USDA Oil Crops Outlook
13 January 2012
USDA Oil Crops: U.S. Soybean Stocks To End Higher in 2011/12
The final estimate of the 2011 U.S. soybean crop was 3.056 billion bushels based on a harvested acreage of 73.6 million acres and an average yield of 41.5 bushels per acre.
USDA lowered its 2011/12 forecast of soybean exports by 25 million
bushels this month to 1.275 billion while soybean crushing is forecast
down 10 million bushels to 1.615 billion. Based on that lower use,
season-ending soybean stocks on August 31 are expected at 275 million
bushels.
USDA trimmed its overall soybean yield forecast for Brazil this month,
lowering its 2011/12 production estimate for the country to 74 million
metric tons. Despite this, soybean exports from Brazil for 2011/12 are
still expected to surge to a record 39 million tons. In Argentina,
serious moisture deficits and a narrowing planting window may curtail
soybean area to 18.7 million hectares. As a result, 2011/12 soybean
production for Argentina is forecast down to 50.5 million tons from
the previous forecast of 52 million.
DOMESTIC OUTLOOK
Lower Domestic Supply, Stronger Foreign Competition Curbing U.S. Exports of Soybeans
The final estimate of the 2011 U.S. soybean crop in this month’s
USDA, National Agricultural Statistics Service Crop
Production—2011 Summary was 3.056 billion bushels. The
production estimate increased 10 million bushels from the previous
forecast as slightly higher yields for Illinois, Indiana, and Ohio
more than offset a reduction for Minnesota. The soybean crop was
harvested on 73.6 million acres with an average yield of 41.5 bushels
per acre. Total supplies of soybeans for 2011/12 have fallen 209
million bushels from last year to 3.286 billion bushels.
According to USDA’s latest Grain Stocks report, U.S. soybean
stocks on December 1, 2011 totaled 2.366 billion bushels. The
first-quarter ending stocks for the 2011/12 crop year were moderately
above the year-earlier inventory of 2.278 billion bushels, despite the
smaller harvest. The stocks data reflect slower exports and domestic
crushing of soybeans last fall. Based on that lower use, season-ending
soybean stocks on August 31 are expected at 275 million
bushels—above the beginning inventory of 215 million. Carryout
stocks for soybeans in that range are comfortable enough to temper any
price rallies. USDA forecasts the season-average soybean price at
$10.95-$12.45 per bushel, compared to $11.30 for 2010/11.
Cumulative export inspections of soybeans for September-December 2011
fell to a 3-year low and far behind (approximately 29 percent) last
year’s record pace. Over the near term, the pace of U.S. export
sales of soybeans may modestly improve given dimmer prospects for
South American crops. However, even assuming some recovery in new
sales, cumulative shipments to date are so far behind last year that
the previous export forecast is unlikely to be realized. Thus, USDA
lowered its 2011/12 forecast of soybean exports by 25 million bushels
this month to 1.275 billion.
Also, soybean crushing for the September 2011-August 2012 marketing
year is forecast down by 10 million bushels this month to 1.615
billion. The revised forecast reflects a year-to-year decline already
present in the year’s first-quarter data. USDA offset the impact
of this change on the production of soybean meal and soybean oil by
steadying the forecast of the October-September crush at 1.625 billion
bushels. More ample stocks next fall are likely to boost soybean
crushing in September 2012 from an unusually low rate last
September.
For domestic soybean processors, profits from sales of soybean meal
are being narrowed by sluggish demand. Soybean meal use by domestic
livestock producers is expected to fall slightly this year. Likewise,
export sales of U.S. soybean meal are lagging—particularly in
Asia—as exports from India are currently the most competitive in
that region. After March, export gains could get even harder for U.S.
soybean meal in the most distant foreign markets with the arrival of
South American new-crop production. The intended closure of an Iowa
crushing plant next month (to begin a modernization of the facility)
is symbolic of the U.S. industry’s current challenges. Although
the value of soybean meal has strengthened a bit since December, the
cost of soybeans has risen almost as fast. Prices for soybean meal and
corn rallied in the second half of December due to deepening concerns
over the condition of South American crops. These circumstances are
reflected in the latest forecast of the 2011/12 average price for
soybean meal, which was raised to $290-$320 per short ton—up $10
from last month but still below last year’s average of $346 per
ton.
For soybean oil, U.S. export sales this year have been sharply reduced
with the normalization of trade relations between China and Argentina.
By this time last year, U.S. sales of soybean oil to China alone
totaled 547 million pounds to make up for the blocked Argentine trade.
That sales windfall vanished many months ago and there has been no
U.S. soybean oil trade with China at all this season. Sales are
lagging even to more traditional U.S. soybean oil markets in Asia,
North Africa, and Latin America. The poor trade prospects led to a
reduction in the 2011/12 forecast of soybean oil exports this month to
1.2 billion pounds. That compares to last month’s forecast of
1.4 billion pounds and last year’s total of 3.2 billion.
Large Canola Supplies May Buoy Crushing While a Smaller Sunflowerseed Crop Restricts Use
U.S. canola acreage plunged 26 percent in 2011 to 1.1 million acres.
North Dakota accounted for nearly all of the reduction, where
excessive soil moisture last spring prevented farmers from sowing as
many acres as intended. Planting intentions last March for canola were
500,000 acres higher. At a below-average 1,475 pounds per acre, canola
yields were not nearly as good as the last 2 years, either. Lower
acreage and yields combined to reduce the U.S. harvest in 2011 by 37
percent to 1.5 billion pounds. A large crop in Canada, however, is
expected to encourage imports of canola and maintain a steady rate of
domestic crushing. U.S. canola imports are seen rising in 2011/12 to
1.9 billion pounds from 1.1 billion last year. The December average
farm price for canola was 22.8 cents per pound, a level that prices
could hover around for the rest of the season.
U.S. planted acreage for sunflowerseed fell 21 percent in 2011 to 1.5
million acres and the lowest since 1976. With near-average yields
(1,398 pounds per acre), production of sunflowerseed totaled just over
2 billion pounds. Prohibitively wet conditions last spring in North
Dakota slashed the acreage sown to sunflowerseed by one-third. That
largely explains why—for the first time ever—South Dakota
out produced North Dakota this year in sunflowerseed. Half of the crop
reduction came from oil-type varieties. Due to much tighter supplies,
domestic crushing of sunflowerseed is already down sharply this year.
USDA forecasts the 2011/12 crush to fall to a 7-year low of 940
million pounds. An above-average price premium for sunflowerseed oil
(compared to soybean oil) is needed to encourage even this low rate of
crushing. However, with the foreign market amply supplied with
sunflowerseed oil from Ukraine and Russia, a high price will restrict
most of U.S. production to being sold for domestic consumption.
Acreage and production of other oilseed crops were also reduced last
spring by excessively wet soils in the Northern Plains. Sown flax
acreage for 2011 totaled 178,000 acres, which was the lowest since
1997. Flaxseed yields—at 16.1 bushels per acre—were also
considerably below the historical trend. Total flaxseed production in
2011 plummeted 69 percent to 2.8 million bushels. The shortfall in
domestic output is likely to pull up imports from Canada to nearly 8
million bushels. Similarly, lower acreage for safflowerseed in the
Northern Plains contributed to a 23-percent decline in crop production
to 170 million pounds.
Crop Reductions To Shrink Market Demand for Cottonseed and Peanuts
An extreme drought in the Southwest this year stifled peanut planting
and devastated yields in the region. Intense competition with other
crops also contributed to an 11-percent reduction in U.S. peanut
acreage to 1.1 million acres. Peanut production for 2011 declined to
3.64 billion pounds from 4.16 billion in 2010. This month’s
final crop estimate for 2011 was down 12 million pounds from the
previous forecast as yield reductions for Texas and Oklahoma more than
offset upward revisions for the Southeast. The national average yield
for 2011 was 3,313 pounds per acre—almost identical to the 2010
yield of 3,312 pounds. Food demand for peanuts in 2011/12 is expected
to grow slightly, but exports and other domestic uses could decline.
Lower supplies are also likely to sharply cut season-ending peanut
stocks to 1.05 billion pounds from 1.5 billion in 2010/11. Peanut
prices have increased sharply from last year as a consequence.
Despite a 34-percent increase in U.S. cotton acreage in 2011,
unusually high abandonment cut the harvested acreage by 9 percent.
Cotton yields also fell, as unirrigated fields in Texas and Oklahoma
were severely damaged by drought. For cottonseed, the final estimate
for U.S. production in 2011 declined to 5.27 million short tons, down
1 percent from last month’s forecast and 14 percent from last
year. Texas and Oklahoma account for nearly all of the production loss
in cottonseed, which will have a pronounced impact on the nearby
crushing industry as well as cattle feedlots in the region. Higher
costs to West Coast feedlots will likely encourage more imports of
Australian cottonseed, which is in abundant supply.
INTERNATIONAL OUTLOOK
Dry Weather Reduces Yields of Early Soybeans in Southern Brazil
In trimming its overall soybean yield forecast for Brazil this month,
USDA lowered its 2011/12 production estimate for the country to 74
million metric tons. Crop output would be down 1 million tons compared
to last month’s forecast and 1.5 million tons from last
year’s harvest. Precipitation throughout southern Brazil for
November-December 2011 was only about half of the normal level. For
that period of soybean growth, the focus for yield damage is on
Parana, where the crop was among the earliest planted in the country
and the furthest developed now. Avoidance of yield losses in areas
where soybeans were sown later will hinge on better distributed
rainfall in January and February. Crop stress during the dry spell in
Brazil may have been moderated by a lack of unusually long bouts of
extreme heat.
In contrast, more northern states in Brazil have fared much better.
Excellent growing conditions in Mato Grosso, Goias, and Bahia will
partly offset yield losses in the South. Soybean harvesting will start
to accelerate in Center-West states by the end of January.
Despite expectations for a minor decline in its crop, Brazil is still
expected to dominate global soybean trade in the months ahead.
Problems with the Argentine soybean crop may only enhance that
position.
Argentine Farmers Wait for Rain To Conclude Soybean Planting
For the major soybean-growing region of Argentina, the weather has
been even hotter and drier than in Brazil. Soils have dried out
rapidly since December, as persistently high temperatures exacerbated
the lack of rainfall. But with about two-thirds of the soybean area in
Argentina planted between late October and December 1, few fields have
reached the critical reproductive stage. While the need for rainfall
is immediate and acute, Argentine soybean yields are still largely
undetermined.
Serious moisture deficits in Argentina have, however, stalled the
completion of intended soybean planting, which for second-crop
soybeans usually proceeds into early February. As of January 5, just
over 16 million hectares of soybeans had been sown. Last year, sowing
conditions were similarly dry, but the return of abundant rainfall in
the second half of January allowed a final surge of soybean planting.
That also prevented the same kind of collapse in crop yields that
occurred with the country’s 2008/09 drought. For the current
season, the sudden return of widespread precipitation this week could
be sufficient for soybean planting to resume. However, considering the
narrowing planting window, the previous forecast of harvested soybean
area at 19 million hectares was overly optimistic. USDA revised down
the area estimate this month to 18.7 million hectares. As a result,
2011/12 soybean production for Argentina is forecast down to 50.5
million tons from 52 million previously.
Argentine soybean processors possess the dominant position in the
world market for soybean products. Preservation of that status means
that soybean exports from the country are likely to decline with a
smaller crop. Argentine soybean exports in 2011/12 are thereby
expected to slip to 9.8 million tons—down 1 million from last
month’s forecast but still up modestly from 9.2 million last
year.
January 2012
Published by USDA Economic Research Service
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