APRIL 1997/98 GLOBAL OILSEED HIGHLIGHTS
KEY CHANGES: The April global oilseed ending stocks forecast dipped 2 percent from the previous month, compared with a 4-percent cut in April 1997. The downward revision in the global oilseed stock estimate from last month chiefly reflects an upward revision in the U.S. soybean crush estimate to supply larger soybean meal and oil export forecasts. Using the current supply estimate with U.S. soybean disappearance through Feb. 1998 and the Mar. 1, 1998 reported stocks, the Sept. 1, 1998 U.S. soybean stock estimate was cut 8 percent. U.S. oilseed ending stocks are now forecast at 33 days of use, sharply above 20 days last year, but 26 percent below its 10-year average. A 16-million-metric-ton recovery in global oilseed supplies drives the stock recovery from last year. Soybeans--most of which are from the United States--account for nearly the entire increase. More than half the output expansion will be achieved through improved yields. Key output estimates and changes in million metric tons include:
|COUNTRY/COMMODITY||1997/98 PRODUCTION||ANNUAL CHANGE||MONTHLY CHANGE|
|ARGENTINA SUNFLOWERSEED||5.2||0.0||- 0.3|
|S. AMERICAN VEG. OIL||10.4||+1.0||- 0.1|
|WORLD OILS||77.1||+1.9||- 0.1|
Large soybean expansion output will refill the pipeline, moderate prices and benefit consumers, but likely slow expansion in global soybean plantings in 1998/99.
LOOKING AHEAD: As we begin to shift our focus toward the year ahead, many contrasts are key: (1) Global oilseed area that increased 3.9 percent in 1997/98 will likely register a below- normal increase, reflecting less favorable prices in relation to competing commodities; (2) Global oilseed output which the USDA estimates to increase 8 percent this season may decelerate toward its 10-year annual average increase of 3 percent in 1998/99, reflecting slowing growth in soybean production; (3) Global oilseed supplies that attained an above-average increase of 5.8 percent in 1997/98 may slow next season, despite a 36-percent increase in carry-in stocks; (4) Expansion in global oilseed usage will exceed its 10-year annual average of 3.2 percent and possibly accelerate from this season's rate as crush margins improve and oilseed prices decline; (5) Global meal and oil usage expansion will both accelerate and likely exceed their respective 10-year annual average growth rates, with oil usage expansion out pacing meal; (6) Global oilseed stocks next season will continue to recover from this season's below-normal level in use coverage if yields are normal and our supply recovery assumption is on track; (7) Most oilseed and meal prices will drop next season from above-average levels this season, reflecting stock rebuilding in the major producer-exporter countries; (8) In contrast, prices for most soft oils will likely strengthen as stocks are worked lower; (9) Lauric acid oil prices that have been above their monthly 10-year averages since December 1994 have been trending lower, but may not reach bargain levels until seasonal output of these oils peaks; (10) Crush margins are likely to improve next season, reflecting more abundant supplies; (11) Feed profitability ratios are likely to improve from their current levels if feed ingredient prices decline as expected; (12) China, a wild card bullish element for the past two seasons, will continue to expand its meal and oil usage as income growth continues, but the import growth rates may moderate if indigenous oilseed output recovers following a 2.4 million-ton decline since 1995/96; and finally (13) U.S. oilseed and product (O&P) export volume prospects could accelerate in the second half of FY-99 after growing foreign demand depletes large South American supplies. However, if 1998 U.S. oilseed yields are normal, lower seed and meal prices could cut the FY-99 U.S. O&P export value in the magnitude of 16 percent below the record large FY-98 forecast of $12.3 billion. During the last 20 years, although the value of U.S. O&P exports trended upward by 5.0 percent per year, annual rates of change has ranged between +37 percent in FY-77 and -27 percent in FY-85.
U.S. STOCKS & IMPLICATIONS: In 1997/98, U.S. soybean ending stocks are forecast at 33 days of use, up 79 percent from last year. In contrast, our grain analysts forecast U.S. ending stocks of corn to expand to 49 days of use, or 34 percent above a year earlier. Thus, the March soybean/corn price ratio weakened to 2.54/1.0, or 11 percent less than a year ago and slightly below its 10-year average for that month. The reduced soybean/corn price ratio sets the stage for slowing expansion in 1998 U.S. soybean plantings.
U.S. 1998/99 SOYBEAN SUPPLY-USE PROSPECTS: U.S. 1998 soybean crop prospects based on record large March planting intentions and the trend toward narrower planting rows point to increased production, supplies, and usage, and more recovery in ending stocks. Expanded plantings will account for only a slight increase in U.S. soybean production, unless a wet spring delays corn plantings. The March soybean/cotton price ratio, at 10.2/1.0, is near its long-term average. However, this ratio is 11 percent less than a year ago and provides producers little incentive to boost soybean plantings. With a normal yield, U.S. 1998 crop soybean production would be in the magnitude of 76 million tons, or 3 percent above last year. However, the large increase in carry-in stocks would boost the U.S. soybean supply increase to 6 percent. If foreign oilseed plantings register a trend-line increase, U.S. ending stocks of soybeans in 1998 would recover sharply from the current below-average level and cut prices for soybeans and meal. Although more attractive grain prices may limit plantings of low oil-content oilseeds, rising vegetable oil prices could boost plantings of high oil content oilseeds.
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