Prices and Economic Indicators
MAY 2000 SUMMARY
U.S. prices for soybeans, soybean meal and corn registered above-normal monthly gains in May. Soybean prices were up 3.0 percent from April or 2.5 times the 10-year average increase of 1.2 percent. Soybean meal prices were up 6.7 percent in May, or four times its 10-year average increase of 1.6 percent. The meal price gain was the largest for that month since 1988. Higher prices may have been triggered by indications of continuing widespread drought across key producing regions of the Midwest during the next few weeks. In contrast, U.S. soybean oil prices registered a counter seasonal decline of 4.4 percent in May, coinciding with an 11 percent drop in Malaysian palm oil prices. Vegetable oil prices were hit by expanding U.S. vegetable oil stocks, a sharp surge in Malaysian palm oil output and larger stocks of rapeseed and oil in the major producing countries. However, global ending stocks of vegetable oil in days of use may decline slightly.
The strength in soybean prices may reflect: [a] the 1.3 million-ton drop in Oct. 1, 1999 stocks in Argentina and Brazil; [b] a 1.4-million-ton drop in U.S. soybean supply [c] a 1.5 million-ton decline in foreign soybean production; and [d] indications of reduced stocks in the three major producer-exporter countries on June 1. The soybean price recovery came, despite an 8.3 million ton increase in global supplies of oilseeds other than soybeans, chiefly rapeseed in the EU, Canada, China and India.
The meal price recovery is supported by: [a] favorable hog/corn ratios which were 29 percent above a year ago; [b] above-normal broiler/feed ratios; and [c] accelerating real income growth in a number of countries.
The trade-weighted index of vegetable oil prices dropped 10 percent in May to 26 percent below a year earlier. The May 2000 index of prices received for all U.S. farm products was 2 percent above the previous month and 4 percent above a year earlier, reflecting some recovery in feed grains and oilseeds. Annual percentage changes in May 2000 U.S. prices for selected commodities were: 48% soybean meal +42; soybeans +14; combined livestock and products +6; and corn +4; soybean oil -6; palm oil -32; and coconut oil -34. In May, prices for most selected commodities were above their respective 12-month trailing averages, except coconut oil and palm oil.
Key indicators in May, were mostly below their respective 12-month averages except the hog/corn price ratio, crush margins, meal/grain price ratios and U.S. soybean oil stocks. A below-average increase in foreign oilseed supplies boosted U.S. soybean and meal exports during the 35 weeks ending June 1, 2000 by 19.5 percent and 1.5 percent above a year earlier, respectively. Census data for Oct-Mar show U.S. soybean and meal exports up 18 percent and 8 percent, respectively from a year earlier. However, a 5.9 percent expansion in foreign supplies of competing oils trimmed U.S. soybean oil exports by 41 percent during Oct-Mar from a year earlier. This season, U.S. oilseed supplies are 28 percent of world oilseed supplies, compared with its 10-year average of 29 percent.
DEVELOPMENTS WITH POSSIBLE PRICE IMPACT
Foreign oilseed supplies are up only 2.2 percent following last year's 5.4 percent increase and significantly less than its 10-year annual average increase of 3.4 percent. Slowing expansion reflects: [a] smaller Oct. 1, 1999 soybean stocks in South America; [b] reduced soybean production in China, India, Brazil and Paraguay; [c] fewer peanuts in India; [d] less cottonseed in China; and [e] reduced sunflower seed in Argentina.
U.S. soybean supplies increased only 1.4 million tons despite a huge recovery in beginning stocks, reflecting lower yields. However, export expansion will trim U.S. soybean stocks on Sept. 1, 2000 by 1.3 million tons. U.S. soybean stocks are expected to drop to 41 days of use, or 17 percent less than a year earlier and 2 percent below its 10-year average.
The U.S. soybean crush during Sep-Apr was about unchanged from a year earlier at 29.6 million tons. The lack of growth reflected: [a] sluggish domestic meal demand in the face of reduced swine numbers; [b] expanded crushing in Brazil; [c] China's 2.2 million ton soybean crush expansion; and [d] recovery in foreign fish and rapeseed meal exports. In April 2000, U.S. soybean crush capacity utilization was only 70.7 percent, compared with 75.8 percent a year earlier and 79.5 percent in April 1998 as capacity continues to expand. When the demand for U.S. meal exports and/or domestic use accelerates, crushers will respond to the challenge by boosting output.
U.S. soybean exports during Sept-May using Census data through March plus weekly inspections for export through May approximated 22.4 million metric tons. This was 4.1 million tons more than a year earlier, reflecting a 2.8 million ton drop in foreign soybean supplies and expanding usage. Changes include increased movements to China, other Asian countries, the EU and Mexico. These regions respectively accounted for 49 percent, 19 percent, 15 percent and 6 percent of the gain in U.S. soybean exports during Sept-March. This season, China will displace Japan as the largest country market for U.S. soybean exports.
U.S. soybean meal exports during Oct-Mar were up 8 percent, reflecting reduced foreign supplies of soybeans and peanuts and improving incomes in some countries. Increased movements to the Mideast, Mexico, and the FSU respectively accounted for 53 percent, 38 percent and 25 percent of the increase in this season's U.S. soybean meal exports through March. However, U.S. meal exports to China were nil, compared with nearly 0.1 million tons a year earlier, reflecting the switch to soybean imports. The Philippines is the largest country market for U.S. soybean meal this season at nearly 0.5 million tons and 15 percent above a year earlier.
Foreign meal use in 1999/00 will grow 4.8 percent, or much more than its 10-year annual average of 3.3 percent, reflecting expanding livestock product output driven by strong income growth. In contrast, U.S. soybean meal use will lag the year earlier volume, reflecting higher meal prices, reduced swine numbers and slowing broiler output.
U.S. soybean planting this spring increased to 29.1 million hectares, 2 percent more than last year, reflecting favorable prices in relation to competing crops. As of June 4, U.S. soybean planting was 90 percent complete, compared with a 67 percent average for that date. Crop conditions for soybeans as of June 4, showed 66 percent to be in good to excellent condition, compared with 70 percent a year earlier. Variations in planting dates explained 43 percent of the U.S. soybean yield trend deviations since 1980. In 2000, earlier than normal soybean planting could put yields above the 1980-98 trend, if rainfall is adequate.
U.S. 2000 cotton planting as of June 4, was 88 percent complete, exceeding its average of 86 percent for that date. On that date, 49 percent of the cotton area was in good to excellent condition compared with 52 percent last year. Last year only 90 percent of the cotton planting was harvested, or less than the 92 percent average. A normal yield and increased area would put U.S. cottonseed output above last year's 6.4 million tons.
Competing exports of soybeans and meal, in meal equivalent from Brazil and Argentina during Oct-Apr 1999/00 totaled 14.7 million tons, or 7 percent more than the same months a year earlier. In the same period, U.S. soybean meal equivalent exports totaled 19.8 million tons, or 15 percent more than the same months a year earlier. Despite higher prices, combined soybean meal equivalent exports from the U.S., Brazil, and Argentina during Oct-Apr 1999/00 increased 11 percent from a year earlier, largely reflecting improving demand growth in some Asian countries.
China's 1999/00 oilseed output is record large at 44.6 million tons, slightly more than last year and 2.4 million tons above the 1994/95 volume. However, accelerated meal and oil usage is expected to boost China's total oilseed crush in 1999/00 to nearly 40 million tons, or 4.7 million tons more than last year and nearly 12 million tons more than in 1994/95. China is expected to fill that increase by sharply boosting oilseed imports, chiefly as soybeans. However, China's annual growth in combined meal and oil usage during the last five years was 2.4 million tons, of which meal accounted for more than 80 percent. Even if China's combined meal and oil usage increases by 3.4 million tons as forecast, we will see sizable declines in China's net imports of meals and oils from last year's 4.6 million tons and 2.0 million tons, respectively, unless the Chinese government decides to change their import duties. Because Chinese data on oilseed and product stocks are unavailable, be alert to the fact that import estimates, indicated purchases and final trades are very tentative.
During Oct-March, U.S. oilseed and product (O&P) exports to China totaled 2.6 million tons, or 89 percent more that a year earlier. U.S. O&P exports to China during Oct-Mar accounted for less than 11 percent of total U.S. O&P exports; however, China accounted for 46 percent of the growth. During Oct-Mar, the value of U.S. O&P exports at $5.6 billion was slightly less than a year earlier. In contrast, the value of O&P exports to China, which exceeded $0.5 billion, were up 50 percent from a year earlier.
U.S. soybean oil stocks on April 30, 2000 totaled 2.099 billion pounds, compared with 1.641 billion pounds a year earlier. This represents 44 days of total U.S. soybean oil use, compared with 33 days a year ago. However, by Sept. 30, U.S. soybean oil stocks are expected to be less than 1.8 billion pounds, or only 37 days of total use.
Malaysian palm oil stocks on May 1, 2000, at 0.97 million tons were 28 percent more than a year earlier, reflecting a 26 percent increase in output during the 12-months ending April 2000. April 2000 marked the 12th consecutive month of increase in Malaysia's 12-month palm oil output. During the last 15 years, Malaysia's 12-month palm oil output registered four increases which lasted between 28 months and 38 months and averaged 34 months. During the last 15 years, the four cyclical downswings in Malaysia's 12-month palm oil output lasted between 7 and 12 months. Malaysian palm oil output expansion was record large at 32.6 percent during the 12 months ending February 2000, but ending September 2000, Malaysian palm oil output expansion is forecast to dwindle to less than 11 percent and the downward slope in the yield cycle will continue next year. Bearing palm tree numbers in Malaysia have trended upward at only 6 to 7 percent per year. This will shrink the expansion in exportable supplies of tropical oils and benefit imports of other vegetable oils.
U.S. coconut oil imports during the 12-months ending March 2000, at 341,000 tons, were down 29 percent from the same months a year earlier and 30 percent below its 5-year average. The cut in imports reflects the fact that coconut oil prices have been at substantial premiums to other oils. U.S. stocks of coconut oil at the end of April, were 46,386 metric tons, or 67 percent less than a year ago. However, in March, the U.S. coconut oil import unit value at $583 per ton, was 18 percent below last year while imports for that month increased 19 percent. The lagged effects of improved rainfall will boost Philippine coconut oil output in coming months and allow U.S. coconut oil importers to rebuild stocks as prices normalize.
Global 1999/00 oilseed supply-use: Despite this month's slight increase in the world oilseed production estimate, global ending stocks are now estimated below last month's estimate, reflecting increases in crushing of soybeans rapeseed and sunflower seed.
|World oilseed S/U (MMT)||
FY-99 May est
An Ch May
FY-99 Jun. est
FY-00 Jun. est
An Ch Jun.
FY-00 Mo. Ch
|Feed S & W||51.07||53.52||2.45||51.12||53.37||2.25||
Key shifts: (1) Despite a 15 percent increase in this year's global oilseed carry-in, a below-average expansion in global oilseed area and slightly lower yields trimmed the global oilseed supply gain to only 2 percent; (2) However, global meal and oil usage expansion are expected to continue at above average rates; (3) This will result in reduced stocks in the United States, as well as abroad; (4) Combined soybean stocks in Brazil and Argentina on Oct. 1, 2000 will drop 3.0 million tons from a year earlier; (5) However, U.S. soybean stocks are expected to drop only 1.3 million tons; (6) With abundant supplies, U.S. soybean exports were up 18 percent during Oct-Mar 1999/00, reflecting a 2.8-million-ton drop in foreign soybean supplies plus an above-average demand expansion in Asia; (7) In coming months, U.S. soybean exports will continue to expand as South American oilseed supplies shrink from the year earlier levels; (8) In contrast, following an 8 percent gain during Oct-Mar, U.S. soybean meal exports are expected to lag as our competitors utilize their abundant crushing capacity on their new crop; (9) U.S. soybean oil exports which dipped 41 percent during Oct-Mar will continue to lag sharply, reflecting abundant supplies of palm and rapeseed oils; (10) Below-normal expansion in global oilseed supplies with above-normal growth in usage may cut stocks to below average levels, but prices will remain below their 10-year averages unless adverse weather substantially trims oilseed yields in the U.S. and/or major producing countries abroad. (11) If most oilseed and product prices continue at depressed levels, it could slow the expansion in global oilseed planting, benefit product usage and set the stage for record large U.S. soybean exports next season.
Selected U.S. prices during May 2000 with 10-year comparisons:
|PRICES AND PRICE RATIOS||
10-YR MAY HI
|10-YR MAY LO||10-YR MAY AV||MAY 2000|
|SOYBEANS, CASH ($/BU)||
|SOYBEANS, NEARBY FU ($/BU)||8.67||4.71||6.46||5.53|
|SOYBEANS, NOV. FU ($/BU)||7.76||4.84||6.27||5.63|
|CORN, CASH ($/BU)||4.14||1.99||2.58||2.06|
|SOYBEAN/CORN PRICE RATIO||3.12||1.86||2.46||2.50|
|48% SOYBEAN MEAL ($/ST)||306||133||196||189|
|SOYBEAN OIL (CENTS/LB)||29.1||17.8||23.8||16.8|
|MEAL/CORN PRICE RATIO||3.19||1.65||2.14||2.57|
|SOY OIL/MEAL PRICE RATIO||3.54||
In May 2000, prices for soybeans, meal and corn registered above-normal gains. The soybean/corn price ratio and the meal/corn ratio posted counter seasonal increases in May. In contrast, the soybean oil/meal price ratio in May was hit with the largest counter seasonal loss in more than two decades. All selected prices and the oil/meal price ratio were significantly below their 10-year averages. However, the soybean/corn price ratio and the soybean meal/corn price ratio both exceeded their respective 10-year monthly averages for May. During the past 10 years, the frequency of monthly price increases during May was: soybeans 8; corn 4; soybean/ corn ratio 8; soybean meal 6; soybean meal/corn 6; soybean oil 5; and soybean oil/meal 4.
Key changes in May 2000 U.S. prices and ratios for selected commodities:
|PRICES & RATIOS||
MAY 2000 % DEV. FM MAY 10-YR AV
MAY 10-YR AV. % DEV. FROM 10-YR OCT-SEP AV.
MAY 2000 % DEV. FM CURRENT FORECAST
|MAY 2000 % CHANGE FROM APR 2000|
|48% SOY MEAL||-3.2%||+1.1%||+14.8%||+6.7%|
Current ending-stock estimates in days of use with comparisons include:
ENDING STOCKS IN DAYS BY REGION & COMMODITY
|98/99||99/00 MAY EST.||99/00 JUNE EST.||10-YR AV.||JN 99/00 % DEV. FM 10-YR AV.|
|U.S. SOYBEAN OIL||31||39||37||40||-8%|
|WORLD VEG. OILS||34||33||33||39||-16%|
SUPPLY-DEMAND PROSPECTS FOR 2000/2001
U.S. 2000 soybean planting is larger and earlier reflecting the improved prices in relation to competing crops and favorable planting conditions, despite drought concerns by growers. Low vegetable oil prices curb sunflower planting, but canola and cotton area may expand.
U.S. soybean supply prospects for 2000/2001 are favorable reflecting early planting and improving moisture which should benefit yields. If the moisture conditions normalize before the critical pod fill stage in August, this year's 2 percent increase in area will result in record large U.S. soybean output. Record soybean output plus above-average carry-in stocks could boost the U.S. soybean supply by 7 million tons and push ending stocks to 65 days of use, or 54 percent above its 10-year average. Even drought may not prevent stock recovery and lower prices next year, unless there is a shortfall in foreign supply and/or global demand significantly exceeds expectations.
U.S. export sales of 2000 crop soybeans as of the first week in June were 0.4 million tons, compared with 0.2 million tons a year ago and 0.4 million tons, two years ago. New crop export sales in early June sharply lag the 2.5 million tons of 1997 crop beans sold as of that date three years ago. However, that may reflect the fact that new crop soybean futures in May were $0.87 per bushel over the midpoint of the current new crop price forecast range. South American exporters have already moved and/or committed above-normal shares of their current exportable supplies. The expected draw down in South American soybean stocks may result in above-normal strength in U.S. soybean exports during the first half of 2000/2001. With lower prices, U.S. exports will continue to expand next year and beyond.
U.S. feed profitability indices are favorable with lower grain prices spurring feed demand, except in some countries where weaknesses in local currencies or high grain/meal price ratios are curbing usage. In the U.S., poultry meat output continues to increase, but higher meal prices and reduced swine numbers are curbing meal usage.
U.S. soybean ending stock use coverage will recover in 2001, but fall short of those in the mid 1980's. However, foreign stock changes are a wild card. The volume of unreported stocks in the foreign sector is unknown, but believed to be growing with usage. Thus, foreign oilseed stock use coverage is under counted. Nevertheless, both U.S. and global oilseed stock use coverage are expected to expand next year and this would drive most oilseed prices lower.
Canadian oilseed area is set to drop this spring, reflecting a less favorable rapeseed price in relation to wheat. Above-normal rapeseed carry-in stocks will moderate Canada's oilseed supply change, but growth in Canadian rapeseed and product exports could slow.
India's 2000 oilseed planting may show little change, but output will chiefly depend upon a timely monsoon. The Southwest Monsoon is reportedly on track and moisture should be sufficient for timely oilseed planting which could result in near-normal yields. In 1999/00, India produced 23.4 million tons of oilseeds on 31.2 million hectares, or 8 percent less than its 5-year average, despite a comparable 3 percent increase in area. With average yields and no change in area, India could expand oilseed output by about 3 million tons. That could boost India's meal exports and curb her oil imports in 2000/2001.
Global vegetable oil stock use coverage could dwindle next year, despite the fact that China and India the leading oil importers may not expand their oil imports next year and olive oil output may increase. Contribuuting factors include: (1) the lagged effects of reduced rainfall in Malaysia will slow the recent sharp expansion in palm oil output; (2) low oil prices are expected to slow the expansion in planting of high oil content oilseeds including rapeseed and sunflowers; and (3) much of the global crush expansion next season will come from soybeans, rather than rapeseed and will generate less oil per ton crushed.
U.S. indigenous oilseed supplies in 2000/2001 could approximate 101 million tons, or 8 million more than in 1999/00. Even if foreign oilseed supplies stagnate at the 1999/00 volume of 234 million tons, global oilseed supplies in 2000/2001 would register a 8 million ton increase.
World oilseed supplies in 2000/2001 would be about 335 million tons, or nearly 3 percent more than a year earlier. This would require an above normal increase in global usage to prevent an increase in ending stocks next year.
If these assumptions are on track, next season most oilseed prices will drop to their lowest levels since the early 1970's.
What would it take to brighten the price outlook? The possibilities include: [a] Widespread adverse weather cuts oilseed yields in several major producing countries; [b] Foreign oilseed producers divert more land to competing crops; [c] Asian recovery exceeds expectations; and [d] Real income growth accelerates in other major market countries;
Unless unforseen changes occur, the oilseed inventory cycle will be prolonged and stocks could build. This could result in even lower prices for most oilseeds and products in the new millennium.
For further information contact Alan Holz Ph (202) 720-0143; FX (202) 720-0965