Prices and Economic Indicators

AUGUST 2000 SUMMARY

Corn, soybeans and soybean product prices registered above-normal seasonal declines in August. However, recent deterioration in U.S. yield prospects for soybeans and corn forced upward revisions in the September price forecasts for soybeans, soybean meal and corn. The midpoints of current 2000/2001 marketing year prices for soybean and meal were raised to $4.75 per bushel, and $167.50 per short ton, respectively, compared with $4.65 per bushel and $167 per ton last year. The soybean oil price forecast remains unchanged at its midpoint of 16.5 cents per pound, compared with 15.7 cents per pound a year ago. Indications of above normal ending stocks of corn continue to pressure corn, as well as soybean prices. The trade-weighted index of vegetable oil prices dropped 2 percent in August to a level 18 percent below a year earlier, reflecting larger global stocks which are expected to be worked lower next year. The index of prices received for all U.S. farm products was 1 percent below July, and 2 percent below a year earlier, chiefly reflecting lower crop prices. Percentage changes in August 2000 U.S. prices for selected commodities from a year earlier include: coconut oil -47; Malaysian RBD palm oil -26. corn -15; soybean oil -13; broilers -6; soybeans -0; 48% soy meal +11; and hogs +23. In August, most selected prices were below their 12-month trailing averages.

In August, most price ratios and indicators were below their respective 12-month averages except soy meal/corn; soy meal/wheat; wheat/corn; hog/corn; feed profitability; and Malaysian palm oil stocks. Although U.S. soybean disappearance (crush plus exports) during the 12-months ending August 2000 was 7 percent more than a year earlier, U.S. soybean oil stocks were 27 percent above a year earlier.

U.S. Market share U.S. oilseed supplies will account for about 29 percent of 2001 global supplies, compared with 28 percent last year, but about unchanged from its 10-year average. U.S. oilseed exports will account for only 46.5 percent of world exports, compared with 43.1 percent last year, but below its 10-year average of 49.2 percent.

KEY DEVELOPMENTS

The September forecast of 2000/2001 global oilseed supply was cut 3.8 million tons, chiefly because of less than previously estimated soybean yields in the United States. Global oilseed output expansion was trimmed to 3.2 million tons. The 4.8-million ton increase in U.S. oilseed supply will overshadow a 1.6 million-ton decline in foreign oilseed supply. Foreign oilseed use is estimated at 245 million tons, or 30 million tons more than production. The gap will be filled by U.S. exports and some reduction in stocks abroad. However, South American crops yet to be planted late this year are uncertain.

Foreign 2000/2001 oilseed supplies are forecast to decline slightly and fall short of its 10-year annual average increase of 3.6 percent. The 3.3 million-ton increase in foreign soybean production will be overshadowed by: [a] reduced Oct. 1, 2000 soybean stocks in South America; [b] a 3.8 million-ton cut in global rapeseed output and [c] a 1.9 million-ton drop in sunflower seed output.

Global 2000/2001 meal and oil usage (beginning stock plus production less ending stocks) growth rates are forecast at below-average rates of 1.6 percent and 2.6 percent, respectively, reflecting high meal/grain price ratios and weak currencies in some countries. However, U.S. oilseed and oil stocks will continue to expand, unless yields fall short of current estimates and/or low prices boost demand above current estimates. U.S. oilseed ending stocks are estimated at 46 days of total use coverage, or 8 percent above its 10-year average. In contrast, foreign oilseed stock/use coverage will be 10 percent below its 10-year average.

U.S. soybean exports during Sep-Jun to the EU-15, and Mexico increased 11 percent and 4 percent, respectively. Exports to Asia during the same period were up 33 percent. However, U.S. exports to China alone at 3.7 million tons were nearly triple those of a year earlier. Lower prices and growing incomes stimulated foreign demand this year. Meanwhile, U.S. domestic demand for soy meal in 1999/2000 is about flat at 27.8 million tons, reflecting reduced swine numbers and slowing poultry meat output expansion.

U.S. soybean exports during Sep-Aug 2000, using Census data through June plus weekly inspections for export through August approximated 26.7 million metric tons. This was 4.8 million tons more than a year earlier, reflecting below-average expansion in 1999/2000 foreign oilseed supply in the face of expanding foreign demand.

Competing exports of soybeans and meal, as meal, from Brazil and Argentina during Oct-Jul 1999/2000 totaled 28.9 million tons, or 2.6 million tons more than the same months a year earlier. During the same period, U.S. soy-meal equivalent exports were 24.2 million tons, or 3.0 million tons more than the same months a year earlier. Combined soy-meal equivalent exports from the U.S., Brazil, and Argentina during Oct-Jul 1999/00 were up nearly 12 percent, reflecting lower prices and improved foreign income growth.

The U.S. 1999/2000 soybean crush using Sep-Jul Census data plus an estimate for August was down 0.3 million tons from the 43.3 million tons a year ago. The decline reflected stagnation in meal exports caused by China’s shift to oilseed imports and above-average expansion in foreign rapeseed meal exports. In July 2000, U.S. soybean crush capacity utilization, using the National Oilseed Processor Association (NOPA) report was 78.8 percent, compared with 73.1 percent a year earlier and 71.2 percent in July 1998. Including non NOPA firms, the July capacity utilization was probably about 74.5 percent, compared with 73.6 percent a year earlier.

Global 2000/2001 oilseed supply-use: This month’s 3.8 million-ton cut in the world oilseed supply estimate will shrink the global supply increase to only 1 percent. However, global oilseed ending stocks will still increase slightly as global usage slows to less than 1 percent. This assumes: (1) reduced usage in the EU-15 because of higher meal/grain prices ratios and weak currencies; (2) continued demand strength in Asia; and (3) a slight increase in combined soybean stocks in Brazil and Argentina on Oct. 1, 2001 to 9.7 million tons. During the last decade, annual average growth in oilseed usage ranged between +0.2 percent in 1992/93 and 10.3 percent in 1994/95, averaging 3.8 percent.

U.S. 2000/2001 oilseed crop conditions as of Sept. 10: (1) Soybean leaf drop 37 percent, exceeding its 5-year average of 18 percent for that date. (2) Soybean crop condition, 52 percent of the area was in good to excellent condition compared with 45 percent last year. (3) Cotton bolls opening, 61 percent, compared with 5-year average of 51 percent. (4) Cotton crop condition, 36 percent of the crop was in good to excellent condition, against 44 percent a year ago. Thus, U.S. oilseed yields may fall short of previous expectations.

U.S. 2000/2001 soybean supplies are forecast to increase by 4.8 million tons because of improved yields and some expansion in area. However, U.S. soybean stocks on Sept. 1, 2000 are estimated to drop 2.6 million tons, reflecting growing export demand.

U.S. soybean oil stocks on Aug. 1, 2000 totaled 2.12 billion pounds, compared with 1.67 billion pounds a year earlier. This represents 44 days of total U.S. soybean oil use, compared with 34 days a year ago. U.S. soybean oil stocks are forecast at 2.2 billion pounds, or 40 days of total use by Sept. 30, 2001.

Malaysian palm oil stocks on Aug. 1, 2000, at 1.07 million tons, were 7 percent less than a year earlier, despite double digit output expansion. Malaysia’s 12-month palm oil output growth rate slowed from 33 percent in the 12 months ending Feb. 2000 to only 10 percent in the 12 months ending July 2000. July marked the 15^th consecutive month of expansion in Malaysia’s 12-month palm oil output. Since 1984/85, Malaysia's 12-month palm oil output registered four upswings which lasted between 28 months and 38 months and averaged 34 months. The current cyclical upswing in Malaysian palm oil output should continue through Feb. 2002. Since 1984/85, there were four cyclical downswings in Malaysia’s 12-month palm oil output which lasted between seven and 12 months and averaged 10 months.

In 2000/2001, global palm oil output growth, is forecast to slow to about 1 million tons following increases of 1.9 million tons and 2.2 million tons in 1999/00 and 1998/99, respectively. With heavy carry-in stocks and low prices, usage and exports will continue to expand. However, global growth in palm oil exports and usage will slow sharply and stocks and prices should stabilize. Palm oil exports are forecast to account for nearly 44 percent of world vegetable oil exports, compared with 43 percent last year. The bulk of the exports will be from Malaysia and Indonesia and China and India will be key importers.

Key shifts in 2000/2001: (1) Global oilseed area may dip below last year’s 190 million hectares as depressed vegetable oil prices shrank planting of high-oil-content crops; (2) However, global soybean area is up 3.4 percent, reflecting attractive prices in relation to grain; (3) Global oilseed production will be up 2 percent, reflecting higher yields, but this is the third consecutive year of below-average expansion; (4) U.S. soybean exports were up 12 percent during Oct-Feb 1999/00, reflecting a 1.2 million-ton drop in South American carry-in stocks, but exports surged 27 percent during Mar-Jun 2000 from the same period a year earlier, reflecting accelerating demand; (5) In FY-2001, U.S. soybean exports will continue to expand reflecting continued growth in foreign demand growth in the face of reduced supplies abroad; (6) U.S. soybean meal exports were up 2 percent through Feb., but recovery accelerated to 4 percent during Mar-Jun and that rate of increase should continue in FY-2001 as foreign meal supply growth dwindles; (7) U.S. soybean oil exports continued to lag through June, down 42 percent, reflecting above-normal foreign vegetable oil output expansion, but sharply slowing foreign output growth is expected to boost U.S. soybean oil exports by more than 30 percent in FY-2001; (8) Vegetable oil prices have bottomed and should recover somewhat as global stocks are worked lower; (9) Oil prices will gain on meal prices as global oil stocks decline; but (10) Oilseed prices will remain sharply below their 10-year respective averages as stocks build next year.

August 2000 prices and ratios with 10-year comparisons:

August prices for soybeans, meal, oil and corn registered above-normal seasonal declines. In contrast, the soybean/corn price ratio weakened and the soybean meal/corn ratio registered an above-normal increase, while the soybean oil/meal price ratio showed a below-normal increase. In August, the soybean/corn and the soy meal/corn price ratios were below their respective 10-year monthly averages. Although the soy oil/meal price ratio was slightly above its 10-year average, the ratio has been trending upward and the August level at 2.33:1 was below its 2.72:1 trend.

Key changes in August 2000 U.S. prices and ratios for selected commodities:

Current ending-stock estimates in days of use with comparisons include:

U.S. export sales of 2000 crop soybeans as of late August were 4.8 million tons, compared with 3.0 million tons a year ago and 3.7 million tons two years ago. In August new crop futures prices were nearly 2 percent below the midpoint of the current new crop price forecast. Since South American exporters have already moved and/or sold the bulk of their exportable supplies, U.S. soybean exports could register above-normal seasonal strength until new crop South American crops are available in Feb. 2001. Abundant supplies and competitive prices will benefit U.S. soybean exports in FY-2001.

U.S. feed profitability indexes are favorable because of low feed ingredient prices. This will accelerate expansion in U.S. meal demand. However, outside the U.S., meal usage expansion will slow despite strong growth in the Asian Rim countries because of higher meal/grain price ratios and weak European currencies in U.S. dollar terms.

Canadian 2000 oilseed area dropped, reflecting a less favorable rapeseed price in relation to wheat. With lower oilseed yields, Canadian oilseed output will drop 1.6 million tons from last year to 10 million tons. This will slow oilseed exports and cut stocks, but the crush will continue to expand and result in larger meal and oil exports.

China’s oilseed output is forecast at 46.7 million tons, or 1.4 million above last year. With meal and oil usage expanding by about 1.5 million tons and 0.9 million tons, respectively, China’s net imports of meal and oil are projected at 0.7 million tons each, but oilseed imports are expected to drop 2.8 million tons. This would result in a significant reduction in Chinese oilseed stocks, for which official data are lacking.

India’s oilseed output is up 1.6 million tons, but less than three of the previous five years. The increase reflects higher yields, but area was the smallest since 1995/96. Despite a 6.9 percent increase in India’s oilseed output, vegetable oil imports are forecast 10 percent and meal exports may drop slightly, reflecting strong expansion in domestic usage.

U.S. coconut oil imports during the 12-months ending June 2000 were 389,000 metric tons, down 10 percent from the same period a year earlier and 17 percent below its 5-year annual average domestic use. Reduced imports shrank U.S. coconut oil stocks on Aug. 1, 2000 to 74,207 tons, or 17 percent less than a year ago. The import cut reflected expanding imports of palm kernel oil, which were up 52 percent or 75,000 tons during the 12 months ending June 2000. However, the lagged effects of improved rainfall are boosting Philippine coconut oil output. Thus, the June 2000 U.S. coconut oil import unit value dropped to $574 per ton or 12 percent below its 5-year average. In FY-2001, U.S. coconut oil imports will recover, but remain significantly below the 1996/97 volume of 653,000 tons, reflecting continued expansion in palm kernel oil imports.

For further information contact Alan Holz Ph (202) 720-0143; FX (202) 720-0965

Last modified: Tuesday, September 14, 2004