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USDA Oil Crops Outlook

15 December 2014

USDA Oil Crops Outlook December 2014USDA Oil Crops Outlook December 2014

USDA Oil Crops Outlook

Strong Soybean Exports Support Prices

USDA raised its forecast of 2014/15 soybean exports this month by 40 million bushels to 1.76 billion based on record U.S. export sales commitments. With no forecast change in the domestic crush, this lowers the forecast of season-ending soybean stocks by 40 million bushels to 410 million. USDA’s forecast of the 2014/15 season-average farm price is unchanged at $9.00-$11.00 per bushel. Global production of rapeseed in 2014/15 is forecast up 1.2 million metric tons this month to 71.9 million. Higher yields and harvested area in Canada raised the 2014/15 production estimate by 1.2 million tons this month to 15.6 million. But import markets for that much additional production are limited, so season-ending stocks in Canada could again stay high at 2.4 million tons.

Domestic Outlook

U.S. Soybean Exports are On a Record Pace

The U.S. soybean harvest is essentially finished except for a last few unharvested acres in Kentucky and North Carolina. The focus of the soybean market now turns to the outlook for U.S. demand and the competing supplies in South America. In that vein, USDA raised its 2014/15 export forecast this month by 40 million bushels to 1.76 billion. U.S. export sales commitments of soybeans this season are at an alltime high. The outstanding sales are now falling rapidly, however, due to a robust pace of shipments. U.S. export inspections of soybeans for November were a record 398 million bushels, which followed record October shipments of 335 million. As a consequence, cumulative export inspections for September-November 2014 swelled 161 million bushels ahead of last year’s record pace. China accounts for most of the gains with 72 percent of U.S. export shipments to date.

Substantial gains have been seen for other importers, as well, including the EU, Turkey, and Taiwan. No changes were forecast this month for the domestic use of soybeans, as the demand outlooks for soybean meal and soybean oil were also unchanged. Thus, the stronger outlook for 2014/15 soybean exports lowers the forecast of season-ending stocks by 40 million bushels to 410 million. Soybean prices rallied in November with high demand and restrained farm sales. However, soybean prices may fall back once deliveries of the record harvest start arriving faster than they are used. Advancement of the South American crop will also push prices lower. USDA’s forecast of the 2014/15 season-average farm price is unchanged at $9.00-$11.00 per bushel. The increase in domestic soybean crushing this fall has taken longer than anticipated. At the same time, foreign buyers of soybean meal have taken commitments for much of the first output from the 2014/15 crop. Prices for domestic users have been buoyed as a consequence.

Central Illinois soybean meal prices strengthened in November to $441 per short ton versus the October average of $382. Nonetheless, soybean meal prices could soon decline sharply once this early flush of export sales has dissipated. Compared to the December 2014 CBOT soybean meal contract of just over $400 per short ton, the contract for March 2015 delivery has dropped below $360. The forecast of the 2014/15 season-average soybean meal price was raised $10 per short ton this month to $340-$380, yet still well below the 2013/14 average of $490 per ton. In contrast, soybean oil prices are being undermined by prospects for record output in 2014/15 along with weakening support from the biodiesel market. Compared to a year ago, 2014 biodiesel production is essentially unchanged. Large supplies of canola are also pressuring the vegetable oil market. Soybean oil prices continued a decline in November to 33.5 cents per pound from the October average of 34.1 cents. This is the lowest price for soybean oil in 6 years. This month, USDA lowered its forecast range for the 2014/15 average soybean oil price by 2 cents to 32-36 cents per pound.

International Outlook

Canadian Canola Harvest Raised on Higher Yields and Harvested Area

Global production of rapeseed in 2014/15 is forecast up 1.2 million metric tons this month to 71.9 million based on a large revision for Canada and 50,000-ton increase for the EU crop. A more moderate year-to-year decline in Canada’s production substantially alters the outlook for global rapeseed inventories. Global seasonending stocks were previously seen declining from 2013/14. Stocks are now forecast expanding 20 percent in 2014/15 to 7.8 million tons—the highest in 5 years. For Canada, higher canola yields contributed to this month’s 1.2-million-ton increase in 2014/15 production to 15.6 million. Canola output might have been even higher this year if not for June flooding that destroyed crops sown in parts of Saskatchewan and Manitoba.

Cumulative rainfall for the growing season was 25 percent above average throughout the Canadian Prairies and in some locations it was more than 50 percent above average. Farmers contended with moist conditions up to and through the harvest. Even so, crop abandonment was less than previously feared and canola harvested area was estimated 275,000 hectares higher to 8.1 million. While this year’s crop falls short of Canada’s record 2013 harvest (18 million tons), it is the second-largest ever. A larger supply in Canada would continue a high level of season-ending stocks in the country at 2.4 million tons. The number of rapeseed importing countries that could absorb that magnitude of additional supply is limited. Two of them—China and the United States—already produced their own record large crops this year. Although China rapeseed imports for 2014/15 were forecast 250,000 tons higher this month to 3.75 million, they are seen only supporting the level of China’s stocks.

Lower Palm Oil Yields Trim Outlook for Indonesian Production Palm oil production

in Indonesia for 2014/15 is expected 500,000 tons lower this month at 33 million. A downward revision for the 2013/14 harvest to 30.5 million tons (a result of extended dry periods in Sumatra during 2013) led to the change in this year’s production forecast. Despite a dimmer production outlook, Indonesian palm oil stocks are still abundant. Exports growth is still likely in 2014/15 for Indonesian palm oil, which is forecast rising to 22.3 million tons compared with 21.2 million in 2013/14. Faced with accumulating stocks and declining prices, the Government of Indonesia (starting October 1) reduced its export tax for crude palm oil to zero. A lower export tax on palm oil, however, eases the downward pressure on domestic prices and thereby curtails its attractiveness for domestic biodiesel producers. EU palm oil imports for 2014/15 are forecast higher (to 6.85 million tons), which would maintain a mostly steady level for edible consumption.

Published by USDA Economic Research Service

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