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USDA Oil Crops Outlook


12 December 2013

USDA Oil Crops Outlook - December 2013USDA Oil Crops Outlook - December 2013


USDA Oil Crops Outlook

USDA raised its 2013/14 forecast of U.S. soybean exports this month by 25 million bushels to 1.475 billion. Similarly, 2013/14 exports of soybean meal were forecast 250,000 tons higher to 10.5 million short tons, which prompted an expected increase in the domestic soybean crush by 5 million bushels to 1.69 billion. An improved demand outlook lowered the forecast of season-ending soybean stocks by 20 million bushels this month to 150 million. USDA raised its forecast range for the season-average farm price by 35 cents this month to $11.50-$13.50 per bushel.

For Argentina, area reductions for corn and sunflowerseed led USDA to raise its 2013/14 soybean area estimate by 300,000 hectares this month to 20 million. As a result, Argentine soybean production is forecast 1 million tons higher to 54.5 million metric tons. Additional output of Argentine soybean meal may push exports of the commodity in 2013/14 to a record 29.4 million tons. Yet, Argentine soybean stocks could be higher by next September to 28.5 million tons.

U.S. Exports of Soybeans and Soybean Meal are Surging

November soybean shipments (656 million bushels) were also on a record pace. Meanwhile, corn shipments are expanding briskly at the same time, so U.S. export capacity is being severely tested.

Similarly, U.S. export shipments of soybean meal in 2013/14 are on par with the 2012/13 record and sales commitments are currently even higher than a year ago. USDA expects soybean meal exports for 2013/14 at 10.5 million short tons—up from last month’s forecast of 10.25 million but below the 2012/13 trade at 11.1 million. However, soybean meal exports may have less staying power than soybean exports will. A rapid drawdown in soybean stocks over the first half of 2013/14 should tighten crushing margins in the season’s second half. Higher foreign demand for U.S. soybean meal is seen boosting the domestic soybean crush for 2013/14 by 5 million bushels this month to 1.69 billion.

An improved demand outlook for soybeans may not allow for any significant increase in 2013/14 ending stocks. U.S. carryout stocks are forecast 20 million bushels lower this month to 150 million, versus 141 million bushels in 2012/13.

Robust exports of soybeans and soybean meal have bolstered their cash prices. USDA raised its forecast range for the season-average farm price by 35 cents this month to $11.50-$13.50 per bushel. Despite completion of the U.S. harvest, central Illinois cash soybean prices edged up to a November average of $12.83 per bushel from $12.69 in October. Likewise, the average price for soybean meal in November had climbed to $451 versus $444 in October. While soybean meal prices are still expected to start weakening by next spring, the 2013/14 average price was forecast $25 per short ton higher this month to $400-$440. The export-led price strength and ample supplies of alternative protein meals (particularly canola meal) are seen trimming domestic use of soybean meal by 150,000 short tons to 29.8 million.

In contrast, prices for soybean oil are being pressured by strong demand for supplies of soybean meal (its joint product) as well as pessimistic prospects for its own demand. In November, central Illinois soybean oil prices slipped again to a monthly average of 39.6 cents pound. Soybean oil prices will continue to be undermined by abundant global production of rapeseed, sunflowerseed, and palm oil. USDA lowered its forecast of the 2013/14-average soybean oil price by 2 cents this month to 38-42 cents per pound.

 Outlook Dims for Soybean Oil Consumption Used in Ester-Based Biodiesel

This month, USDA lowered its consumption forecast for soybean oil used in methyl ester-based biodiesel for 2013/14 from 5.6 billion pounds to 5.2 billion. An increase from the 4.6 billion pounds used in 2012/13 is still anticipated because production for October-December 2013 will likely accelerate due to expiration of a $1-per-gallon blending credit at the end of this month (if not extended by law). This season’s revised outlook is based on a changing composition of the biodiesel industry.

There are two main processes for producing biomass-based diesel. The first is transesterification—which produces a fatty acid methyl ester that can be blended at fuel distribution centers with petroleum-based diesel. The other is hydro-treated vegetable oil—also known as “renewable diesel”. A petroleum refinery can directly incorporate renewable diesel into its normal processes of distillation and distribution via pipeline. Both processes create a biofuel RIN (Renewable Identification Number, an EPA accounting measure used to monitor RFS compliance) and both are eligible for the blending credit. However, another advantage for non-ester renewable diesel is that it earns a higher “equivalence value” up to 1.6-1.7 times the energy value of a gallon of corn-based ethanol, versus 1.5 times for ester-based biodiesel.

In comparison to biodiesel produced from methyl esters, U.S. output capacity for renewable diesel has been growing rapidly. EPA reports that for January-October 2013 renewable diesel accounted for 14 percent of total biomass-based diesel production—up from just 8 percent in 2012 and 4 percent in 2011. While renewable diesel processing can easily use any combination of vegetable oil or fats, its primary feedstocks have been lower-cost waste fats, recycled grease, and distillers corn oil (DCO). Current prices for yellow grease and DCO are 23 cents and 29 cents per pound, respectively. In contrast, a majority of methyl-ester based biodiesel is produced from soybean oil. Thus, if the share for renewable diesel production rises again over the next 12 months, it could increasingly displace the use of soybean oil by methyl ester producers.

International Outlook

Argentine Soybean Area Expands As Other Crops Lose Favor With Farmers

Precipitation in Argentina’s main farm belt was below average throughout September and early October. The late arrival of the rainfall discouraged some planting of corn and sunflowerseed. In addition, soybeans have comparatively stronger prices and lower production costs, which facilitated an easy switch in farmers’ cropping plans. Argentine sunflowerseed area in 2013/14 is seen down this month to 1.48 million hectares—down 170,000 hectares from last month’s forecast and last year’s total of 1.62 million. Thus, Argentine sunflowerseed output is forecast 340,000 tons lower to 2.7 million metric tons, which may have small consequence globally due to large crops in Russia, Ukraine, and Europe. In addition, the reduction in Argentine corn area this year is expected to be 550,000 hectares.

By late October, however, the rains started to pick up—just in time for the usual start of soybean planting. Topsoil moisture is now much improved for crop germination although subsoil moisture could still be better for supporting subsequent development. As of December 5, 66 percent of the soybean area in Argentina had been sown. Much of the unsown area is in the northern part of the country.

Area reductions for these other Argentine crops led USDA to raise its 2013/14 estimate of soybean area this month by 300,000 hectares to 20 million. As a result, soybean production is forecast 1 million tons higher to 54.5 million tons and may equal the country’s 2009/10 record. Argentine crushers are now anticipated to consume up to 39 million tons of soybeans, compared to last month’s forecast of 38.5 million. The additional output of soybean meal may push 2013/14 exports to a record 29.4 million tons. Yet, Argentine soybean stocks could be higher by next September to 28.5 million tons, compared to 24.4 million this year.

Large Surpluses Expected From Record Canola Harvest in Canada

Global rapeseed production for 2013/14 is forecast at a record 70 million tons. This reflects an 11-percent increase from last year, with a huge Canadian crop accounting for a majority of the gain. In Canada, a higher estimate for canola yields is expected to push its harvest up by 1.85 million tons this month to 18 million. This is a 30-percent increase over last year’s canola crop and would dwarf the country’s 2-year-old record of 14.6 million tons. Although keen demand by importers could push Canadian exports to 8.3 million tons, most of the production gains are likely to raise carryout stocks. Season-ending canola stocks are seen climbing to 2.35 million tons—a nearly four-fold increase from last year’s inventory.

Australia’s canola crop is also expected slightly higher this month to 3.4 million tons from 3.2 million previously. Crop area is estimated 100,000 hectares higher to 2.5 million. Favorable weather in western and southern Australia could boost canola yields to just below the 2011/12 record. Even with an increase in expected exports (to 2.7 million tons), 2013/14 carryout stocks would be larger due to upward revisions in the previous year’s production and carryover stocks.

This year’s abundant global supply situation presents a good opportunity for rapeseed importers. China could soak up some of the surplus with imports as large as 3.3 million tons—down only slightly from last season’s trade at 3.4 million. And, despite a very good domestic crop, U.S. imports of canola could increase substantially with inexpensive Canadian supplies. U.S. imports of canola are seen increasing 27 percent in 2013/14 to 499,000 metric tons. U.S. ending stocks of canola could more than double as a consequence.

Published by USDA Economic Research Service

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