Oil Crops YEARBOOK -- SUMMARY March 21, 2005 March 2005, ERS OCS-2005 Approved by the World Agricultural Outlook Board ------------------------------------------------------------- This SUMMARY is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. The complete report will be available electronically about 1 week following the summary release. ------------------------------------------------------------- Adverse Developments for Foreign Soybean Crops Keep U.S. Prices Aloft The U.S. Department of Agriculture’s (USDA) forecast of 2004/05 soybean exports was raised 35 million bushels this month to 1,045 million. If the forecast is realized, it would exceed the 2003/04 exports by 160 million bushels. It would put only a modest dent into the prospective stock carryout, which is still expected to be very large at 410 million bushels. Domestic soybean meal disappearance for 2004/05 was forecast lower this month from 33.7 to 33.4 million short tons. There is a slightly better outlook for U.S. soybean meal exports (at 5.9 million tons), although that increase will offset only half of this month’s reduction in domestic use. Soybean processors will therefore need to crush less to meet total soybean meal demand, and the 2004/05 crush was forecast down 5 million bushels to 1,650 million. U.S. soybean prices in February 2005 were pushed up approximately $1 per bushel due to the abrupt reversal of fortune for the Brazilian crop. The forecast of the 2004/05 average farm price was raised from $4.80-$5.40 to $5.05-$5.45 per bushel. Cash values for soybean meal jumped by more than $25 per short ton from the prior month toward $185 per ton. Consequently, USDA forecast a higher season average price of $160-$170 per ton. Similarly, cash prices for soybean oil rose about 4 cents per pound and by early March were near 23.5 cents per pound. This led to a half-cent increase in the forecast of the 2004/05 average price to 21.0-23.0 cents per pound. A worsening drought led to a lower 2004/05 soybean yield forecast for Brazil this month, which cut the production estimate from 63.0 million to 59.0 million metric tons. The poorer prospective supply alters the soybean demand outlook for Brazil, scaling back the export forecast by 1.2 million tons to 21.1 million as U.S. sellers pick up more sales. Brazil’s ending stocks picture appears to be less burdensome than before, however, with an inventory of 20.9 million tons at the end of September versus the previous forecast of 23.7 million. Combining that with a lower projected crop in Paraguay, global ending stocks are seen at 56 million tons, down from last month’s estimate of 61.3 million but still well above the 2003/04 carryout of 37.5 million tons. For the 2003/04 marketing year, U.S. soybean acreage declined for the third consecutive year to 73.4 million sown acres, down from the 74.0 million in 2002. A summer of drought, unfavorably high temperatures, and significant damage by soybean aphids slashed the national average soybean yield to just 33.9 bushels per acre in 2003. This was well below the 2002 yield of 38.0 bushels and the smallest since 1993. The lower acreage and yield cut 2003 soybean production to 2,454 million bushels. With lower beginning stocks, total soybean supplies for the crop year plunged 331 million bushels from 2002/03. Despite a strong start, U.S. soybean exports fell to 885 million bushels in 2003/04 from 1,044 million in 2002/03. Processor rationing during the summer cut the 2003/04 domestic soybean crush to 1,530 million bushels, well down from the previous year’s volume of 1,615 million. Even with an extraordinary decline in soybean use in the second half of the crop year, season ending stocks were forced downward to a minimal pipeline level of 112 million bushels. The U.S. season-average farm price surged upward to $7.34 per bushel compared with $5.53 in 2002/03. World oilseed production increased to 336 million metric tons in 2003/04 from 330 million the prior year because of improved harvests of cottonseed, peanuts, sunflowerseed, and rapeseed. That increase was partly offset by a decline in global soybean output from 197.1 million to 188.8 million metric tons. The poor U.S. soybean crop in 2003/04 accounted for nearly the entire decline in world production. The soybean shortfall caused a slight decline in global use. World soybean ending stocks fell 8 percent in 2003/04 to 37.5 million tons as output declined more than consumption. In Brazil, soybean area expanded by 16 percent to 21.5 million hectares due to higher prices. However, many producers’ expectations were dashed by an unrelenting drought that severely damaged yields throughout southern Brazil. Brazil’s 2003/04 soybean production was estimated at 52.6 million tons, only marginally higher than the preceding crop. An interruption of shipments to China limited soybean exports from Brazil to 19.8 million tons in 2003/04 versus 19.7 million the previous year. Poor soybean yields also offset an expansion of sown area in Argentina, dropping the country’s output to 33.0 million tons from 35.5 million in 2002/03. The smaller crop lowered 2003/04 Argentine soybean exports by 2 million tons from the previous year to 6.7 million. Lower soybean meal demand in the United States, European Union, China, and other Asian countries trimmed world consumption by 1 percent in 2003/04 to 128.5 million tons. In at least 10 Asian countries, a wide outbreak of avian influenza caused a great upheaval of the region’s poultry sector. A financial crisis for processors also interrupted soybean imports into China, restricting the country’s 2003/04 imports to just 16.9 million tons, down from 2002/03 imports of 21.4 million. Global vegetable oil output increased 6.1 million metric tons in 2003/04 to 100.8 million. The only major oil to have a decline in output was soybean oil, which fell to 30.0 million tons from 30.3 million in 2002/03 mainly due to lower U.S. production. However, world trade in vegetable oil slowed in 2003/04 as India (a major importing country) saw some of the best improvement in output. India’s 2003/04 soybean oil imports declined 40 percent to 0.8 million tons, while palm oil imports were trimmed to 3.55 million tons (from 3.95 million in 2002/03).