USDA Oil Crops Outlook
12 April 2012
USDA Oil Crops Outlook April 2012
USDA’s Prospective Plantings report in March indicated that U.S. farmers intend to reduce the
acreage sown to soybeans this year by 1.4 percent to 73.9 million acres as expected returns for
corn were more attractive. Also, growers intend this spring to increase U.S. sunflowerseed
acreage by 17 percent to 1.8 million acres, canola by 45 percent to a U.S.-record 1.56 million
acres, and peanuts by 25 percent to 1.4 million acres.Crop failures in South America could reduce global exports of soybeans by 4 percent in 2011/12 to 89 million metric tons. Based on drought damage in major southern states, USDA lowered its 2011/12 soybean production estimate for Brazil to 66 million tons from 68.5 million last month. Drought also forced reductions this month in soybean crop estimates for Argentina (to 45 million tons from 46.5 million) and Paraguay (to 4.2 million tons from 5 million).
Domestic Outlook
U.S. Soybean Acreage in 2012 May Dip to 5-Year Low Following a Surge in Corn Planting
Last month, USDA’s Prospective Plantings report indicated that U.S. farmers intend to reduce
the acreage sown to soybeans this year by 1.4 percent to 73.9 million acres. Higher intentions for
corn acreage—which farmers would expand 4 percent to a 75-year high—are largely behind this
potential reduction in 2012 soybean acreage. The Corn Belt region is where the main shift in
cropland between corn and soybeans is anticipated. The sole region where an expansion in
soybean acreage might occur this year is the Northern Plains, where millions of acres were
unsown last year due to excessively wet soil conditions. This spring, North Dakota growers
intend to sow record-high acreage to soybeans, although that too may be constrained by even
larger acreage gains for corn, durum wheat, and other oilseeds.
In the South, intended acreage for corn is also higher. But the net change there in soybean
acreage could be minimal as some cropland is likely to be recovered at the expense of cotton.
Compared to a year ago, cash market prices for cotton are down sharply because of large
supplies and weak demand. And while price incentives for double-cropping soybeans are good,
that acreage might change only modestly. This year’s acreage of Soft Red Winter wheat—the
crop that usually precedes soybeans when the two are double-cropped—was down slightly.
With perhaps the warmest March ever for the Midwest, crop planting is primed for an unusually
fast start this spring. In northern areas, however, many farmers may be wary to begin until after
the earliest planting dates allowed under Federal crop insurance. If farmers were to sow earlier
than that, they would risk losing a replanting payment in the event of a spring frost. These dates
are established because the last frost dates of the spring for some locations can extend well into
May. Farmers will take advantage of the warm and firm soils when they are fully covered for the
frost risk. They would find that desirable because early planting often brings a yield bonus at
harvest. Thus, a fast pace could make it even more likely that all (and perhaps more) of the
intended grains acreage is planted.
This aspect is helping to force soybean prices even higher this spring to compete for cropland.
Even so, once these other crops are planted, there could be only a small opportunity to stimulate
additional soybean acreage. U.S. soybean plantings seldom increase by more than 2 million acres
between USDA’s March planting intentions report and the June Acreage report (and that is most
often the result of weather-related delays in corn planting). If planting conditions stay favorable
throughout the spring, then there might be a greater expansion in total crop acreage this year as
rising crop prices encourage expansion onto even the least productive farmland.
High Prices, Better Sowing Conditions Buoy Outlook for Canola and Sunflowerseed Acreage
Last year, U.S. sunflowerseed acreage plummeted 21 percent as it got too wet to finish planting
in the Northern Plains. That prompted a tumble in the 2011 sunflowerseed crop to a 22-year low
and helped send prices soaring toward all-time highs. This spring—encouraged by attractive
prices and more favorable planting conditions—growers intend to increase U.S. sunflowerseed
acreage by 17 percent to 1.8 million acres. Despite this, plantings would still be the secondlowest since 1987. Potential gains in sunflowerseed acreage are limited as many of the crops that
can be grown in the Northern Plains offer competitive returns this spring. North Dakota and
South Dakota would account for the majority of the increase in sunflowerseed acreage. Nearly
all of acreage gains would be for oil-type sunflowerseed varieties.
Likewise, intended acreage for canola would surge 45 percent this year to a U.S.-record 1.56
million acres. This supply response is motivated by record-high cash prices this spring for canola
(approaching $28 per hundredweight). Restoration of the canola acreage would primarily occur
in top-producing North Dakota, where virtually all of U.S. canola acreage was lost a year ago to
excessively wet topsoil.
Sown acreage for other oilseed crops predominantly grown in the Northern Plains is also likely
to rise this year. Flaxseed acreage is seen up 62 percent from 2011 to 289,000 acres, with nearly
all of the increase in North Dakota. Although greatly improved from last year, flaxseed acreage
at that level would be far below its 10-year average (532,000 acres).
Farmers To Shift More Cotton Acreage Back to Peanuts This Year
Last year, farmers in the South were switching many acres from peanuts into cotton production. The situation will reverse this year as cotton supplies are now abundant. In contrast, carryover stocks for peanuts are expected to fall to a 9-year low and prices have risen to a 21-year high. Consequently, sowing intentions for peanuts this year are up 25 percent to 1.4 million acres while an 11-percent decline is seen for cotton acreage. If realized, this would be the highest U.S. peanut acreage sown since 2008. The Southeast, particularly Georgia, will account for most of the gains in sown acreage.
Soybean Crushing Perks Up With Strengthening Prices for Soybean Meal and Oil
USDA’s Grain Stocks report last month indicated that March 1 soybean stocks totaled 1.372
billion bushels, exceeding the year-earlier inventory by 123 million bushels. By August 31,
season-ending soybean stocks are expected to decline to 250 million bushels—moderately above
the beginning inventory at 215 million bushels. Carryout stocks are forecast down 25 million
bushels from last month as a result of higher forecasts for domestic crush and exports.
Ordinarily, it would be a comfortable level for U.S. ending stocks if not for a sharply reduced
South American supply this year.
Although demand for soybeans in 2011/12 is far below last season, domestic use picked up
modestly in February. Rejuvenation of the domestic-crush market for soybeans was precipitated
by rallying prices for soybean meal and soybean oil. In March, cash prices for soybean meal
surged to $366 per short from the February average of $330. The strengthening market prompted
an increase in the forecast of the season-average price to $335-$355 per short ton from $310-
$340 last month. Contributing to the higher price outlook is stronger than expected domestic use
of soybean meal. U.S. feed demand was likely supported by larger inventories of hogs on hand
than originally indicated for the fall and winter quarters. USDA raised its forecast for the
domestic disappearance of soybean meal by 400,000 short tons this month to 30.6 million.
Similarly, soybean oil prices are also rising again—up 1 cent per pound in March to 53.4 cents.
In response, USDA raised its forecast range for the 2011/12 average price for soybean oil to
52.5-54.5 cents per pound from 50.5-54.5 cents last month. A higher crush will boost the output
of soybean oil. More of those supplies are likely to be used in the domestic production of
biodiesel (methyl esters). U.S. Environmental Protection Agency (EPA) data on biodiesel
production for October 2011-February 2012 indicate a nearly threefold increase from a year
earlier. Throughout the remainder of the year, percentage gains in biodiesel production could be
more modest. But current gains are already large enough to warrant an increase in USDA’s
forecast in the use of soybean oil for methyl esters this month by 400 million pounds to 4 billion.
Although edible use of soybean oil is expected to decline slightly in 2011/12, higher use for
biodiesel would raise total domestic use by 300 million pounds this month to 17.9 billion.
This month, USDA raised its U.S. export forecast for soybeans in 2011/12 by 15 million bushels
to 1.29 billion. Export inspections of soybeans still lag far behind (283 million bushels through
April 5) last season’s cumulative volume. However, that export gap has already started to narrow
and a less pronounced seasonal decline is seen over the second half of the marketing year. By
late summer, there could even be an upswing in U.S. soybean exports as declining crops in South
America force a faster drawdown of stocks there. Export prices from Brazil for July-August
delivery are now turning less advantageous compared to U.S. origins.
In light of the poor crop situation in South America, U.S. cash soybean prices surged again in
March—rising nearly $1 per bushel. The price rally gathered even more momentum after the
March 30 planting intentions report, which indicated an unexpectedly low U.S. acreage for
soybeans this year. Prices almost certainly will set an all-time high in 2011/12. The U.S. seasonaverage farm price was forecast up to $12.00-$12.50 this month from $11.40-$12.60 last month.
International Outlook
Downsized South American Soybean Crops May Wind Down 2011/12 Exports More Quickly
Drought in South America is creating a serious deficit in the global soybean supply that could
take years to erase. World soybean production in 2011/12 is forecast 4.9 million metric tons
lower this month to 240.2 million. Crop failures in the region are expected to reduce global
exports of soybeans by 4 percent this year to 89 million tons. The global stocks carryout could
also fall by 20 percent this year to 55.5 million tons.
For Brazil, USDA lowered its 2011/12 soybean production estimate to 66 million tons from 68.5
million last month. The country’s second and third-largest soybean producing States (Parana and
Rio Grande do Sul) have been ravaged by a major drought. In Rio Grande do Sul, soybean yields
could be the worst since the area’s last major drought 7 years ago. Cumulative precipitation since
planting for the State has been nearly 40 percent below average. An unusually high number of
days with extreme heat may have exacerbated the crop damage there.
An ample inventory left over from last year’s record crop in Brazil is still likely to boost the
country’s soybean exports for 2011/12 to a record 35.7 million tons compared to nearly 30
million for last season. For October 2011-March 2012, soybean exports from Brazil exceeded the
previous year’s level by 6.7 million tons. Those gains are fading as almost all of these old-crop
stocks have been used by now. By March, exports were accelerating quickly as more than threefourths of Brazil’s new-crop soybean harvest had been completed by the month’s end. At the
same time, poor crops in Argentina and Paraguay may direct even more of the nearby export
trade to Brazil. With Brazil’s much smaller new-crop harvest, this means that export shipments
for the rest of the marketing year could peak sooner. Unlike last year, Brazil’s soybean stocks
could tighten well before the U.S. fall crop becomes available. By September 30, the country’s
soybean stocks could plummet nearly 8 million tons compared to the previous year.
Foreign demand, particularly from China, will soon start to constrict the availability of soybeans
for Brazil’s domestic processors. This month, soybean crushing for 2011/12 is seen slowing to
35.5 million tons—down compared to last month’s forecast of 36 million and the 2010/11 total
of 35.9 million. Lower output and higher domestic use will also curtail Brazilian exports of
soybean meal in 2011/12 to 14.5 million tons.
Crop Damage in Argentina and Paraguay Becomes More Apparent
Production losses for Brazil alone would already severely impact the world soybean supply. But
a nearly matching reduction for the combined crops in Argentina and Paraguay compounds the
situation. This year’s soybean harvest in Argentina is forecast down to 45 million tons from 46.5
million last month and last year’s crop of 49 million. Drought and high temperatures throughout
November and December hurt yields for the main part of Argentina’s soybean crop. Since midJanuary, a revival in rainfall is benefiting late-planted soybeans, but they may also need an
extended growing season to reach maturity.
Argentine soybean processors, who typically consume about three-fourths of the country’s crop,
will seek to secure adequate stocks for their own use. That means, as in Brazil, the window for
soybean exports from Argentina could close 1-2 months earlier than it did last year. Argentine
soybean exports in 2011/12 are forecast down to 8.6 million tons compared to 8.9 million last
month and last year’s total of 9.2 million. However, it is unlikely that Argentine crushers will be
untouched by a smaller crop. They may be able to process only 38.2 million tons of soybeans
versus the previous forecast for 38.9 million. That would trim growth in Argentine exports of
soybean meal and soybean oil. By the end of September, Argentine soybean stocks could still be
barely adequate to sustain crushers for 6 months until the next harvest.
Paraguay may be hardest hit of all by drought as its production region is more concentrated than
in either Brazil or Argentina. Compared to last year’s record high, soybean yields in Paraguay
could be slashed by 45 percent. On a harvested area of 2.6 million hectares, that would halve
soybean production from a year ago to 4.2 million tons (down 800,000 tons from last month). A
comparable reduction is expected for soybean exports from Paraguay, which could drop to 3.3
million tons in 2011/12 from 6.7 million in 2010/11.
Published by USDA Economic Research Service
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