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USDA Oil Crops Outlook

14 June 2013

USDA Oil Crops Outlook - June 2013USDA Oil Crops Outlook - June 2013

USDA Oil Crops Outlook

USDA raised its 2012/13 forecast of soybean meal exports this month by 500,000 short tons to 10.4 million based on stronger than expected shipments this spring. These shipments have provided major support for the domestic soybean crush in 2012/13, which was forecast 25 million bushels higher this month to 1.66 billion. A price rally for soybean meal led USDA to raise its forecast of the 2012/13 average price to $450 per short ton from $425 last month.

Global soybean production for 2012/13 was lowered 1.5 million metric tons this month to 267.6 million due to a downward revision in Brazil’s crop to 82 million tons. A reduction of port backlogs in Brazil prompted USDA to raise its forecast of the country’s 2012/13 soybean exports this month by 1.55 million tons to a record 37.9 million. However, this was partly offset by a lower forecast of Argentine soybean exports (down 1.3 million tons to 7.8 million).

For the upper Midwest, abundant rainfall this spring has largely erased the soil moisture deficits that were left over from last year’s severe drought. But muddy fields have also stalled soybean planting to its slowest pace since 1996. In mid-May, a brief respite from the rains allowed some planting to advance. Still, only 71 percent of the country’s soybeans had been sown by June 9 compared to the 5-year average of 84 percent. Planting delays are particularly acute in Iowa, Minnesota, North Dakota, and Wisconsin. Iowa recorded its highest ever March-May precipitation, which was more than 70 percent above average.

Farmers who were unable to finish planting corn by early June will consider switching to soybeans, which has been a common pattern in other years with similarly wet conditions. However, some drying must develop soon for any expansion of soybean planting from farmers’ intentions in March. Crop insurance policies sold in the Midwest have final planting dates that generally extend through the second or third weeks of June. Benefit levels for crops planted beyond those dates are reduced daily. For the crops that have been planted, emergence has been slowed this spring by cooler than usual temperatures. Just 48 percent of soybeans were emerged as of June 9 compared to 67 percent on average. Planting delays have occurred in the Northern Plains for canola and sunflowerseed, as well.

U.S. Soybean Crushing for 2012/13 Buoyed by Slowing Exports, Firm Soybean Meal Demand

For most import markets for soybeans, U.S. prices will not be competitive with South American shipments until next fall’s new-crop harvest. U.S. export shipments of soybeans have slowed to a crawl—currently averaging only 3-5 million bushels a week. As a result, USDA this month lowered its forecast of 2012/13 soybean exports by 20 million bushels to 1.33 billion. Previously booked sales to Mexico, Japan, Indonesia, and Taiwan will make up the bulk of this season’s remaining soybean shipments.

The slowdown in export shipments of soybeans is conserving more supplies for use by domestic processors. Also adding to the available domestic supply are record large U.S. imports of soybeans, which are forecast up to 25 million bushels. While most U.S. soybean imports still come from Canada, several shipments from South America will arrive this summer. For the processors that can still acquire soybeans over the next few months within a reasonable distance from their plants, surging soybean meal prices will enable them to maintain an adequate crushing margin. Such circumstances are seen supporting the 2012/13 domestic soybean crush to 1.66 billion bushels—up 25 million from last month. So, as forecasts for lower exports and higher imports of soybeans offset a stronger outlook for crushing, season-ending stocks are forecast unchanged (at 125 million bushels).

U.S. crushing demand has been largely supported this year by robust shipments of soybean meal abroad. Soybean meal exports are now on a seasonal decline, but they stayed remarkably firm earlier this spring considering the rapidly dwindling stocks of soybeans. U.S. processors stayed competitive longer than expected due to a slow upswing in soybean meal trade from Brazil and top-exporting Argentina. This month,USDA raised the 2012/13 forecast of soybean meal exports by 500,000 short tons to 10.4 million.

Domestic prices of soybean meal are being boosted by a tightening of soybean stocks, declining production, and a delayed arrival of South American supplies. For central Illinois processors, the May average value of soybean meal surged to $466 per short ton compared to $422 in April. Prices have continued to climb in early June to $490-$500 per short ton. The strength of this rally led USDA to raise its forecast of the 2012/13 average price to $450 per short ton from $425 last month. However, processors are being obliged to bid higher prices for soybeans, as well. In May, the average cash soybean price paid by central Illinois processors (at $15.38 per bushel) was 80 cents per bushel higher than in April. Although a high percentage of soybeans have already been marketed, the rise in prices was enough to warrant an increase in USDA’s forecast of the 2012/13 average farm price to $14.35 per bushel from $14.30 last month. New-crop soybean prices are expected to derive support from lower prospective supplies of corn this year. USDA raised its forecast of the 2013/14 average farm price to $9.75-$11.75 per bushel versus $9.50-$11.50 last month.

The recent slide in U.S. stocks of soybean oil reflects a declining rate of soybean crushing. Domestic disappearance of soybean oil in 2012/13—which is forecast 200 million pounds higher this month to 18.55 billion pounds—also appears to be strengthening. The soybean oil gains are coming either from rising current consumption or through an accumulation of end user inventories that will be used subsequently. Many end users of soybean oil may anticipate that—by December 31—a stronger competition for a smaller supply will emerge. Thus, they could seek to fulfill future contractual obligations by building up their inventories now. Having such stocks on hand could be particularly useful for biodiesel producers. By the last quarter of the calendar year, biodiesel producers could profit from any rise in the value of RINs (the tradable identification that is assigned to renewable fuels for compliance with Federal blending requirements). Season-ending stocks of soybean oil are forecast up moderately to 1.73 billion pounds as the forecast increase in production exceeds the increase for domestic disappearance.

International Outlook 

On a harvested area of 27.7 million hectares, the estimate of Brazil’s 2012/13 soybean production is lowered 1.5 million metric tons this month to 82 million due to a lower yield estimate. Production gains in southern Brazil this year have not been enough to compensate for yield losses in northeast Brazil, where it was drier than usual this year.

In recent weeks, Brazil’s backlog of soybean exports has been trimmed since its major ports extended weekday operations to 24 hours from 8 hours previously. As a result of the enhanced capacity, soybean exports for the country set a monthly record in May at 7.95 million tons. More large monthly shipments are likely to follow. USDA raised its forecast of Brazil’s 2012/13 soybean exports this month by 1.55 million tons to a record 37.9 million.

While forecasts of a lower crop and higher soybean exports in Brazil will moderate an increase in carryover stocks this fall, the supplies that remain in Argentina could be larger than ever. Despite a very large soybean harvest for 2012/13, it is unlikely that Argentine exports and domestic use will expand very much over the near term. Soybean exports from the country may increase to only 7.8 million tons this year from 7.4 million in 2011/12. This forecast was lowered 1.3 million tons from last month’s estimate on account of likely restrained sales by farmers. Similarly, a lack of available soybeans could moderate the Argentine crush in 2012/13 to 34.7 million tons, compared to 35.9 million last year. A lower output is seen reducing Argentine exports of soybean meal to 25.4 million tons from 26 million in 2011/12.

Area Reductions Expected To Trim EU-27 Rapeseed Production

EU-27 rapeseed production for 2013/14 is expected 300,000 tons lower this month to 19.7 million based on lower projected output for France and the United Kingdom. Wet weather in both countries prevented an increase in sown area last fall. Despite good price incentives to expand production, French rapeseed area is estimated to have declined 8 percent this year. For northern Europe in general, crop yields could be diminished if this spring’s excessive wetness persists.

A smaller expected EU crop is seen shaving the rapeseed crush to 22 million tons in 2013/14 from 22.1 million in 2012/13. Season-ending rapeseed stocks may also tighten to a 6-year low of 1.2 million tons, compared to 1.4 million for 2012/13.

Global Sunflowerseed Production May Approach a Record High

Global production of sunflowerseed for 2013/14 is forecast 250,000 tons higher this month to 40.3 million tons and close to the 2-year-old record of 40.6 million. Russian sunflowerseed production was forecast up to 8.9 million tons from 8.5 million last month based on better-than-anticipated Russian planting data. The country’s sunflowerseed area for 2013/14 is estimated 300,000 hectares higher this month to 6.8 million. By expanding sown area, Russian farmers are seeking to recoup production losses from last year’s poor harvests. Except for parts of southern Russia, where it has been too dry, overall planting conditions have been favorable this spring.

 In contrast, EU sunflowerseed production is seen 150,000 tons lower this month to 7.75 million.

Total area for EU sunflowerseed is forecast down nearly 2 percent from last year to 4.2 million hectares. Sown area for Romania and Bulgaria is expected down due to minimal abandonment of winter grain crops, which were protected last winter from damaging low temperatures by a thick cover of snow. Sunflowerseed production will also be held down in these countries by a higher area sown to corn.

Published by USDA Economic Research Service

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