Situation and Outlook
U.S. oilseed production for 1998/99 is forecast at a record 84.1 million tons, down 148,000 tons from last month. The drop is mostly due to a decrease of 172,000 tons in forecast 1998 soybean production. Current soybean production is forecast at 75.2 million tons or 2,763 million bushels. Late summer dryness curtailed yields, mainly in southern growing areas. A modest increase is indicated for peanut production, while cottonseed production is lowered slightly this month.
The U.S. soybean crush and export forecasts for 1998/99 were both increased this month despite the decline in production. Soybean crush was increased 408,000 tons to 44.0 million tons while exports were increased 272,000 tons to 22.9 million tons. Most of the increase is attributed to the recently announced concessional sales to Russia, which include 200,000 tons of soybeans and 300,000 tons of soybean meal. Other changes this month include a 111,000-ton increase in soybean oil supplies, mostly due to the larger crush forecast. With only small increases made in domestic use and exports, soybean oil ending stocks were increased 65,000 tons to 721,000 tons.
U.S. season-average soybean farm prices are forecast higher at $5.15 to $5.75 per bushel. Soybean meal prices are increased slightly to $135 to $155 per short ton while soybean oil prices are lowered slightly to 25.5 to 28 cents per pound.
Global oilseed production for 1998/99 is forecast at a record 288.0 million tons, down 0.34 million tons from last month. Foreign oilseed production for 1998/99 is forecast at 203.9 million tons, down slightly from last month. A decline in foreign cottonseed output is largely offset by small gains in soybeans and rapeseed production. An increase in Paraguay's soybean crop accounts for most of the soybean change.
NOVEMBER GLOBAL 1998/99 OILSEED HIGHLIGHTS
BULLISH BEANS This month's net changes were constructive for soybean and meal prices, but slightly bearish for oil. Key factors include: (1) slight cuts in U.S. soybean and FSU-12 cottonseed output estimates, reflecting lower yields; (2) upward revisions in U.S. soybean crush and exports, reflecting 0.5 million tons of soybeans and meal assistance to Russia; (3) the soybean disappearance (crush plus exports) in the major producer-exporter countries since Sept. 1 surged from a year earlier, reflecting improved feed profitability ratios; (4) the value of the European Currency Unit in U.S. dollars gained 7 percent since Oct. 1997, thus making U.S. exports less expensive in the E.C.; (5) recent improvement in prices of Asian equities could be signaling a turn around in real income growth which could result in accelerated oil and meal usage in some Asian Rim countries; (6) U.S. oilseed ending stocks in days of total use are now forecast at only 10 percent above its 10-year average, compared 20 percent last month; and (7) foreign oilseed ending stocks are forecast to be 19 percent under its 10-year average in days of total use coverage, unchanged from last month, but less than a year earlier.
SOY OIL PRICES MAY LAG For soybean oil, this month's forecast changes are more convoluted. Key price shifters include: (1) U.S. vegetable oil ending stocks in days of total use are now forecast at 21 percent under its 10-year average, compared 27 percent under last month, reflecting the upward revision in crush and a slight increase in the soybean oil extraction rate; (2) in Malaysia palm oil output during the year ending September 1998 fell short of expectations, reflecting the lagged effects of drought; (3) an upward revision in foreign vegetable oil usage failed to prevent an upward revision in ending stocks, reflecting larger than expected carry in stocks, due to flat per capita usage abroad last year; (4) foreign vegetable oil ending stocks are now forecast at 25 percent under its 10-year average, compared 27 percent last month; (5) combined vegetable oil supplies in Malaysia, Indonesia and the Philippines are now forecast at 20.0 million tons, only 0.2 million more than last year and 0.8 million less than in 1996/97; (6) using customs data, China's annual vegetable oil import growth is now forecast to slow to 0.3 million tons, compared with 0.5 million during the last five years; and (7) net vegetable oil exports from Argentina, Brazil, Bolivia and Paraguay are now forecast at 5.4 million tons, or 0.44 million more than last year, or slightly more than the annual average growth during the last five years. (8) In October 1998, the U.S. soybean oil/48% meal price ratio at 3.71:1.0 was 71 percent above its 10-year average for that month. This could boost Southern Hemisphere plantings of high oil content oilseeds to be harvested early next year.
EXPORT IMPLICATIONS This month's global oilseed supply growth forecast was cut to only 2.2 percent, compared with its 10-year average of 2.7 percent, yet ending stocks are expected to build. The expected stock buildup will be in the United States, reflecting reduced soybean and product exports. The FY-99 volume of U.S. oilseed and product exports is now forecast at 35.1 million tons, or 0.8 million more than last month's forecast. Most of the increase is expected to move to Russia as soybeans and meal. Despite the upward revision, U.S. oilseed and product exports are expected to trail last year's record volume by 1.0 million tons. In FY-99, the value of U.S. oilseed and product exports is now forecast at $9.3 billion, or $125 million more than last month's estimate, but $1.8 billion less than last year's level. Although the FY-99 volume of U.S. oilseed and product exports is expected to decline less than 3 percent, sharply reduced unit values could trim the export value by 16 percent. This will be the largest decline in U.S. oilseed and product export value since FY-85 when export value dropped 27 percent on a 12 percent decline in volume.
World soybean production in 1998/99 was nearly unchanged this month at 153.7 million tons. Increased production in Paraguay, up 200,000 tons from the October forecast to 3.1 million tons, was nearly offset by the 172,000 ton decline in the U.S. production estimate. With the U.S. harvest nearly complete, it is becoming apparent that this past summer's dry weather in the southern United States had a greater impact on yields then earlier thought resulting in this month's lower production estimate. Paraguay's soybean production forecast for 1998/99 was raised this month based on official Agricultural Ministry figures and reflects the prospect of improved yields on somewhat smaller area this season.
The world soybean export forecast was strengthened this month by a recent increase in export activities plus the expected impact associated with the recently announced Russian food aid package. This aid package includes a projected 200,000 tons of soybeans and 300,000 tons of soybean meal. Paraguay's export estimate was also increased and reflects the improved export climate expected in the coming months. Larger import prospects for Russia helped raise the world soybean import forecast 1 percent from October's level. World soybean ending stocks for 1998/99 were reduced 4 percent this month reflecting a large drop in projected ending stocks in the United States. The South American soybean ending stocks forecast for 1998/99 was increased this month in response to expected larger carry-in stocks for Brazil due to slower than expected exports in 1997/98. Argentina's ending stocks forecast was lowered due to larger exports in 1997/98.
World soybean meal production for 1998/99 was increased 402,000 tons this month to 102.1 million tons with increases in the United States and Russia following announcement of the Russian aid package. World soybean meal trade is up slightly as larger U.S. exports and larger Russian imports result from the aid package.
Forecast world soybean oil production was also increased this month in response to the increased soybean crush. However, a reduction in China's import forecast, down 250,000 tons to 1.8 million tons, combined with the increase in soybean oil production, helped push the ending stocks forecast higher this month. World ending stocks are forecast to reach 2.5 million tons in 1998/99, reflecting increases in the United States, Brazil, and Argentina.
China's soybean oil imports for 1997/98 and 1998/99 were revised downward to reflect the crackdown on smuggling. Based on preliminary exporter data, China imported 1.7 million tons of soybean oil in 1997/98, down from the 1.8 million ton estimate of last month. In 1998/99, China is forecast to import 1.8 million tons of soybean oil, down from 2.0 million tons forecast last month. Beginning stocks were increased for both periods, while stocks are still expected to be drawn down throughout 1998/99.
Preliminary 1997/98 import data is now available for key Asian countries:
The following table summarizes preliminary 1997/98 import statistics for four key Asian importers, the change from the previous year, and the 1998/99 import estimates (which remain unchanged from last month).
|Soybean Imports||1997/98||Change from 96/97||1998/99 estimate|
|Korea, Rep of||1,340||- 10 %||1,400|
|Taiwan||2,387*||- 9 %||2,500|
|Total||11,540||+ 0.9 %||12,200|
All units 1,000 metric tons. *1997/98 import figures may differ from Table 6 due to rounding.
While total soybean import demand has declined in three key markets, growth in China has compensated - albeit not to the benefit of U.S. soybean exports alone. The United States has lost market share in this region in the face of stiff competition during the Jul/Sep quarter. Based on importer data for the 1997/98 period, Brazil, Argentina and Paraguay shipped at least 2.5 million tons of soybeans to the above region, capturing between 20 and 25 percent of the total market. This compares with only 10 percent in CY 1996 and 17 percent in CY 1997. U.S. market share has fallen over this same period from nearly 90 percent to below 75 percent.
Growth in U.S. soybean meal and oil exports to this region during 1997/98 - especially to China and Korea - has helped offset the decline in U.S. soybean exports.
Strong competition is expected to continue into the current marketing year due to relatively large availabilities in South America during Oct/Dec 1998. Meanwhile, as of Oct 29, U.S. exports (1,960 tons) and outstanding sales (3,952 tons ) of soybeans to this region are currently ahead of last year's pace (1,783; 3,519 tons).
World oilseed production for 1998/99, excluding soybeans, was reduced 361,000 tons in November to 134.3 million tons. A lower world cottonseed forecast more than offset minor increases in peanut, sunflowerseed, and rapeseed production this month. Cottonseed production forecasts were reduced in Uzbekistan, down 200,000 tons, and the Sudan, down 105,000 tons. Other reductions this month could be found in Azerbaijan and Kazakhstan, as well as Argentina, Tanzania, Paraguay, Iran, and the United States. Reductions in these countries ranged between 15,000 and 40,000 tons. Elsewhere, changes include an increase in the U.S. peanut production forecast, and an increase in Poland's rapeseed and Australia's sunflowerseed production forecasts for 1998/99.
The world oilseed export forecast for 1998/99, excluding soybeans, was increased 230,000 tons to 14.7 million tons primarily due to an increase in sunflowerseed export forecasts for the Ukraine and Australia, and higher copra exports expected for Indonesia. The cottonseed export forecast for 1998/99 remained unchanged despite the lower world production forecast as all of the shortfall in production will impact local crush and use. Subsequently, total world other oilseed crush, which excludes soybean crush, was reduced 427,000 tons to 106.6 million tons. The world oilseed ending stocks forecast for 1998/99, excluding soybeans, was increased 47,000 tons to 3.1 million tons this month in response to an increase in forecast rapeseed stocks in Japan.
World protein meal production, excluding soybean meal, was reduced 69,000 tons in November to 58.9 million tons. This reduction is in response to lower world cottonseed production and crush forecasts for 1998/99. Partially offsetting this decline were increased rapeseed meal production in Poland and sunflowerseed meal production in the Ukraine. Forecast exports of other protein meals, which excludes soybean meal, were reduced 27,000 tons to 16.1 million tons in response to lower cottonseed meal exports. Total world protein meal consumption, excluding soybean meal, was unchanged this month as increased rapeseed, sunflowerseed, and copra meal consumption offset declines in forecast cottonseed consumption. The world ending stocks forecast for protein meals, excluding soybean meal, remained unchanged at 1.7 million tons in November.
World vegetable and marine oil production, excluding soybean oil, remained unchanged this month at 56.6 million tons. Lower cottonseed and coconut oil production forecasts were essentially offset by increased rapeseed and sunflowerseed oil forecasts. Total forecast world vegetable and marine oil exports for 1998/99, excluding soybean oil, were up slightly to 23.2 million tons this month. Total vegetable and marine oil consumption, excluding soybean oil, was reduced 99,000 tons this month to 56.4 million tons. While the sunflowerseed oil consumption forecast was raised this month, declines in rapeseed, cottonseed, coconut, and palm oil led to the reduction in the total oil consumption forecast. The ending stocks forecast for 1998/99, excluding soybean oil, was unchanged in November at 4.2 million tons.
Other Oilseed Highlights
Ukraine's 1998 sunflowerseed production forecast was reduced 400,000 tons to 2.3 million tons reflecting lower yields in response to drought conditions in eastern parts of the country. This smaller crop is expected to result in decreased crush, lower exports, and reduced sunflowerseed meal and oil production.
Sudan's cottonseed production forecast for 1998/99 was reduced 105,000 tons to 155,000 tons in response to untimely heavy rainfall which cut cotton production. As a consequence, crush was reduced with a corresponding reduction in cottonseed meal and oil production forecasts.
Jim L. Matthews (202) 720-5448
Floudia Bradley (202) 720-2257
William V. George (202) 720-6234
George Douvelis (202) 720-2494
Greg Edwards (202) 690-4199
Kwamena Cudjoe (202) 720-0141
Robert Hanson (202) 690-2581