Like the many holiday shoppers, world soybean buyers have been very busy in the present U.S. soybean market. Inspections of U.S. soybeans for export in October soared to a record 173.6 million bushels, well surpassing the previous high of 152.4 million in November 1996. The price spreads between nearby and deferred Chicago soybean futures have narrowed, signaling a greater risk for storage and encouraging near term physical marketing. Shifting an even greater proportion of the farm marketings to the first half of the marketing year has boosted the season average price forecast to $6.20-$7.00 per bushel. Soybean prices were able to rally last spring because of tighter supplies and emerging drought in Argentina.

On the other hand, year to date U.S. export sales of soybeans to Mexico have moderated. Mexico's 1997/98 soybean imports were trimmed from 3.1 million to 3.0 million tons this month, although still up from 2.7 million in 1996/97. The difficulty in acquiring railcars from the United States this fall, including for soybean deliveries, has also dimmed trade prospects.

To supply the very brisk export trade in soybean meal, U.S. crushers processed 140.4 million bushels in October, a record volume for any single month. U.S. soybean meal exports have benefited from the sharp decline in South American crushing. Low Brazilian soybean supplies and unfavorable crush margins have cut exportable meal and oil supplies. Brazil's 1997/98 imports and crush were trimmed to 1.6 million and 20.45 million metric tons, respectively.

Trade reports indicate U.S. soybean meal exports soared again in November, on the heels of a very robust October volume. The world's dependence on U.S. supplies has kept meal prices relatively firm, currently around $245 per short ton. This price situation will last another 3 months until the 1998 soybean harvest begins in South America. If the expected record planting and decent weather materialize to produce bumper Brazilian and Argentine crops, U.S. soybean and meal prices will likely slide next spring. The market reflects this viewpoint with a price inverse for deferred versus nearby soybean meal futures.

Despite early wetness that stalled seeding in southern Brazil, a recent window of clear weather has advanced soybean planting to nearly three-fourths complete by late November. Recent rains in the drier northern regions have also improved planting conditions. Soybean planting progress in Argentina has been near average, with 64 percent planted by December 5.

Other than the United States, India is the only major soybean meal exporter in the current picture. The forecast for India's soybean crop was raised this month from 5.0 million tons to a record 5.35 million. This was based on a higher area harvested estimate and the best soybean yields ever seen in India. Most of the increased supply will be crushed. Indian soybean meal prices are about $20 per metric ton less than U.S. gulf quotes, resulting in a significant competitive advantage in several major Asian markets. Forecast 1997/98 Indian soybean meal exports were raised to 3.2 million tons this month. The additional soybean oil produced may lift India's domestic consumption to almost 1 million tons.

Despite this month's better yield estimate for 1997/98 Chinese cottonseed production, a shortfall in oilseeds production and unabated consumption have accelerated Chinese imports of soybeans this fall. However, this has also moderated China's import demand for soybean meal so far. Import demand from the rest of Asia for soybean meal will show no growth in 1997/98 because of the region's serious economic downturn.

Persistently wet and cold weather has hampered the sunflowerseed harvest in Russia and the Ukraine. Lower yields dropped projected output by all the New Independent States below last year's disappointing level to 5.2 million. Similar shortfalls have occurred in Romania and Hungary. This tightening of supplies may curtail sunflowerseed imports and crushing in the EU and would favor greater processing of soybeans and rapeseed. This has contributed to the surge of soybean exports from the United States to the EU, which are 16 percent ahead of last year's pace.

Soybean oil prices have risen steadily since last summer to near 26 cents per pound. The 1997/98 average price was forecast up to 24.0-27.0 cents per pound this month. Even with a tremendous production increase in October, month-ending oil stocks barely budged as already robust domestic consumption and exports expanded.

Concerns about tropical oils production in Southeast Asia have also supported the world soybean oil market. Indonesia and Malaysia have been struck by a serious drought. Recent rains have eased the dryness in Java and Sumatra although the seasonal moisture deficit is still substantial. The weather will limit 1997/98 production growth compared to recent years. Indonesian palm oil production is expected to rise modestly, from 5.1 million tons in 1996/97 to 5.36 million this season. Last summer, the Indonesian government dramatically reduced export taxes on crude palm oil. But that regime has been replaced by a newly instituted quota system, where exporters are to limit their exports to one-fourth of their total palm oil production to stabilize domestic prices. Steadily rising domestic consumption of palm oil and lower production and imports from Malaysia are expected to shave Indonesian 1997/98 palm oil exports to 2.15 million tons. This would be virtually unchanged from the 1996/97 export volume.

Despite higher fish catches in Peru and Chile, the fish have been smaller than usual. This has reduced the quantity and quality of the fish oil produced in Chile, which would reduce exports and raise domestic inedible consumption. Sharply rising prices will curtail fish oil imports and consumption by the major buyers in Western Europe. The reduction further tightens projected ending stocks for world edible oils to 6.5 million tons. The last time world oil stocks have been this low was in 1995.

December 12, 1997 Economic Research Service

USDA, Washington, D.C.

LIVESTOCK MONTHLY Rising Pork Production Dampens Prices
COTTON OUTLOOK U.S. Cotton Crop Forecast Unchanged
OIL CROPS OUTLOOK World Snatches Up U.S. Soybeans And Soybean Products
WHEAT OUTLOOK U.S. Wheat Forecasts Mostly Unchanged For 1997/98
FEED OUTLOOK Weaker Export Outlook Leads To Small Increase In Feed Grain Stocks

Consensus National Futures and Financial On Line Index

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