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Oil Crops Outlook Summary (September 14, 2018)

Core Content Overview

This report provides an outlook on U.S. and international oil crops, focusing on soybeans, soybean meal, soybean oil, and peanuts. It discusses production, demand, export trends, and market impacts, including the influence of weather, government policies, and global trade dynamics.

U.S. Soybean Outlook

• Production Increase: The 2018/19 U.S. soybean production is forecast to increase by 107 million bushels to 4.693 billion bushels. This is attributed to a record U.S. yield forecast of 52.8 bushels per acre, surpassing the previous record of 52 bushels per acre.
• Yield Trends: States like Kansas, Illinois, and Indiana contributed to the higher yield forecast, while North Dakota and South Carolina saw reductions.
• Domestic Crush: U.S. soybean processors crushed a record 179 million bushels in July, up 15 percent from the previous month. This prompted USDA to raise the 2017/18 crush forecast by 15 million bushels to 2.055 billion.
• Exports: U.S. soybean exports for August 2018 were the highest ever for the month. The forecast for 2017/18 soybean exports was raised by 20 million bushels to 2.13 billion.
• Ending Stocks: The 2018/19 ending stocks are projected to reach an all-time high of 845 million bushels, up from 785 million in the previous forecast.
• Farm Price Forecast: The USDA lowered the 2018/19 forecast range for the U.S. season-average farm price by 30 cents to $7.35-$9.85 per bushel.
• Market Facilitation Program (MFP): The MFP will provide a $1.65 per bushel cash payment to eligible soybean producers on half of their 2018/19 certified production, with initial payments potentially reaching $3.6 billion.

U.S. Peanut Outlook

• Production Decline: U.S. peanut production for 2018/19 is forecast to decrease by 329 million pounds (5 percent) to 5.76 billion pounds, a potential 20 percent drop from the 2017/18 marketing year.
• Acreage and Yields: The total acreage is reduced by 75,500 acres to 1.43 million, with a national average yield down by 16 pounds per acre to 4,151 pounds.
• Ending Stocks: Season-ending peanut stocks for 2017/18 were up by 88 million pounds to 2.7 billion pounds, but the smaller new-crop harvest is expected to reduce total supply and ending stocks for 2018/19.

International Outlook

China

• Soybean Use: China's soybean use is expected to slow for both 2017/18 and 2018/19. The 2017/18 crush forecast was reduced by 1 million tons to 90 million, and 2018/19 by 1.5 million tons to 93.5 million.
• Imports and Consumption: China's soybean imports are forecast to slow to 94 million tons for 2017/18 and could remain steady through 2018/19. Soybean meal consumption in China is projected to decline for both years.
• African Swine Fever (ASF): The outbreak of ASF in August 2018 could lead to a reduction in hog populations, affecting the demand for soybean meal.

India

• Soybean Production: India's soybean production for 2018/19 is expected to be 300,000 tons lower to 10.5 million due to a smaller sown area of 11.2 million hectares.
• Domestic Crush: Domestic crush is forecast to remain unchanged, which could lead to a low level of season-ending stocks.

Argentina

• Export Tax Changes: Argentina suspended a previously planned reduction in export tax rates for soybeans, soybean meal, and soybean oil to address fiscal issues. The tax rate for soybeans was reduced to 18 percent from 25.5 percent, and for soybean meal and soybean oil to 18 percent from 23 percent.
• Currency Depreciation: The Argentine peso has dropped over 50 percent against the U.S. dollar, leading to increased interest rates and fiscal austerity measures.
• Soybean Exports: Argentine soybean exports have nearly halted, with the 2017/18 forecast reduced by 1 million tons to 2.1 million. This is being offset by increased Brazilian exports.

Brazil

• Soybean Exports: Brazil's soybean exports reached an all-time high of 8.1 million tons in August 2018, with China as the main destination. Cumulative exports to China for October 2017-August 2018 were 11.1 million tons higher than the previous year.
• USDA Forecast: Brazil's 2017/18 soybean exports are forecast to increase by 1.2 million tons to 76.7 million.

Indonesia

• Palm Oil Domestic Use: Indonesia's domestic use of palm oil is expected to increase due to a new policy requiring 20 percent biodiesel blending in diesel fuel. This policy is extended to all privately-owned industries.
• Biodiesel Subsidies: Subsidies for biodiesel use are now available to all industries, including electric generation, railways, construction, and shipping.
• Palm Oil Exports: Exports of palm oil from Indonesia and Malaysia have slowed due to reduced global demand, influenced by India's increased import duties on vegetable oils.

Tables Overview

• Table 1 (Soybeans): Annual U.S. supply and disappearance for the 2016/17, 2017/18, and 2018/19 marketing years, including area planted, harvested, yield, production, imports, and ending stocks.
• Table 2 (Soybean Meal): U.S. supply and disappearance for soybean meal, with data on beginning stocks, production, imports, and ending stocks for the 2016/17, 2017/18, and 2018/19 marketing years.
• Table 3 (Soybean Oil): U.S. supply and disappearance for soybean oil, including domestic use breakdowns and export data for the 2016/17 and 2017/18 marketing years.

Key Information and Trends

• U.S. Soybean Production: A record yield and increased acreage have led to a significant rise in production, which is expected to increase ending stocks to an all-time high.
• Domestic Demand: Increased domestic crush and exports have contributed to higher demand, though the overall demand outlook for 2018/19 is minimal.
• Global Demand: China's reduced use and imports, along with India's import policies, have impacted global demand for soybeans and soybean meal.
• Argentina's Fiscal Challenges: The suspension of export tax reductions and the introduction of a general surtax have affected export volumes and processor margins.
• Brazil's Role: Brazil's increased soybean exports to China have influenced the global market, with USDA forecasting higher export levels.
• Indonesia's Policy Shift: The mandatory biodiesel blending policy and extended subsidies are expected to boost domestic use of palm oil, impacting export volumes.