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USDA Oil Crops Outlook


14 May 2012

USDA Oil Crops Outlook - 14 May 2012USDA Oil Crops Outlook - 14 May 2012

Using a long-term yield trend of 43.9 bushels per acre and an estimated harvested area of 73 million acres, the U.S. soybean crop for 2012 is projected up 5 percent to 3.205 billion bushels. Fast early shipments are forecast to raise U.S. soybean exports for 2012/13 to a record 1.505 billion bushels. Season-ending soybean stocks are projected at 145 million bushels—near an alltime low as a percentage of total use. Another record high could be set in 2012/13 for the U.S. soybean farm price at $12 to $14 per bushel.
USDA Oil Crops Outlook

USDA projects global soybean production in 2012/13 to increase 15 percent to 271.4 million metric tons, which would account for most of the yearly gain for all oilseeds. Brighter prospects for an expansion of soybean area in Brazil and Argentina next season are projected to raise crops to 78 million tons and 55 million tons, respectively.

Domestic Outlook

On Lower 2012 Acreage, U.S. Soybean Crop To Rise Moderately With a Better Yield

U.S. intended acreage for soybeans in 2012 is down 1 percent to 73.9 million acres. In the Corn Belt this spring, farmers are substituting more corn area for soybeans, although acreage gains for soybeans in the Northern Plains and the South could partly offset that decline. Last year, a hot and dry summer in parts of the Midwest and early frosts for late-sown crops in the upper Midwest cut the national average soybean yield to 41.5 bushels per acre. Soybean yields could recover in 2012 (assuming average weather) to a long-term trend of 43.9 bushels per acre. On an estimated U.S. harvested area of 73 million acres, the 2012 soybean crop is projected up 5 percent from last year to 3.205 billion bushels, making it the third-largest on record.

Aided by historically warm weather for March and April, soybean planting this spring is off to one of the fastest starts ever. As of May 6, 24 percent of U.S. soybeans had been sown—more than double the usual rate. Planting might slow briefly with heavy rains across the upper Midwest in early May. But if the fast progress resumes, farmers might be able to maximize use of all available cropland and possibly reap yield benefits later in the growing season.

A Quicker Pace for Soybean Exports To Lead a Sharp Decline in Season-Ending Stocks

U.S. soybean exports for the upcoming crop year could have a dramatically different trajectory than the current season. For 2012/13, soybean exports should accelerate quickly during next fall’s harvest. By spring, the pace of shipments could just as suddenly deteriorate with a tapering off of domestic stocks, rising prices, and a rebound in South American supplies. USDA expects fast early shipments to raise U.S. soybean exports for 2012/13 to a record 1.505 billion bushels. In contrast, it has not been easy to make up a slow start in soybean exports last fall, when exports from South America were unusually large. Shipments for 2011/12 are forecast to a 3-year low of 1.315 billion bushels. Nonetheless, that export forecast was raised 25 million bushels this month as a seasonally firm pace is seen lasting throughout the summer.

A very competitive export market next season will draw a larger portion of the soybean supply away from domestic crushers. The domestic soybean crush for 2012/13 is seen rising only 10 million bushels to 1.655 billion. Processor margins would be pressured by higher costs for soybeans while the demand for soybean products weakens. Export markets for U.S. soybean meal could be undermined when U.S. soybean supplies become scarcer and foreign competition surges back. USDA projects a decline in U.S. soybean meal exports for 2012/13 to 8.4 million short tons from a revised 9.1 million in 2011/12. Domestic use of soybean meal is forecast modestly higher to 31.2 million short tons from 30.9 million in 2011/12. Exports of soybean oil may struggle to be more competitive next year, too. U.S. soybean oil exports are forecast 4 percent higher for 2012/13 to 1.25 billion pounds. A 2-percent increase in domestic soybean oil consumption (to 18.2 billion pounds) would lead a reduction in carryout stocks.

More robust demand for soybeans will quickly draw down inventories in 2012/13. Seasonending soybean stocks are projected down to 145 million bushels from the 2011/12 forecast carryout of 210 million. The soybean carryout—as a percentage of total use—could fall toward an all-time low.

Record High Prices Needed for Rationing a Limited Supply of Soybeans

Current soybean prices are up to the highest level since a July 2008 peak. Markets will be sensitive this summer to any weather-related threats to U.S. soybean yields. Even assuming normal yields, strong demand may very well push soybean prices in 2012/13 above this year’s expected record at $12.35 per bushel. At this time, many farmers can forward price soybeans for fall delivery at more than $13 per bushel. For 2012/13, the U.S. season-average farm price for soybeans is expected at $12.00-$14.00 per bushel.

In April, prices for soybean meal averaged $394 per short ton and only moderately below a June 2009 high of $418. Any easing of soybean meal prices, however, may not gain momentum until midway through the 2012/13 marketing year. The 2012/13 average price for soybean meal is forecast at $335-$365 per ton, compared to $360 per ton for 2011/12. Conversely, prices for soybean oil could continue to find support through a gradual decline in the global stocks of vegetable oil. USDA projects the 2012/13 average price for soybean oil at 52.5-56.5 cents per pound versus 53.5 cents for 2011/12.

Canola and Sunflowerseed To Regain Acreage With Better Sowing Conditions

In the Northern Plains, soil conditions this spring have reverted to a more normal state. A lot more cropland would be sown than a year ago, when excessively wet fields prevented crop planting. Aided also by strong prices, the U.S. acreage for canola may surge 45 percent to a record 1.56 million acres. Higher acreage and a better yield could swell U.S. canola production in 2012 by 50 percent to 2.3 billion pounds. A larger domestic crop and a strengthening demand by China for Canadian exports might help to trim U.S. imports of canola to 1.46 billion pounds in 2012/13 from 1.7 billion this year. Total supplies of canola for 2012/13 would be 15 percent higher and could boost the domestic crush by 13 percent to 3.3 billion pounds.

Similarly, Northern Plains farmers plan to raise sown acreage for sunflowerseed by 17 percent in 2012 to 1.8 million acres. Assuming a modest rise in yields this year, the U.S. sunflowerseed crop would increase by 21 percent to 2.5 billion pounds. Sunflowerseed crushing for 2012/13 could improve to 1.3 billion pounds from 750,000 tons this season, although still far below earlier years. That could commence a restoration of sunflowerseed oil supplies in 2012/13. Exports of sunflowerseed oil in the current season are likely to fall to a 4-decade low. Higher U.S. imports of sunflowerseed oil (primarily from Argentina) have been needed this year to maintain domestic consumption.

Peanut and Cottonseed Crops May Improve With Less Adverse Weather

In the South, soil moisture conditions are better for planting than they were a year ago, although some deficits remain in parts of the Southern Plains and the Southeast. That could be a positive development for a recovery in peanut and cottonseed production this year.

Peanut prices soared in 2011/12 as a loss of sown acreage to cotton led to a sharply lower supply. Peanut farmers, particularly in the Southeast, are responding to the much tighter market by intending to raise 2012 acreage by 25 percent to 1.4 million acres. Higher peanut yields this year, particularly for Texas and Oklahoma, could result in a 30-percent increase in production to 4.7 billion pounds. While this would help support growth in domestic consumption and exports of peanuts, many of the additional supplies would go to shore up inventories, which are likely to decline to a 9-year low in 2011/12. Year-ending stocks for peanuts in 2012/13 are expected to increase 29 percent to 1.2 billion pounds.

U.S. planting intentions for cotton this year are down 11 percent to 13.2 million acres as farmers are favoring production of corn and soybeans. Despite lower sown acreage for cotton, harvested area may actually increase in 2012 by 11 percent. Last year, record-setting heat and drought in the Southwest led to a wave of cotton abandonment. Of the cotton acreage sown in Texas last year, nearly 60 percent was never harvested. The percentage of cotton harvested in 2012 should be considerably better and yields will likely recover, also. That combination may raise U.S. cottonseed production for 2012/13 to 6 million short tons from 5.4 million in 2011/12. A much improved Texas crop this year may account for nearly all of the forecast increase in U.S. cottonseed production. A higher cottonseed supply could help to boost 2012/13 crushing to 2.5 million tons from an estimated 2.4 million this year. U.S. exports of cottonseed may also recover to 300,000 tons next season against this year’s depressed level of 160,000 tons.

International Outlook

Soybean Market To Tighten Before a Rebound in 2012/13 Crop Production

There should be a strong worldwide recovery in soybean output next year. USDA projects global soybean production in 2012/13 to increase 15 percent to 271.4 million metric tons, which would account for most of the yearly gain for all oilseeds. Even so, almost a year could pass before the supply situation would materially ease. Later this fall, low soybean inventories in South America will last for only a short period. For months afterward, importers would be almost entirely dependent on U.S. soybean exports until February 2013, when new-crop supplies from South America would become available. The U.S. market share of global soybean exports in 2012/13 could edge up to 42 percent from 40 percent this year. Even then, excellent South American crops are needed next year just to prevent another decline in global ending stocks, which for 2011/12 are forecast down 24 percent. By September 2013, soybean inventories could be restored to 58.1 million tons (up 9 percent) with the projected improvement in world crops. In the interim, the supply outlook could force soybean prices high enough to stimulate more production and ration consumption in some countries. For 2012/13, a 7-percent increase in global soybean imports is expected to 95.8 million tons, with a dominant share of the gain for China. By comparison, the increase for global trade in soybean meal for 2012/13 may be only 1.5 percent to 58.6 million tons. Two key factors largely explain the discrepancy. First, China is a major soybean importer but typically imports only a small volume of soybean meal. Second, soybean meal consumption in the European Union (EU-27) (which is the top import market for soybean meal) may not grow much at all next year.

In Brazil, record-high soybean prices have considerably brightened prospects for an expansion of soybean area in 2012/13. An outlook for tight soybean supplies and record corn crops in Brazil and the United States should begin to strengthen the position of soybeans versus corn in their respective March 2013 futures contracts. A favorably strong price ratio could expand soybean area in Brazil by 6 percent to 26.5 million hectares. On that higher area, the soybean yield trend for Brazil suggests a potential crop of 78 million tons, up from this year’s drought-reduced harvest of 65 million. Despite a gain for Brazilian soybean production, the increase in total supply for 2012/13 could be limited to only 3.2 million tons by sharply lower carryover stocks. Demand for Brazilian soybeans would grow moderately. Brazil’s domestic soybean crush is seen up 2 percent to 36.8 million tons. In contrast, low stocks and strong U.S. competition could reduce soybean exports from Brazil sharply in the first half of 2012/13. An upswing for the second half of the year might be unable to make up the difference. Soybean exports from Brazil in 2012/13 are forecast to decline to 34.2 million tons from 35.7 million this year. Exports of soybean meal from Brazil could also decline—to 13.9 million tons from 14.3 million in 2011/12. A 3-percent gain in domestic consumption could outstrip the growth in soybean meal output.

Similarly, in Argentina, the outlook for soybeans in 2012/13 looks clearly superior to other crop alternatives, particularly wheat and to a lesser extent corn and cotton. Argentine harvested area for soybeans is anticipated 11 percent higher to 19.7 million hectares. Late last year, extreme heat and drought devastated soybean yields throughout Argentina, slashing the 2011/12 crop to a 3-year low of 42.5 million tons. Assuming that Argentine soybean area and yields rebound, production for 2012/13 could increase to 55 million tons from 42.5 million this year. Exporttrade with China and other countries could pick back up in 2012/13 to 10.1 million tons versus 8.5 million this season. Growth in domestic crushing could resume with a 6-percent increase to 39.8 million tons. Argentine exports of soybean meal would rebound 2 percent to 29.8 million tons—nearly half of world trade.

Record high soybean prices in India this year will encourage some shifting of cropland from cotton to soybeans. With abundant reserves of grains in the country, farmers may also find oilseeds production a more attractive alternative. Harvested soybean area is expected to increase 5 percent in 2012/13 to 10.8 million hectares. Provided India’s summer monsoon deposits a normal amount of precipitation on the crop, soybean production in the country could reach a record 11.4 million tons. Historically, India has produced surpluses of soybean meal and been a major exporter. In recent years, though, rapid growth in domestic consumption has curtailed the soybean meal trade from India, which is seen slipping to 4.2 million tons in 2012/13 from 4.4 million this year.

Strengthening feed demand in China this year has led to a growing deficit of corn in the country. Domestic corn prices have surged, prompting China to boost state reserves by raising its corn import quota. That may also lead China’s farmers this spring to shift more cropland into corn production from soybeans. The subsequent decline in domestic production of soybeans (down 3 percent to 13.1 million tons) would enhance China’s import requirements. More soybeans are crushed in China than in any other country. Soybean imports for 2012/13 are projected up to 61 million tons from a revised 2011/12 forecast of 56 million tons.

While soybean consumption in China may continue to grow unchecked next year, in other importing countries supply rationing is more likely. In particular, the higher costs would constrain EU-27 demand for soybean meal. An ongoing economic recession in several EU countries would also temper demand for protein meal. No increases are seen in 2012/13 for EU imports of either soybeans (11 million tons) or soybean meal (21.9 million tons). Anemic growth is also likely for soybean meal consumption and trade by Japan, South Korea, and Taiwan.

Rapeseed Market Outlook for 2012/13 Squeezed With Static Crops, Growing Demand

Global rapeseed production in 2012/13 is expected nearly unchanged at 60.4 million tons as disappointing crops in Europe offset record harvests in Canada and Australia. Overall consumption of rapeseed keeps on rising, so global stocks would decline for the third consecutive year. World rapeseed stocks are seen plummeting by one-third to 2.9 million tons— a 9-year low.

By April, soil moisture conditions in northern Europe were improving, following below-average precipitation throughout the fall and winter. But EU-27 rapeseed crops had already suffered harm, particularly in major growing regions of northwestern Poland, northeastern France, northern Germany, and the countries along the lower Danube River (Hungary, Romania, and Bulgaria). Sown last fall in the absence of much topsoil moisture, rapeseed crops throughout Europe were never well established. Poor crop emergence left them more vulnerable to cold weather, which followed in early February. Over a 10-day period, bitterly cold temperatures and a lack of protective snowcover led to widespread crop losses for winter rapeseed. Crop abandonment would depress EU harvested rapeseed area in 2012/13 to 6 million hectares from 6.6 million last year. Lower area is pushing down the forecast of EU rapeseed production this year to 18 million tons from 19.1 million in 2011/12. At the same time, minimal carryover stocks will be available to cushion the output losses. Supplementing EU rapeseed supplies with imports is also complicated by likely smaller harvests for major trade partners in Ukraine and Russia. Projected EU rapeseed imports for 2012/13 may slip to 2.9 million tons from 3 million in 2011/12. European rapeseed prices have spiked on the prospects for lower supplies, which will pressure EU processing margins later this year. The EU rapeseed crush for 2012/13 may decline 2 percent from the previous year to 20.9 million tons.

Similarly, winter rapeseed production in Ukraine was hurt by a dry autumn and several cold spells with minimal snowcover. Close to 70 percent of Ukraine’s sown rapeseed area was affected by winterkill, which slashes the estimate of 2012 harvested area by 47 percent from the previous year to 450,000 hectares. Ukraine rapeseed production would be more than halved this year to 700,000 tons from 1.5 million last year. Lower rapeseed exports from Ukraine are highly likely in 2012/13.

Despite a record canola harvest in Canada last year, robust use of the crop has supported a high price. Harvested area of canola for Canada may expand 8 percent in 2012 to a record 8.05 million hectares. Even though farmers in the Canadian prairies will concurrently raise the area grown to wheat and barley, a sharp decline of fallow acreage will allow for an expansion in both the grains and oilseeds area. A large increase in canola area is seen for Manitoba, where spring flooding last year prevented many fields from being sown. Prairie soil conditions this spring are considerably better for planting than a year ago as snowfall over the winter was below average. Canada’s 2012/13 canola crop may eclipse last year’s record of 14.2 million tons with an increase to 15.4 million. However, that may spawn only a 1-percent increase in the total supply of canola for 2012/13, as beginning stocks could be slashed by more than half of their previous level. More domestic processing capacity is being added, too, and may aid a modest gain in the 2012/13 crush to 6.9 million tons from 6.7 million this year. Even such a minor increase in domestic use might not allow for any expansion in canola exports, which could stabilize around this year’s expected 8.4 million tons. Little improvement in Canada’s season-ending canola stocks is likely next year from this year’s tight expected carryout.

Likewise, in Australia, prices are more attractive for canola than for wheat and barley. Crop rotation considerations will also facilitate a shift into canola production after last year’s record wheat area for the country. Planting of canola is now underway in Australia, with the 2012/13 area expected to expand 11 percent to 2 million hectares. Australia’s new-crop canola production is projected up to 3.25 million tons from last year’s record harvest of 2.9 million. Import demand by China and the EU could pull up Australian 2012/13 exports to 2.4 million tons from 2.15 million this year and prevent little accumulation of stocks.

China’s domestic production of rapeseed is anticipated to remain even with last year’s crop at 13 million tons as a modestly higher yield offsets a small decline in area. Chinese farmers favored growing wheat last fall, which has lower production costs and generally better returns than rapeseed. In recent years, rapeseed crushing capacity in China has expanded and—with less than 40 percent in operation—is substantially underused. Absent gains in the domestic crop, the best way to better utilize that crushing capacity is to accept more rapeseed imports. That can be a more regular occurrence now with the addition of new crushing plants in areas where rapeseed is not grown (and thereby not affected by the phytosanitary restrictions on imports from Canada). Nevertheless, limited export supplies from Canada and Australia may allow only a modest gain in 2012/13 rapeseed imports for China (to 2.1 million tons from 1.8 million this year).

Sunflowerseed Output May Exceed Last Year’s Record With Area From Failed Winter Crops

Global sunflowerseed production for 2011/12 was an all-time high of 39.1 million tons. Production for 2012/13 may be only slightly less at 38.9 million tons as a smaller crop for Russia is partly offset by a gain for Argentina. In Russia last year, dry spring conditions limited the planting of spring wheat and swelled sunflowerseed area to a record 7.2 million hectares. Planting conditions in Russia this spring are more normal, so the sunflowerseed area may recede to 7 million hectares. Sunflowerseed yields in Russia may also slip compared to last year’s record high and lower the 2012/13 harvest by 12 percent to 8.5 million tons. Reduced supplies could trim the country’s sunflowerseed crush by 6 percent to 7.5 million tons.

Although Ukraine had a record sunflowerseed harvest last year, the change in the area for 2012 could be minimal. Considerably more cropland will be available for spring crops—particularly corn and sunflowers—with a replanting of failed winter grains. Sunflowerseed area for Ukraine is expected to expand by 200,000 hectares this year to 6 million. Provided normal growing conditions, Ukraine may equal last year’s record sunflowerseed crop of 9.5 million tons. Processors would be able to crush up to 9.3 million tons of sunflowerseed.

A common theme resonating throughout Europe this year is the replanting of damaged winter grain crops with spring crops. Led by an increase for Romania, EU sunflowerseed area is seen up 3 percent in 2012 to 4.35 million hectares. Production of sunflowerseed for the EU as a whole is expected at 8.1 million tons, a slight reduction from last year’s crop of 8.2 million. Higher imports of sunflowerseed could let EU processors expand crushing a little. But the main source of additional sunflowerseed oil supplies would likely to come from higher EU imports of the oil.

In 2011/12, drought ruined many crops in Argentina but the sunflowerseed crop was mostly unscathed. For 2012/13, a global shortage of oilseeds will encourage Argentine farmers to raise production, including sunflowerseed. Harvested area for sunflowerseed in Argentina is expected to increase 10 percent next year to 2 million hectares—a 5-year high. With normal yields, Argentine sunflowerseed production is projected to increase to 4 million tons for 2012/13 from 3.4 million this year. Nearly all sunflowerseed in Argentina is crushed domestically with the resulting oil and meal shipped to Europe and other countries.

Global Production of Cottonseed May Retreat From 2011/12 Peak

A worldwide deficit of cotton last year elicited a strong supply response. The subsequent glut of the commodity should scale back crops this year for many of the major cotton-producing countries excluding the United States. As a result, global production of cottonseed would decline 4.5 percent from last year’s record to 44.5 million tons. For top-producing China, sharply lower cotton prices this year may reduce sown area in the country by 10 percent. Steady yields in China would reduce 2012 cottonseed production by 9 percent to 12 million tons. Similarly, cotton area in India this year could decline 10 percent from the 2011/12 record to 11 million hectares. Indian cottonseed production for 2012/13 would be cut to 10.6 million tons from 11.3 million last year. Smaller crops for both countries would curtail their domestic use and the output of cottonseed oil and meal.

Tighter Competing Oils Supplies May Benefit Palm Oil Share of World Vegetable Oil Trade

In 2012/13, moderate production gains for the major oilseeds will hone a keen interest in palm oil by the world’s vegetable oil importers. Global palm oil trade is expected 4 percent higher next season to 40.4 million tons. In contrast, exports of soybean oil and rapeseed oil may decline slightly. Other than palm oil, only sunflowerseed oil may register a significant increase in exports for 2012/13.

Despite larger crops in Argentina next year, vegetable oil exports from the country may continue to decline. Growing use for biodiesel (both for exports to Europe and a domestic quota) may trim Argentine soybean oil exports by 5 percent in 2012/13 to 4.1 million tons. Last month, in retaliation for nationalization of a Spanish petroleum producer in Argentina, Spain ordered that only EU-produced biodiesel would qualify toward the country’s biofuel blending requirements. Other European countries could replace the biodiesel imports for Spain but would create a deficit for their own national biofuel targets. These countries would then likely expand imports of cheaper Argentine biodiesel by an amount equivalent to Spain’s reduction.

In the EU, losses for domestic oilseed crops will encourage more imports of vegetable oil. The main increases for imports will be for sunflowerseed oil and palm oil, which are seen increasing by 22 percent to 1.5 million tons and 4 percent to 5.5 million tons, respectively. A shortage of domestically produced vegetable oil will put even more stress onto EU producers of biodiesel. Rising fuel blending targets and inadequate feedstock for domestic biodiesel production will continue to extend market inroads for biodiesel imports (particularly from Argentina and Southeast Asia).

Indonesia is the world’s top producer and exporter of vegetable oil. The main Indonesian commodity is palm oil with 2012/13 output projected to increase by 6 percent to 27 million tons. Indonesian palm oil exports for 2012/13 are forecast at 19 million tons from 18 million in 2011/12. The increase would supply more than half of the increase for all world trade in vegetable oils next year.

Palm oil production in Malaysia may increase by only 1.6 percent in 2012/13 to 19 million tons. Unlike Indonesia, Malaysia is almost at its limit for arable oil palm area. But Malaysian palm oil production can still expand with higher productivity. A high level of rainfall over the past 6 months will benefit Malaysian oil palm yields. Malaysian exports of palm oil may make only a modest contribution to the global market, though. Palm oil shipments from Malaysia are forecast just 1 percent higher for 2012/13 to 16.9 million tons.

A small (200,000 tons) gain in India’s domestic oilseeds production this year may generate only a minimal increase in vegetable oils output. In contrast, Indian consumption of vegetable oil for 2012/13 could expand by 800,000 tons (to 17.6 million tons). Higher imports would then become India’s primary means for raising vegetable oil consumption. Imports of palm oil would account for the largest share of India’s higher trade, which are expected to rise to 7.7 million tons from 7.25 million in 2011/12. However, comparatively higher prices could trim Indian imports of soybean oil in 2012/13 by 4 percent to 770,000 tons.

In China, soybean oil is the most widely consumed vegetable oil. Soybean oil imports for 2012/13 are forecast up 8 percent to 1.3 million tons. But palm oil is the leading imported oil due to an absence of domestic production. China’s imports of palm oil are expected to rise 3 percent in 2012/13 to 6.5 million tons.

May 2012

Published by USDA Economic Research Service

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