August 2001 - Prices and Economic Indicators

AUGUST 2001 SUMMARY

Soybeans, corn and soybean meal prices registered counter seasonal gains in August, while soybean oil prices posted an above-normal increase. Downward revisions in U.S. carry-in stocks and yield prospects for soybeans and corn caused upward revisions in the September price forecasts for soybeans, soybean meal and corn. The midpoints of current 2001/02 marketing year price forecasts for soybean and meal were raised to $4.90 per bushel, and $175 per short ton, respectively, compared with $4.85 per bushel and $173.5 per ton last month. The soybean oil price forecast midpoint is 17.0 cents per pound, compared with 18 cents per pound last month. All of the current price forecasts exceed their respective year earlier levels, reflecting reduced ending stocks forecasts. The trade-weighted index of vegetable oil prices gained 4 percent in August to 25 percent above a year earlier on indications of reduced global stocks in 2002. The price index for all U.S. farm products was 2 percent above July, and 14 percent above a year earlier, largely reflecting higher livestock and product prices. Percentage changes in August 2001 U.S. cash prices for key commodities from a year earlier: U.S. broilers +27; corn +27; palm oil, RBD Malaysia +23. soybean oil, +19; hogs +18; 48% soy meal; +13; soybeans +9; and coconut oil -6. In August, most selected prices exceeded their 12-month trailing averages.

In August, most price ratios and indicators were above their respective 12-month averages except soy meal/corn; wheat/corn; hog/corn; and Malaysian palm oil stocks. Although U.S. soybean disappearance (crush plus exports) during the 12-months ending August 2001 was only 3 percent more than a year earlier, U.S. soybean oil stocks were 37 percent above a year earlier.

U.S. Market share U.S. oilseed supplies will account for 27.4 percent of 2002 global supplies, unchanged from last year, but below its 10-year average of 28.9 percent. U.S. oilseed exports will account for 40.7 percent of world exports, compared with 40.1 percent in 2001, but below its 10-year average of 49.2 percent.

KEY DEVELOPMENTS

The September forecast of 2001/02 global oilseed supply was cut 3.0 million tons, from last month because of down revisions soybean carry-in stocks in the U.S., Brazil and Argentina, soybean production in the U.S. and Canada, rapeseed production in Canada and sunflower in the FSU. Global oilseed supplies will increase only 5.4 million tons or only 1.6 percent. The U.S. oilseed supply increase, at 1.5 million tons, accounts for 28 percent of the global increase. The 7.9-million-ton increase in the global oilseed crush forced a 3.2-million-ton downward revision in global oilseed ending stocks from a year earlier. Global oilseed ending stocks are now estimated at 34 days of use, the smallest since 1996/97.

Foreign 2001/02 oilseed supplies are expected to increase by 3.9 million tons, of which soybeans will account for 4.4 million tons. Key changes for soybeans: [1] a 1-million-ton increase in South American soybean stocks on Oct. 1, 2001; [2] a 2.0-million-ton increase in the Chinese carry-in; [3] a 1.6-million-ton increase in foreign output. Key production changes for oilseeds other than soybeans: [1] a 3.6-million-ton increase in India and [2] a 1.9-million-ton increase in China.

Foreign oilseed use is estimated at 259 million tons, or 7.7 million tons more than last year. Since foreign oilseed supplies are expected to increase only 3.9 million tons, this implies nearly a 4-million-ton stock cut, unless imports from the U.S. expand. However, South American crops yet to be planted late this year are still uncertain.

Global 2001/02 expansion in meal and oil usage (beginning stocks plus production less ending stocks) will continue at below average rates but diverge as slower oil supply growth depletes stocks in the face of accelerating meal usage. Although abundant soybean meal supplies and income growth will boost global meal usage above the 2000/01 rate of 2.7 percent, total meal usage will fall short of its 4.0 percent 10-year average annual growth. In contrast, slowing palm oil production and reduced supplies of rapeseed and sunflower seed will boost prices for soft oils and curb global oil usage expansion significantly below its 10-year annual average of 4.4 percent.

Global stocks of oilseeds and oils will drop unless production exceeds current estimates and/or high prices curb demand below current estimates. U.S. soybean ending stocks are estimated at 33 days of total use, or 23 percent below its 10-year average. In contrast, foreign oilseed stock/use coverage will be 2 percent above its 10-year average.

U.S. soybean exports during Sep-Jun totaled 25.1 million tons, or 7 percent more than a year earlier. Combined exports to China, Indonesia, Thailand and Mexico increased 30 percent to 10.3 million tons and accounted for the total increase. U.S. soybean export expansion in these countries reflects above-average income growth. During the same period U.S. soybean exports to the EU were down 1 percent to 5.9 million tons, reflecting some reduction in livestock numbers and increased purchases from South America. U.S. soybean exports for that period to all other countries at 8.9 million tons dropped 8 percent.

U.S. soybean exports during Sep-Aug 2001, with Census data through June plus weekly inspections for export through August approximated 27.2 million metric tons, a below-average 3 percent increase from a year earlier, reflecting above-average expansion in 2000/01 foreign soybean supply in the face of slowing foreign demand.

Competing exports of soybeans and meal, as meal, from Brazil and Argentina during Oct-Jul 2000/01 totaled 33.4 million tons, or 4.6 million tons more than the same months a year earlier. During the same period, U.S. soy-meal equivalent exports were 25.7 million tons, or only 1.7 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 2000/01 were up nearly 12 percent, reflecting reduced supplies of other meals and continued expansion in foreign incomes and livestock product output growth.

The U.S. 2000/01 soybean crush using Sep-Jul Census data plus an estimate for August was up 1.6 million tons from the 42.9 million tons a year ago. U.S. soybean meal usage in 2000/01 increased 1.1 million tons or 4 percent, to 28.7 million tons because of favorable feed profitability ratios and growing poultry meat output. Total soybean meal exports were up nearly 6 percent with Indonesia, the EU, Egypt, Canada and the FSU accounting for all of the gain. In July 2001, U.S. soybean crush capacity utilization, based on National Oilseed Processor Association (NOPA) data was 81.8 percent, compared with 78.8 percent a year earlier and 73.1 percent in July 1999.

Global 2001/02 oilseed supply-use: This month’s 3.0 million-ton cut in the world oilseed supply estimate will shrink the global supply increase to only 1.6 percent. Global oilseed ending stocks will drop 10 percent. Assumptions: (1) a 7.9-million-ton increase in the global crush driven by a 3.3 percent increase in meal usage; (2) a resumption in EU meal usage growth following stagnation in 2000/01; (3) continued demand strength in Asia; and (4) a 1-million-ton increase in combined soybean stocks in Brazil and Argentina on Oct. 1, 2001 to 14.3 million tons. During the last decade, annual growth in global oilseed usage was between +0.2 percent in 1992/93 and 10.3 percent in 1994/95, averaging 3.9 percent.

U.S. 2001/02 oilseed crop conditions as of Sept. 9: (1) Soybeans, 53 percent of the area was in good to excellent condition compared with 52 percent last year. (2) Soybean leaf drop 22 percent, exceeded its 5-year average of 20 percent for that date. (3) Cotton, 45 percent of the crop was in good to excellent condition, against 36 percent a year ago. (4) Cotton bolls opening, 53 percent, compared with 5-year average of 52 percent. U.S. oilseed yields are currently expected to slightly exceed last year’s levels.

U.S. 2001/02 soybean supplies are forecast to increase by 1.7 million tons, despite a 1.4 million-ton decline in the carry-in. However, U.S. soybean stocks on Sept. 1, 2002 are estimated to increase by 0.4 million tons, unless exports exceed the current forecast. Since FY-75, there were only three years in which U.S. soybean supply expansion failed to result in expanded soybean meal equivalent exports, FY-85, FY-91 and FY-99.

U.S. soybean oil stocks on Aug. 1, 2001 totaled 1.32 million tons, compared with 0.96 million tons a year earlier. August 1 stocks represent 55 days of total U.S. soybean oil use, compared with 44 days a year ago. U.S. soybean oil stocks are forecast at 1.02 million tons, or 43 days of total use by Sept. 30, 2002.

In 2001/02, global palm oil output may expand by less than 1 million tons - far less than the 2.25 million-ton average annual increase since 1997/98. With a lower palm oil carry-in and below-average output expansion, prices will rise as usage and exports slow. Despite slowing supply growth, global palm oil exports may account for nearly 49 percent of world vegetable oil exports, compared with 48 percent last year as stocks are worked lower in Malaysia and Indonesia. China, Pakistan, and Iran will likely import more palm oil, but India, the leading importer may fall short of last year’s 4.4 million-ton estimate.

Malaysian palm oil stocks on Aug. 1, 2001, at 0.92 million tons, were 14 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 14 percent in the 12 months ending July 2001. July marked the 27^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 29 months and 38 months and averaged 34 months. Using average and maximum length of previous cycles, the current cyclical upswing in Malaysian palm oil output might continue through next February, but could last through June. Since 1984/85, the four cyclical downswings in Malaysia’s 12-month palm oil output lasted between seven and 11 months and averaged 10 months.

August 2001 prices and price ratios with 10-year comparisons:

Key shifts in 2001/02: (1) Global oilseed area may approximate 191 million hectares, or only 1.4 percent more than last year since depressed vegetable oil prices shrank planting of high-oil-content crops; (2) World soybean area is up 2.2 percent, because of higher local currency prices in Brazil and a favorable U.S. soybean/corn loan ratio; (3) With little change in yields, global oilseed production may increase 2.1 percent, but this is the fourth consecutive year of below-average expansion; (4) U.S. soybean exports may dip during Oct-Feb 2001/02, reflecting a 1.0 million-ton increase in South American carry-in stocks; (5) However, U.S. soybean exports during Mar-Jun 2002 may improve a bit, depending on upcoming oilseed production in South America and foreign demand; (6) In FY-2002, U.S. soybean exports may not expand unless foreign demand exceeds current estimates and/or South America suffers below-trend yields; (7) U.S. soybean meal exports could accelerate in July-Sep from the 4 percent growth registered during Oct-Jun, but expanding foreign exports may curb U.S. meal exports in FY-2002; (8) Following a 5 percent drop in U.S. soybean oil exports through June, slowing foreign output growth is expected to boost U.S. soybean oil exports by more than 75 percent in FY-2002; (9) Vegetable oil prices have bottomed and will continue to recover as global stocks are worked lower; (10) Soybean meal prices could strengthen, with some recovery in grain prices although the meal/corn price ratio is significantly above its long-term average; (11) Higher meal prices could slow the oil/meal price ratio recovery as oil stocks decline; (12) The expected decline in global oilseed stocks will boost oilseed prices; (13) Recovery in vegetable oil prices could set the stage for recovery in planting of high oil content oilseeds in 2002/03.

Key changes in August 2001 U.S. prices and ratios for selected commodities:

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

Canadian 2001 oilseed area dropped 16 percent to the lowest level in 5 years, reflecting a less favorable rapeseed/wheat price ratio. Dry weather curbed the rapeseed yield and Canadian rapeseed output will drop 2.0 million tons from last year's to 7.1 million tons. This will cut exports and stocks sharply, but the crush may decline only slightly. This would imply that U.S. rapeseed meal and oil imports will be about unchanged from their respective 2000/01 volumes of 1.16 and 0.54 million tons.

China’s oilseed output is forecast at 52.1 million tons, or 1.5 million more than in 2000/01. The increase could hold China's oilseed imports below the record large 14.8 million tons in 2000/01. However, China's soybean imports from the U.S. are expected to exceed the 2000/01 estimate of 5.8 million tons as imports of other oilseeds decline. We expect China's meal and oil usage expand by about 2.2 million tons and 0.55 million tons, respectively. That would cause China to expand its oil imports by 0.3 million tons, but meal imports would remain small. However, unexpected changes could occur, because complete Chinese oilseed stock data are lacking.

India’s oilseed output is up 4.0 million tons, but still below its 1998/99 volume. Although India's oilseed area is up nearly 16 percent it is still 5 percent below 1996/97. India's vegetable oil imports may drop 0.3 million tons despite nearly a 0.4 million ton increase in domestic usage. However, vegetable imports from the United Sates, may remain about unchanged. During Oct-Jun 2000/01 U.S. soybean oil exports to India totaled 50,053 tons or more than double the year earlier volume.

U.S. feed profitability ratios are favorable because of higher livestock and product prices. If favorable prices result in accelerated poultry and hog output expansion, U.S. meal usage would benefit. Abroad, meal usage will exceed last year’s below-average growth, reflecting accelerated real income growth, lower meal/grain price ratios and recovery from disease problems in some countries.

U.S. coconut oil imports during the 9-months ending June 2001 were 497,000 metric tons, up 27 percent from the same period a year earlier and 6 percent above its 5-year annual average domestic use. Increased imports boosted U.S. coconut oil stocks on Aug. 1, 2001 to 128,529 tons, or 57 pecent more than a year ago. The import gain reflected recovery in Philippine output. However, the lagged effects of less faorable rainfall may curb Philippine coconut oil output next season. This could boost prices and curb U.S. coconut oil imports in FY-2002 as U.S. stocks are worked lower.

U.S. export sales of 2001 crop soybeans as of late August were 4.52 million tons, compared with 4.76 million tons a year ago and 2.97 million tons two years ago. In August new crop futures prices were 2.1 percent above the midpoint of the new crop price forecast. Although South American soybean exporters have moved the bulk of their 9.6-million ton increase in supplies, U.S. soybean exports may register below-normal seasonal strength until new crop South American crops are available in Feb. 2002. Larger U.S. supplies could benefit U.S. soybean exports in FY-2002, if growth in new-crop foreign supply slows.

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

Last modified: Tuesday, September 14, 2004