Grainnet

USDA Economic Research Service Annual Oil Crops Yearbook Report

This Summary is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831.

The text of the yearbook will be available electronically on March 28.

MINIMAL 2007/08 ENDING STOCKS OF SOYBEANS MAY FOLLOW A STEADY EXPORT PACE

So far in calendar 2008, there has been little letup in the weekly rate of U.S. export shipments.

Export inspections data through March 13 indicates soybean shipments are only 36 million bushels behind last year’s record pace, with considerable outstanding sales remaining to be shipped.

Foreign demand is being supported by a declining U.S. dollar and a less robust rate of soybean exports from Brazil.

USDA responded by raising its March forecast for 2007/08 U.S. soybean exports 20 million bushels to 1.025 billion.

A firmer demand outlook revises the 2007/08 forecast of soybean ending stocks to 140 million bushels.

The resulting stocks-to-use ratio (4.6 percent) would nearly match the all-time lows of 2003/04 and 1972/73.

In February, the national average price received by farmers rallied to $11 per bushel--an all-time high for soybeans.

WIDE PRICE SWINGS FOR SOYBEAN OIL CONTINUE

Current price volatility in the soybean oil market is unprecedented.

Historically, a price move of 5 cents per pound in a year was considered significant.

This year, the price of soybean oil has erupted by nearly 7 cents per pound in just 2 months (since January).

Reported freeze damage to rapeseed crops in China helped precipitate the market rally, along with the declining value of the dollar and rising petroleum prices are also contributing to price volatility.

In February 2008, the monthly average price for soybean oil was 56.7 cents per pound, nearly twice as high as a year earlier.

As a result, USDA raised its 2007/08 price forecast for soybean oil to 53-57 cents per pound from 47.5-51.5 cents previously.

Prices for other vegetable oils have exhibited comparable upward movements.

For biodiesel producers, the rapid escalation in vegetable oil costs exacerbates the losses that they were already experiencing.

Despite a rise in the U.S. average retail price for diesel fuel in March to an all-time high of $3.82 per gallon, feedstock costs for biodiesel producers have more than kept pace.

Over the past 3 months, consumption of soybean oil for methyl esters is down 28 percent against the previous 3-month period.

Consumption of cheaper fats for biodiesel has increased somewhat over the past several months, but soybean oil continues to be the main feedstock.

A prohibitively high spike in soybean oil costs led USDA to reduce its 2007/08 consumption forecast of soybean oil for methyl esters from 3.4 billion to 2.8 billion pounds nearly level with 2006/07 use.

In contrast, U.S. exports of soybean oil in February 2008 registered one of the top volumes ever for 1 month.

Cumulative exports to date are the strongest since 1998/99.

Shipments of soybean oil have been particularly brisk to North Africa, China, Venezuela, and Colombia.

A dropoff in exports from Argentina, where more supplies are being used for the production of biodiesel is leading many importing countries to book sales from the United States.

Consequently, USDA raised its 2007/08 forecast of soybean oil exports by 450 million pounds to 2.4 billion.

Due to exceptional oil extraction rates, 2007/08 production of U.S. soybean oil was forecast up to nearly 22 billion pounds.

After accounting for lower domestic use and higher exports, the forecast of season-ending soybean oil stocks for 2007/08 was raised to 2.84 billion from 2.5 billion pounds.

Cash prices for soybean meal have also fluctuated sharply.

By late February, prices rallied to $365 per short ton, but have settled back in recent weeks to where they were at the beginning of the year.

A rise in the February average to $346 per short ton prompted a higher forecast of $320-$350 per ton for the 2007/08 average.

BRAZIL SOYBEAN CROPS BENEFIT FROM FAVORABLE MOISTURE

Abundant rainfall this season has aided soybean crops throughout the Center-West States of Brazil.

The States in southern Brazil, however, have had less regular precipitation.

Rains faltered in Parana, Santa Catarina, and Rio Grande do Sul in late January and February.

However, a March revival of rainfall should limit the overall impact on soybean yields.

USDA raised its 2007/08 production forecast for Brazil from 60.5 million to a record high 61 million metric tons.

The increase was based on higher yields.

By mid-March, about one-third of the soybean harvesting in Brazil was complete, behind last year’s pace but equivalent to the 5-year average.

Expected use of soybeans in Brazil for 2007/08 is unchanged this month, as a 2-million-ton increase for Brazil’s domestic crush was completely offset by a reduction in forecast exports.

Higher anticipated processing raised the export outlook for soybean meal to 12.9 million tons and for soybean oil to 2.6 million tons.

Modest increases in domestic use of soybean meal and soybean oil are also projected.

Additional exports of soybean oil from Brazil and the United States will help offset slowing trade from Argentina, where oil processors are supplying a growing domestic market for biodiesel.

Higher estimated domestic use shaved the 2007/08 forecast of Argentine soybean oil exports to 6.3 million tons.

The March forecast for 2007/08 global soybean imports was trimmed mainly due to a 500,000-ton reduction for EU-27 imports (to 14.95 million tons).

EU-27 processors are expected to crush fewer soybeans than last year.

Instead, rising South American supplies could raise EU-27 imports of soybean meal to a record-large 24.4 million tons--400,000 tons more than the previous forecast.

Soybean meal consumption in the EU-27 has benefited this year from appreciation of the euro and a shortfall in domestic feed supplies.