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USDA Oil Crops Outlook

13 December 2012

USDA Oil Crops Outlook - 12 December 2012USDA Oil Crops Outlook - 12 December 2012

Lower prices buoy U.S. export prospects for soybean products.
USDA Oil Crops Outlook

USDA raised its forecast of the 2012/13 soybean crush by 10 million bushels this month to 1.57 billion, as lower prices helped to strengthen export outlooks for soybean meal and soybean oil. USDA’s price forecast for soybeans in 2012/13 is lowered 35 cents to $13.55-$15.55 per bushel. Export forecasts for 2012/13 were raised this month for both soybean meal (up 300,000 short tons to 8.2 million) and soybean oil (up 600 million pounds to 1.8 billion).

Global sunflowerseed production for 2012/13 is estimated at 35.7 million metric tons—up 930,000 tons from last month. The sunflowerseed crop in Russia was raised 800,000 tons this month to 7.5 million based on reports of better than expected yields. These gains were partly offset by trimming 200,000 tons from the forecast of Argentine sunflowerseed production (to 3.4 million) on account of wetness-related losses in sown area.

Domestic Outlook

Domestic Soybean Crushing Boosted by Solid Export Sales of Soybean Meal and Soybean Oil

This month, USDA raised its forecast of the 2012/13 soybean crush by 10 million bushels to 1.57 billion. Since the summer, processor margins have been supported by a sharp decline in the cost of soybeans. The soybean prices paid in November by central Illinois processors fell to $14.64 per bushel from $15.49 in October and $16.95 in September. Their competitors in Brazil and Argentina are slowing crush rates due to the scarcity of remaining soybean stocks there. At least for the next few months, these factors will make U.S. processors more competitive exporters of soybean meal and soybean oil.

U.S. export inspections of soybeans through December 6 totaled 648 million bushels—an alltime high for this date. The record pace is unlikely to continue very long as exports should start slowing with a steep decline in new sales. It is likely that an uncommonly high percentage of soybean exports will be shipped in the first half of this marketing year. Even so, the soybean sales already booked for 2012/13 may be large enough to reach the current export forecast, which was left unchanged this month at 1.345 billion bushels.

The expectation this month of a higher soybean crush then lowers the forecast of season-ending stocks to 130 million bushels from 140 million last month. Despite a tighter outlook for soybean stocks, declining prices this fall are anticipated to trim back the U.S. season-average farm price. USDA’s price forecast for 2012/13 is lowered to $13.55-$15.55 per bushel, which would still be an all-time high but down from $13.90-$15.90 last month.

Strong November Sales Lead to Surge in Soybean Oil Exports

In November, unusually large export sales of soybean oil have suddenly boosted U.S. trade prospects for the commodity. Importers in China were particularly active buyers this fall in the U.S. soybean oil market. Shipments to China for October-November already totaled 243 million pounds—more than for all of last year. As a consequence, USDA raised its 2012/13 export forecast for soybean oil this month by 600 million pounds to 1.8 billion.

Despite the early surge in exports, current production of soybean oil has also been quite strong and stocks are still rising. Soybean oil output for 2012/13 is forecast up 460 million pounds this month to 18.3 billion pounds due to higher expected rates for both the crush and oil yield. Above-average oil content is often associated with soybean pods that fill out during an extended period of hot weather (like last summer). If realized, the soybean oil extraction rate forecast for 2012/13 would be at an all-time high.

In November, central Illinois soybean oil prices fell 3 cents per pound from October to a monthly average price of 46.3 cents. The decline in soybean oil values led USDA to lower its forecast of the 2012/13 average price by 2 cents per pound this month to 49-53 cents per pound. Ample global supplies of palm oil and moderate costs for crude petroleum are also maintaining pressure on soybean oil prices. By next spring, however, a reversal of the trends in U.S. soybean oil supply and demand (hastened by robust export shipments) could set up a moderate price rally. Stocks of soybean oil could be declining rapidly by that time once the crush slows and domestic use strengthens. Season-ending stocks of soybean oil are forecast down 40 million pounds this month to 1.48 billion as higher export demand offsets the additional production.

The current increase in soybean processing is also weighing on soybean meal prices, which dropped to a November average of $466 per short ton compared to $488 in October. In response, USDA lowered its forecast of the 2012/13 average price for soybean meal to $440-$470 per short ton from $455-$485 last month. These lower costs for soybean meal have stimulated more export sales this fall, particularly for the Philippines, EU-27, and Turkey. A brighter sales outlook encouraged USDA to raise its 2012/13 forecast of soybean meal exports this month by 300,000 tons to 8.2 million. On the other hand, domestic disappearance of soybean meal is trimmed another 100,000 tons to 29.4 million, in line with a lower U.S. production forecast for hogs over the next 9 months.

International Outlook

Sunflowerseed Yields in Russia Exceed Expectations But Down from Last Year

Global sunflowerseed production for 2012/13 is estimated at 35.7 million metric tons. Output gains for this month totaled 930,000 tons because of higher crop estimates for Russia, the EU-27, and India. For Russia, the sunflowerseed crop was raised 800,000 tons this month to 7.5 million. Although a hot and dry summer stressed the country’s crops, government harvest data showed slightly better yield results for sunflowerseed than initially anticipated. Yet, the country’s sunflowerseed production is still down from last year’s harvest of 9.6 million tons, primarily due to a 17-percent decline in harvested area. Most of the additional sunflowerseed production would likely be crushed domestically. The sunflowerseed crush in Russia is expected to total 6.9 million tons in 2012/13, still well below the 2011/12 total of 8.6 million tons. The additional output of sunflowerseed meal and sunflowerseed oil is seen being exported.

In Argentina (the world’s fourth-largest sunflowerseed producing country after Ukraine, Russia, and the EU-27), earlier prospects for an increase in 2012/13 production have dimmed. For Argentina’s main agricultural production region, August-November cumulative rainfall ranged from 50 to 100 percent above average. Current soil conditions are now the wettest since 2001. The areas with saturated soils include the southern Argentine Provinces of Buenos Aires and La Pampa where about three-fourths of the country’s sunflowerseed is grown. Prevented planting is responsible for reducing the 2012/13 sunflowerseed area by 100,000 hectares this month to 1.7 million. Farmers are anticipated to switch most of the unsown cropland to soybeans, which have a longer planting window. The lost opportunity to expand sunflowerseed area trims the Argentine production forecast by 200,000 tons this month to 3.4 million. However, there was also an upward revision this month in Argentine sunflowerseed production and ending stocks for 2011/12, so 2012/13 forecasts of domestic use, exports, and ending stocks are virtually unchanged.

Record Acreage for Canola in Canada Countered by Disappointing Yields

The 2012/13 forecast of global rapeseed production—at 59.3 million metric tons—declined slightly this month as crop reductions for Canada and the EU-27 were offset by an increase for Russia. For Canada, canola production was shaved 90,000 tons this month to 13.31 million. Despite a government report indicating a larger harvested area of 8.6 million hectares, canola yields were pegged down from earlier estimates. The impact of that reduction in the canola crop on this year’s total supplies in Canada is largely negated by higher beginning stocks, which stemmed from an upward revision in last year’s production. Nevertheless, the reduced supply situation for 2012/13 still portends very tight season-ending stocks. That outcome is also conditioned on a firm outlook for canola demand. Forecasts of new-crop canola exports and domestic crush for Canada were unchanged this month at 7.3 million and 6.75 million tons, respectively.

Published by USDA Economic Research Service

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