------------------------------
 
Table 6--Oilseed meal prices
---------------------------------------------------
             Soy-   Cotton   Sun-           
Marketing    bean    seed   flower  Peanut  Linseed
 year        meal    meal    meal    meal    meal
---------------------------------------------------
                        $/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
 
1992/93:
October     180.60  154.40   86.25  163.33  141.25
November    181.90  157.50   95.00  170.00  152.50
December    187.60  174.50   86.25  173.13  137.40
January     188.75  164.40   87.50  180.00  136.70
February    179.90  149.40   90.00  175.83  142.50
March       183.60  153.50   89.00  165.00  135.40
April       187.40  149.00   82.50  161.50  126.25
May         193.25  143.10   83.50  165.63  126.25
June        193.10  153.00   91.00  171.25  123.20
July        229.90  170.30   97.50  200.00  133.75
August      219.10  178.50   97.00  213.75  150.00
September   199.90  193.75   95.00  210.63  148.75
                  
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 1/ 151.96    NA      NA    107.50    NA
---------------------------------------------------
 
******************************************************************************
Information Contacts:
Mark Ash         Soybeans, Minor Oilseeds, Fats and Oils    (202) 219-0838
Jaime Casteneda  World Oilseeds                             (202) 219-0826
Scott Sanford    Peanuts, Cottonseed                        (202) 219-0835
******************************************************************************
 
The next release of the OIL CROPS OUTLOOK is scheduled for 4:00 p.m. ET
Wednesday, April 12.