The 1997/98 U.S. soybean production forecast of 2,746 million bushels, was about unchanged from last month's forecast. While some dry pockets remain and additional rain this month would be welcome for later planted fields, rains during August secured good yield potential in several Midwestern States. Below average temperatures also helped moderate moisture needs during this definitive period and warmer temperatures by the end of August helped advance growth. Pod development has been slightly ahead of average, and well ahead of last year's pace. Consequently, the risk from an early frost this fall is much diminished. In the western Corn Belt, September pod counts were the highest ever recorded.

The soybean harvest is underway throughout the South. Yields in the Delta and Southeast have slipped this year because of summer dryness. However, some Southern farmers are able to take advantage of prices for September delivery that are at least $1.00 per bushel higher than prices for October delivery. That price incentive makes applying chemical drying agents, or even incurring moisture discounts for soybeans that haven't fully field dried, profitable actions for accelerating the harvest. As the harvest spreads into northern producing States in late September, U.S. cash market prices will drop.

Beginning stocks for 1997/98 will be known from the September 30 Grain Stocks report. Given the existing production estimate, USDA forecasts the 1996/97 soybean carryover down to 115 million bushels. This very tight level results from a seasonally robust summer crushing rate that lifted expected 1996/97 crush to 1,435 million bushels. Export sales of soybean oil and meal have continued their strong showing, and 1996/97 shipments were forecast up to 2.0 billion pounds and 6.9 million short tons, respectively. The huge demand for soybean meal in 1996/97, both domestic and export, has pushed the season average price forecast to a record $270 per short ton.

One sign of the strong current demand for soybeans is the narrow spread between November and January soybean futures, which encourages producers to market more supplies quickly versus storing them on farm. USDA's September forecast anticipates the season average farm price will rise from the August projection, to $5.60-$6.70 per bushel. Soybean crushing in 1997/98 is projected to reach 1,495 million bushels. Record domestic soybean meal disappearance (28.0 million short tons) and exports (7.6 million tons) are seen driving the prodigious crush. Yet, domestic soybean oil consumption will continue its gradual ascent in 1997/98 and U.S. oil exports of 2.25 billion pounds will rank second only to the record 1994/95 export volume. The accumulation of year ending soybean oil stocks will be modest, considering the large crush increase.

This month, USDA raised its 1997/98 soybean export forecast to a record 950 million bushels. One explanation for this optimism is that current export sales have been very fast-paced and should stay brisk for several months. As of September 4, 285 million bushels have been sold, 30 percent of projected 1997/98 exports. These sales are 69 percent higher than a year ago, which at the time was also considered a rapid pace. Much of the current rate can be attributed to strong sales to China, the EU, and Brazil. And, if oilseed production problems develop elsewhere in the world, the United States is now well positioned to further expand its export gains. For now, South American farmers are poised to produce bumper oilseed harvests next year.

The tremendous surge in Brazilian soybean exports since February (nearly 8 million metric tons) has recently slowed as Brazilian supplies are greatly depleted. Brazilian crushers will soon be compelled to use U.S. supplies, being one of the few sources available to sustain operations until the Brazilian 1998 harvest. Steady supplies of soybean meal are needed by Brazil's rapidly expanding poultry sector.

However, Brazilian legislation requiring approval of imports of genetically modified organisms has added much uncertainty to Brazil's import prospects. A decision clarifying the government's position on this matter will be made early next month. Even with a favorable ruling allowing GMO soybeans, the uncertainty may have already trimmed potential soybean imports from the United States, which are forecast down from last month's 2.25 million tons to 2.0 million. This would also curtail Brazil's 1997/98 soybean crush and exports of meal and oil.

Projected Argentine soybean production in 1997/98 was increased to a record 14.2 million tons this month based on larger expected planted area and improved yields. With little relief from the previous drought, soils in Santa Fe and Cordoba were too dry for Argentine farmers to finish planting winter wheat, and the recommended plant-by dates have now passed. Record plantings of soybeans (6.5 million hectares) and sunflowerseed (3.3 million hectares) will replace the unplanted wheat area. With fewer soybeans double cropped after wheat, a considerably greater percentage of the area planted will be higher-yielding first-crop soybeans. Ample 1997/98 supplies will permit a solid rebound in Argentine exports and crush, to 1.5 million and 11.7 million tons, respectively. Argentine sunflowerseed production in 1997/98 is also projected up to a record 6.0 million tons, from 5.2 million this season. Sunflower planting will commence once sufficient precipiation has been received.

Mexican soybean imports for 1997/98 were projected higher, to 3.1 million tons, based largely on a new crushing facility that began operating last spring. Larger soybean imports by the EU were also anticipated, rising to 15.1 million tons. The additional domestic meal production trimmed expected EU soybean meal imports to 15.5 million tons.

Total Chinese oilseed production in 1997/98 is forecast down 2.8 million tons from 1996/97. Projected Chinese peanut production was cut 1.0 million metric tons from the previous estimate to 8.0 million (in-shell basis). Drought in the major northern producing provinces of Shandong, Henan, and Hebei has damaged peanut yields. China's peanut exports will drop by half, as many of its traditional Southeast Asian buyers, including Indonesia, are expected to scale back imports because of struggling economies. Chinese consumption of peanuts for food is relatively inelastic, so most of the shortfall will reduce peanuts crushed for oil. This decreases peanut meal supplies by nearly 200,000 tons. Consequently, China's 1997/98 soybean and soybean meal imports are anticipated higher to bridge the deficit in protein meal and vegetable oil supplies. Chinese soybean imports would rise to 3.0 million tons and soybean meal imports to 3.75 million tons.

China is also the world's largest consumer of high protein fish meal. Chinese fish meal imports are forecast down 17 percent in 1997/98, which also highlights the need to import more soybeans and soybean meal. World fish meal production is projected down to 6.4 million tons, off 5 percent from 1996/97. The principal reason is that Peru, the world's largest producer, has imposed a seasonal fishing ban during the spawning period to prevent overfishing. The catch of sardines and anchovies for reduction into fish meal declines as a result. Concerns about the developing El Nino also led to the ban. This climatic phenomenon involves an abnormal warming of equatorial Pacific Ocean waters. Fish move to deeper waters and normal migration patterns are altered, hampering the South American coastal fish harvests. Current fish meal prices are about 10 percent higher than a year ago and will probably continue to increase.

The Canadian canola harvest is about one-third finished and the frost risk appears to have faded, despite the late start this year. The 1997 Canadian harvest was forecast down to 6.1 million tons this month, but will still be the country's third largest ever. Hot and dry summer weather pinched yields in Saskatchewan, Canada's largest canola producing province. Smaller forecast production will restrict the volume of Canadian canola seed exports to about 2.5 million tons. Reflecting this estimate, expected seed imports by Mexico and Japan, two major buyers, were also decreased this month.

Indonesian palm oil production in 1997/98 was projected up to 5.5 million tons based on a greater proportion of trees at peak productivity and an upward revision in the tree population. A portion of the palm oil increase will be consumed domestically, with the remainder raising Indonesian exports to 2.25 million tons. On the demand side, China's palm oil imports are forecast up to 1.7 million tons, from 1.5 million in 1996/97.

September 15, 1997 Economic Research Service

USDA, Washington, D.C.

Consensus National Futures and Financial On Line Index

Added to the WWW 09-19-97
Last updated on 09-20-97

Hosted by:
One Crossroads Place
610 West Maple Ave, Suite WWW
Independence, MO 64050
(816) 252-4080
sysop@kcmo.com

wmeubank@ocp.kcmo.com