USDA Oil Crops Outlook
18 January 2013
USDA Oil Crops Outlook - January 2013
U.S. Soybean Crushers Benefiting from Strong Export Sales of Products
Based on a higher yield and harvested acreage, USDA pegged the final estimate
for the 2012 soybean crop at 3.015 billion bushels, which is 44 million bushels
higher than the previous forecast. Strong export sales commitments of soybean
products led USDA to raise its forecast of the 2012/13 soybean crush by 35
million bushels this month to 1.605 billion. USDA raised its 2012/13 forecast of
soybean meal exports this month by 500,000 short tons to 8.7 million. Similarly,
soybean oil exports for 2012/13 were forecast up 350 million pounds this month
to 2.15 billion.
Based on a higher yield outlook, Brazil’s 2012/13 soybean output is forecast up
to 82.5 million metric tons from 81 million last month. For Argentina,
excessively wet conditions (reinforced by weakening prices) are expected to
curtail the 2012/13 soybean area and thereby trim soybean production by 1
million tons to 54 million.
Domestic
Higher Yield and Harvested Acreage Raises Final Estimate of 2012 Soybean Crop
In this month’s Crop Production—Annual Summary report, USDA pegged the final estimate for the 2012 soybean crop at 3.015 billion bushels, which is 44 million bushels higher than the previous forecast. The national average soybean yield was raised 0.3 bushels to 39.6 bushels per acre. Also, based on increases for the central Plains and Illinois, the estimate of U.S. harvested acreage was raised 411,000 acres to 76.1 million. Despite the improved production estimate, the total soybean supply for 2012/13 still falls 121 million bushels below last year’s level.
Strong Early Pace of Soybean Exports to Abate After Sales Taper Off
Cumulative U.S. export inspections of soybeans through January 10 were a record
856 million bushels. Last fall, more U.S. soybean shipments were needed to fill a
trade deficit out of South America. For September-November 2012, the aggregate
year-to-year decline for soybean exports from Brazil and Argentina was 5.5 million
metric tons (202 million bushels). Considering the large reduction in U.S. supplies
available for export this season, the current level of soybean sales is still
impressively high. In part, this reflects a large number of U.S. sales that importers
(particularly in China) bought as a hedge in case of another poor South American
crop this year.
Soybean importers are seemingly confident that the supplies they will need next
spring can be sourced from Brazil and Argentina. In recent weeks, importers
cancelled previous U.S. sales, although some were subsequently repurchased at a
lower price. If such developments continue, it could aid the rationing of U.S.
soybean supplies in the second half of the crop year. Also, soybean exports after
February could be limited by capacity constraints on deliveries to Gulf ports via the
Mississippi River. Thus, USDA’s forecast of 2012/13 soybean exports is unchanged
this month at 1.345 billion bushels.
Brisk Export Sales for Soybean Meal and Soybean Oil Fuel a Robust Crushing Rate
For the first quarter of 2012/13, favorable margins sparked a high volume of
soybean crushing. This led USDA to raise its forecast of the 2012/13 soybean crush
by 35 million bushels this month to 1.605 billion. Right now, the main support for
the U.S. crush market is derived from very strong export sales of soybean meal.
Like the trade in soybeans, U.S. exports of soybean meal benefited last fall from a
decline in competition from South America, where reduced soybean stocks have
tempered the rate of crushing. Soybean meal exports from India have also
moderated. As a consequence, U.S. cumulative shipments of soybean meal through
January 3 were up 1.1 million short tons from a year earlier. At the same time, the
outstanding sales of U.S. soybean meal currently exceed last year’s level by
831,000 tons. The origin of these sales is widespread, with many of the major
importing countries accelerating their U.S. purchases. The strength of these sales
commitments led USDA to raise its 2012/13 forecast of soybean meal exports this
month by 500,000 short tons to 8.7 million.
Looking ahead, the second half of 2012/13 is likely to be dramatically different for
the export market, though. Fast use of soybeans over the first half of the season is
only hastening a sharp reduction of U.S. stocks. Coupled with a quick recovery in
South American output this spring, an abrupt transition for the domestic market is
likely. An impending slump in soybean meal trade throughout the spring and
summer could result in an exceptionally poor finish for U.S. exports in the current
marketing year.
While the domestic market for soybean meal has been far less dynamic than the
export market, moderating feed costs have brightened its outlook somewhat. USDA
raised its 2012/13 forecast for domestic disappearance of soybean meal 350,000
short tons this month to 29.75 million. After a brisk fall slaughter, USDA data on
the U.S. hog inventory for December 1 was down 2 percent from September 1. Yet,
the overall decline was less pronounced than anticipated and the current breeding
herd actually increased slightly compared to the previous year. No herd expansion
is likely for some time, but the data suggest that producers are deferring output
reductions longer than first anticipated. Similarly, lower costs are also expected to
boost the feeding of poultry this year. Even with this expected improvement in
soybean meal use, a supply shortfall and a rebound in the overall protein level
would keep forecast domestic use well below the 2011/12 total of 31.55
million tons.
Soybean meal values have slipped for several months now, falling to a December
average of $459 per short ton compared to $565 in August. The price easing was
prompted by improved forecasts of supply for both the United States and South
America. USDA lowered its forecast of the season-average price for soybean meal
this month by $10 per short ton to $430-$460.
Also, an extraordinarily strong seasonal pace is being set for export sales of soybean
oil. Through January 3, U.S. export sales commitments already totaled nearly 1.5
billion pounds. Sales to China—usually a small (but opportunistic) market for U.S.
exporters—account for most of these early gains. The 2012/13 forecast of soybean
oil exports was increased 350 million pounds this month to 2.15 billion. For the
short term, higher production of soybean oil is expected to accommodate the export
gains. Subsequently, soybean oil stocks should begin a steep decline once the
crushing of soybeans starts to moderate.
Soybean Prices Weaken Despite Rapid Decline in U.S. Soybean Stocks
USDA’s Grain Stocks reported U.S. soybean stocks for December 1 at 1.966 billion
bushels. This is the lowest December inventory since 2003 and down sharply from
the 2.37 billion bushels on hand a year earlier. The lower 2012/13 supply and record
high first-quarter use account for this outcome. Season-ending stocks are seen
declining to 135 million bushels but are forecast up 5 million bushels compared to
last month.
Soybean prices, however, have been unable to derive any strength from the rapid
decline in U.S. stocks. Instead, prices have receded as the global market has grown
more confident of record soybean crops in South America. For instance, the price of
the July 2013 soybean futures contract has declined toward $13.50 per bushel,
which is its lowest trading level since July 2012 and down sharply from its peak 4 months ago near $16.00 per bushel. The U.S. average farm price for soybeans in
2012/13 was lowered to $13.50-$15.00 per bushel from $13.55-$15.55 last month.
Northern Plains Oilseed Crops Recover With Acreage Gains, Improved Yields
In 2012, U.S. sunflowerseed production increased 37 percent to 2.8 billion pounds.
Most of the output gains stemmed from a 26-percent expansion of harvested
acreage to 1.84 million acres. An increase in the national average sunflowerseed
yield to 1,513 pounds per acre from 1,398 pounds in 2011 also contributed to the
much improved crop. For North Dakota, a record high sunflowerseed yield helped
its farmers account for 93 percent of the entire gain in U.S. production. In contrast,
sunflowerseed output fell in the central Plains as yields were hurt by an unusually
hot and dry summer there. Due to the regional differences, production gains for oiltype
sunflowerseed (up 39 percent to 2.4 billion pounds) were considerably larger
than for non-oil varieties (up 22 percent to 386 million pounds).
An improved supply of sunflowerseed in 2012/13 has eased farm prices
considerably, which fell to $25.40 per hundredweight in December 2012 compared
to $29.60 a year earlier. Although sluggish deliveries to processors this fall have
stalled an increase in sunflowerseed crushing, faster use is anticipated by spring.
The 2012/13 crush is forecast at 1.25 billion pounds from 770 million in 2011/12. A
likely boost in the domestic production of sunflowerseed oil is seen trimming
imports and restoring U.S. export demand for the commodity.
Based on a record sown acreage of 1.77 million acres, U.S. canola production
rebounded well in 2012. Total output increased 59 percent to 2.447 billion pounds,
which was only 3 million pounds below the 2010 record. However, canola yields
for 2012 fell to 1,416 pounds per acre from 1,475 pounds in 2011 due to more
widespread crop diseases. North Dakota accounted for 84 percent of the additional
production, but strong crop gains were also seen in other States,
particularly Oklahoma.
U.S. imports of canola are expected to slip to 1.2 billion pounds for 2012/13 from
1.37 billion in 2011/12 because of the larger domestic crop and reduced Canadian
supplies. Domestic canola crushing is seen rising 16 percent to 3.1 billion pounds.
Despite expected production gains for canola oil and canola meal, U.S. imports of
these commodities should continue to expand. Steady growth in consumption of
canola oil and canola meal may help offset lower U.S. supplies of soybean oil and
soybean meal. A tight supply of canola this year in Canada—the global market
leader—is supporting the commodity’s price just below its all-time high.
Like these other two Northern Plains crops, flaxseed production surged in 2012 as
greatly improved planting conditions allowed a 93-percent increase in sown acreage
(to 344,000 acres). The 2012 crop was up 106 percent to 5.8 million bushels.
Flaxseed yields also improved to 17.1 bushels per acre from 16.1 bushels in 2011.
The larger domestic crop is expected to trim flaxseed imports in 2012/13 to 7
million bushels.
Peanut Surplus Grows Even Larger
Few U.S. crops performed better than peanuts did in 2012. The combination of a 44-percent increase in sown acreage (to 1.6 million acres) and a record yield (to 4,192 pounds per acre) swelled peanut production by 84 percent to 6.7 billion pounds. Even with peanut domestic use (4.35 billion pounds) and exports (825 million pounds) forecast at all-time highs, it is almost certain that very large stocks will be carried over to the next crop year. Season-ending stocks are forecast at a record 2.6 billion pounds.
International
Favorable Weather Raises Brazil Soybean Output Forecast
Upward adjustments for Brazil and the United States increase the 2012/13 estimate
of global soybean production to 269.4 million metric tons—up 1.7 million from last
month. For Brazil, a late arrival of summer rains caused minor delays for the start of
its growing season, but since October the rainfall has been regular and widespread.
In contrast, northeastern Brazil has been very dry but there is comparatively little
soybean production in the affected part of the region. Of far more significance are
the greatly improved moisture conditions in southern Brazil, where a year ago
soybean yields were slashed by drought. New-crop soybean yields in this region
could be 30-50 percent better than last year. Soybean planting is essentially
complete throughout the country and farmers have already started to harvest the
earliest sown fields.
Based on a higher yield outlook, Brazil’s 2012/13 soybean output is forecast up to
82.5 million metric tons from 81 million last month. If realized, Brazil's crop would
top U.S. soybean production (at 82.1 million tons) for the first year ever.
Brazilian producers have already made forward sales of more than half of their
prospective soybean crop. Post-harvest exports of soybeans should be record high,
although the pace of shipments could be constrained by transportation bottlenecks.
USDA raised its forecast of 2012/13 soybean exports from Brazil this month by 1
million tons to 38.4 million.
Wet Soils in Argentina Hamper Soybean Planting
For August through December, the main agricultural regions of Argentina have had
little respite from a rainy weather pattern. Cumulative rainfall over that period was
nearly twice the usual level. This year, crop planting was incredibly challenging due
to waterlogged soils. Flooding of low-lying areas will prevent some fields in
Argentina from being sown to any crop. Working between the days that it rained,
farmers have made sporadic progress. By January 10, 91 percent of Argentine
soybean planting was reported complete. Normal seasonal warming this month may
help to speed planting to a conclusion. Farmers delayed plantings last year too,
while waiting for hot and dry conditions to abate, which never quite happened.
Although expected Argentine soybean area for 2012/13 would still be a record high,
wet conditions (reinforced by weakening prices) could curtail sown area to 19.5
million hectares. Northern Argentina accounts for most of the soybeans still
unsown. The soybeans that have emerged so far are in excellent condition. The
lower area estimate is expected to trim Argentine soybean production to 54 million
tons compared to last month’s forecast of 55 million.
A lower supply outlook, coupled with likely stronger competition from Brazil, is
expected to reduce Argentine soybean exports in 2012/13 to 11 million tons—down
1 million from last month’s forecast.
Argentine processors are finding that the soybean stocks remaining from last year’s
drought-reduced harvest are getting low. Crushing plants are currently operating
well below capacity. Compared to a year earlier, the September-November 2012 crush in Argentina declined 23 percent. The new-crop harvest is at least 4 months
away, so further year-on-year declines in the monthly crush are inevitable. The slow
start for the 2012/13 crush means that it could take until next summer to catch up to
last year’s pace. Eventually, the improvement in new-crop soybean supplies is
expected to boost the marketing year total to 38.2 million tons compared to 35.9
million for 2011/12.
January 2013
Published by USDA Economic Research Service
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