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Oil Crops Outlook Summary: November 2021

Core Content

This report provides an overview of the outlook for U.S. and global oil crops, focusing on soybeans, soybean oil, and soybean meal for the 2021/22 marketing year. It highlights production, supply, demand, and price trends, as well as the impact of weather, trade policies, and market dynamics.

Main Points

Domestic Outlook

• Soybean Harvest Progress:

  • Harvest progress for the 2021/22 crop was slightly behind the 5-year average as of November 7, due to slow October weather conditions.
  • Heavy rains in key soybean-producing states (e.g., Indiana, Michigan, Tennessee) reduced harvest rates by 10-20% compared to the 5-year average.
  • As of October 31, nearly 50% of cropland in major producing states had excess moisture, which is now drying out.
  • Delayed harvest may impact local elevator prices if weather patterns remain unfavorable.

• Soybean Yield and Production:

  • The average soybean yield forecast was reduced to 51.2 bushels per acre, down 0.3 bushels from the previous month.
  • This led to a 23 million bushel reduction in the U.S. soybean production forecast, bringing it to 4.42 billion bushels.
  • Total soybean supply is estimated at 4.7 billion bushels, with unchanged import expectations.

• Soybean Exports:

  • Exports for the 2021/22 marketing year started slowly in September, totaling 79.6 million bushels.
  • This is 87.4 million bushels below the 5-year average of 167 million bushels.
  • The export forecast was lowered by 40 million bushels to 2.05 billion bushels due to lower production and export pace.

• Soybean Prices:

  • Farmers received $12.20 per bushel in September, which is $1.50 per bushel lower than in August.
  • The seasonal average price forecast was reduced by $0.25 to $12.10 per bushel.

• Soybean Oil and Meal Balance Sheet:

  • The balance sheet estimates for the 2020/21 marketing year are nearly finalized.
  • Soybean oil supply increased by 171 million pounds to 27.2 billion pounds, while demand decreased by 153.2 million pounds to 25 billion pounds.
  • This resulted in an additional 324.2 million pounds of soybean oil carried into the 2021/22 marketing year.
  • Soybean meal supply and demand both decreased by 0.45 million tons to 51.69 and 51.35 million tons, respectively.
  • Domestic use of soybean meal is expected to increase in 2021/22 due to reduced availability of alternative protein sources like canola and sun meal.

• Soybean Oil Prices and Use:

  • Soybean oil prices remained strong in October, reaching $0.70 per pound at Decatur, Illinois.
  • The crush margin for soybean oil increased to nearly 50% of total production, driven by strong biofuel demand.
  • Biofuel use of soybean oil is projected to rise to 43% of total production in 2021/22, which may put pressure on meal prices.
  • Soybean oil exports are forecast to decrease by 473 million pounds to 1.25 billion pounds in 2021/22.

International Outlook

• India's Soybean Crop:

  • India's soybean production forecast increased by 0.9 million metric tons to 11.9 million metric tons for the 2021/22 marketing year.
  • Improved weather conditions contributed to a 1.45 million metric ton increase in production compared to the previous year.
  • This led to a 0.4 million metric ton increase in prospective crush and a 0.5 million metric ton increase in soybean oil production.

• India's Vegetable Oil Market:

  • India's effective import duties were reduced to alleviate rising vegetable oil prices, which are driven by strong global demand and limited supply.
  • Crude palm oil prices reached a record high this summer, averaging $1,230 per metric ton, up 73% from summer 2020.
  • Import duties for crude palm oil, soybean oil, and sunflower oil were reduced by 29.3%, 33%, and 33%, respectively, between February 2021 and October 14, 2021.
  • These duty cuts spurred record imports of crude palm oil (1.242 million metric tons) and refined palm oil (398,000 metric tons) in September 2021.
  • Vegetable oil stocks in India increased to 2 million metric tons as of October 1, 283,000 tons higher than the same period last year.
  • The government introduced a limit on edible oil stocks to prevent hoarding.

• Argentina and Brazil:

  • Argentina's soybean production forecast was reduced by 1.5 million metric tons to 5.35 million metric tons for the 2021/22 marketing year.
  • This is due to a decrease in planted and harvested soybean hectares, with farmers opting for corn instead.
  • Brazil is expected to export a record 94 million metric tons of soybeans in the upcoming marketing year.
  • Global soybean ending stocks are forecast to decrease by 787 million metric tons to 103.78 million metric tons for 2021/22.
  • However, global stocks are rebounding from 2020/21 levels by 3.7 million metric tons.

Key Information

• Weather Impact:

  • Delayed harvest progress in the U.S. due to heavy rains in key states.
  • Moisture surplus in cropland is now drying out, which may help with harvest timing.

• Market Dynamics:

  • Lower soybean production and export pace have led to higher ending stocks and downward pressure on prices.
  • Strong biofuel demand is shifting the crush focus from meal to oil, affecting both supply and prices.

• Trade Policies:

  • India's reduction in import duties has supported increased imports of palm and soybean oils.
  • These policies aim to stabilize domestic prices, especially for essential food products.

• Global Outlook:

  • Argentina's lower production and Brazil's higher exports are shaping the global supply and demand balance.
  • Global soybean ending stocks are expected to be lower than previously forecasted, but still higher than in 2020/21.

Conclusion

The 2021/22 soybean outlook is characterized by a combination of lower production in the U.S. and Argentina, and higher production in India. These changes are influencing global supply and demand dynamics, with a shift in the crush margin from meal to oil and a corresponding impact on prices. Trade policies in India, particularly the reduction in import duties, are playing a significant role in shaping the international market. The report underscores the importance of monitoring weather conditions, trade policies, and market trends in assessing the future of oil crops.