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USDA Oil Crops Outlook Report

18 September 2011

USDA ERS

USDA revised the forecast of the 2011 national average soybean yield up to 41.8 bushels per acre from 41.4 bushels last month.

U.S. Soybean Yield Forecast Is Revised Higher

On a total harvested acreage of 73.8 million acres, 2011 soybean production would be 3.085 billion bushels. This month’s 24-million-bushel increase in the soybean supply estimate led USDA to raise its 2011/12 forecast of US exports by 15 million bushels to 1.415 billion. Even with a year-to-year decrease in soybean use, US season-ending stocks are likely to decline to 165 million bushels.

Due to larger crop estimates for the United States and India this month, global soybean production for 2011/12 is forecast up to 259 million metric tons. For India, the 2011 soybean harvest is forecast at a record 10.5 million metric tons. The new crop could support a record soybean crush in India of 9.4 million tons, which would keep Indian soybean meal exports competitive at 4.4 million tons.






Domestic Outlook

While Dryness in Some Areas Stresses Soybeans, Others Retain Enough Moisture To Yield Well

Temperatures in the Midwest were more moderate in August than July but some areas fell well below average for precipitation. That included the southern halves of Illinois and Indiana, where August rainfall was 50-75 per cent of normal. Southeastern Iowa was also quite dry. For some of these areas, a wet spring may have deterred soybeans from developing deep roots this spring, contributing to yield losses from the untimely summer dryness. The largest reductions in USDA crop forecasts (compared to last month) were for Iowa and Indiana.

However, adequate subsoil moisture in the Midwest has precluded more serious crop losses. As of September 11, 56 per cent of the US soybean crop was still rated in good-to-excellent condition (compared to 64 per cent a year earlier). Due to delayed development of this season’s crop, it could still benefit from good September weather but it may be more vulnerable to frost damage also. Some of the year’s best soybean crops are seen for Nebraska, Ohio and Michigan. USDA revised the forecast of the national average soybean yield up to 41.8 bushels per acre from 41.4 bushels last month based on higher yields for these States. On a total harvested acreage of 73.8 million acres, 2011 soybean production would be 3.085 billion bushels—an increase of 29 million bushels from the August forecast.

Soybean Exports Still Constrained Despite Upward Crop Revision

This month’s higher soybean supply estimate led USDA to raise its 2011/12 forecast of US exports by 15 million bushels to 1.415 billion. Despite this change, shipments abroad could still be down sharply from last season’s trade estimate of 1.495 billion bushels. An early indicator of this outlook is the sluggish pace for new-crop export sales. As of September 1, soybean export sales were down 19 per cent compared to a year ago. Much of the slack in US exports this season would be taken up by higher trade from Brazil. Even with a year-to-year decrease in soybean use, US season-ending stocks are likely to decline as well. At 165 million bushels, 2011/12 carryout stocks are up 10 million bushels against last month’s forecast but lower than last year’s level of 225 million bushels.

A reduced soybean supply this fall means that demand must be rationed to make it last through next summer. And with a disappointing corn harvest, strong competition for sown acreage is likely next spring. It could take record-high soybean prices to simultaneously manage the new-crop supplies through the end of the year and maintain acreage for 2012. USDA’s forecast of the 2011/12 average farm price is $12.65-$14.65 per bushel, which is up 15 cents from last month’s price range.

US Vegetable Oil Imports May Enable Higher Use of Soybean Oil for Biodiesel

Domestic use of soybean oil for 2011/12 is forecast to rise to 17.75 billion pounds from 16.6 billion this year. Nearly all of next year’s gain is projected for the production of biodiesel, which has been accelerating quickly over the last few months. USDA forecasts that soybean oil used for methyl esters (biodiesel) will expand to 3.6 billion pounds in 2011/12 from 2.4 billion this season.

Likely tempering next year’s increase in domestic soybean oil use will be a higher availability of other edible oils, particularly canola oil. In Canada, a huge canola supply may incite record US quantities for canola oil imports and production (from imported seed). The Environmental Protection Agency does not yet count biodiesel made from canola oil toward meeting the US Renewable Fuels Standard for biodiesel. In the absence of that market, canola oil can supply much of the growth in US edible oils consumption. At nearly 4 billion pounds, more canola oil would be used in the United States than any other vegetable oil aside from soybean oil. US palm oil imports may also rise next year due to a widening price gap with soybean oil. The national average price for soybean oil in 2011/12 is seen up to a record 55-59 cents per pound. The forecast is up from 54.5-58.8 cents last month and 53.25 cents for 2010/11.

Extreme Weather Ravages Peanut Output

Severe drought and scorching temperatures have taken a heavy toll on crops in the southern United States this summer. Growing conditions generally continued to deteriorate over the past month. In Texas, this summer’s hot and hard-packed soils hindered peanut pegging, the developmental stage when the plant puts shoots into the ground. Half of the crop in Texas is currently rated in very poor-to-poor condition, with yields forecast falling to 2,600 pounds per acre—an 11-year low. Coupled with the lowest harvested acreage since 1926, the crop forecast of 273 million pounds would be the State’s smallest since 1964.

Crop conditions were not much better in the Southeast, where peanut fields had also been in urgent need of precipitation. That situation was recently altered by two storms that brought abundant rainfall to the region. Last month’s Hurricane Irene brought flooding rains to the coastal areas of North Carolina and Virginia, while bypassing Georgia’s parched peanut fields farther inland. In early September, tropical storm Lee deposited heavy rainfall through the Southeast as it slowly moved up from the Gulf Coast. USDA’s September yield forecasts may not reflect the full impact of both storms. It is still unclear whether these rains may have benefited, harmed, or arrived too late to materially affect peanuts in the Southeast. Some farmers in the region have already begun harvesting peanuts.

Overall, only 37 percent of the U.S. peanut crop was rated in good-to-excellent condition as of September 11, compared to 60 percent a year earlier. Based on late- August conditions, US peanut yields for 2011 are expected to fall to 3,104 pounds per acre, versus 3,311 pounds last year. This follows an 11-percent reduction in harvested acreage. Lower peanut yields for Texas, Georgia, Alabama, Mississippi, and New Mexico reduce the 2011 crop estimate by 154 million pounds this month to 3.458 billion. Total supplies for 2011/12 would be down by nearly 1 billion pounds (16 per cent) to 5.05 billion.

To some extent, the sharp supply reduction can be cushioned by drawing down season-ending stocks to a 9-year low. Carryout stocks are seen declining to 936 million pounds from 1.516 billion in 2010/11. But domestic and export demand for peanuts will be restricted also. US growth in the food use of peanuts (which has risen steadily over the past decade) would stall near last year’s consumption at 2.84 billion pounds. US peanut exports are forecast to decline to 485 million pounds, which—if realized—would be the lowest since 1975/76.

September 2011

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