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Oil Crops Outlook: February 2022 Summary

Core Content

This report provides an analysis of the global and domestic outlook for oil crops, focusing on soybeans and soybean products. It highlights the impact of weather conditions in South America on production, prices, and trade dynamics, as well as the effects of economic factors in China and Indonesia on soybean demand and export policies.

Main Points

Global Soybean Outlook

• Production Forecast: The global soybean production forecast for 2021/22 was reduced by 8.7 million metric tons to 363.86 million metric tons due to dry and hot conditions in major South American soybean producing countries.
• Export Reductions: Argentina, Brazil, and Paraguay are expected to reduce their soybean exports by 1.1, 3.5, and 1.1 million metric tons, respectively, due to lower production.
• Crush Forecast: The global soybean crush forecast was also reduced by 2.4 million metric tons, reflecting tighter supply conditions.
• Price Impact: Reduced global supply has led to a rally in soybean prices, with a corresponding decline in global demand, especially from China.
• Ending Stocks: World ending stocks for soybeans are projected to decrease by 2.4 million metric tons to 92.83 million metric tons.

U.S. Soybean Outlook

• Domestic Prices: U.S. soybean prices rose in January 2022, with the Central Illinois country elevators reaching an average of $13.81 per bushel.
• Farm Price Forecast: The U.S. average farm price for the 2021/22 marketing year was revised up to $13.00 per bushel from $12.60.
• Crush Volume: U.S. soybean crush volume hit a record 198 million bushels in December 2021, with regional records observed in Iowa, North Central, and West Central.
• Crush Forecast: The 2021/22 U.S. soybean crush forecast was revised up by 25 million bushels to 2.215 million bushels.
• Ending Stocks: U.S. ending stocks for soybeans are reduced to 325 million bushels due to higher crush and unchanged exports.
• Crush Margins: Strong crush margins supported domestic processing, with Central Illinois processors achieving the highest crush margins in recent history, averaging nearly $3.30 per bushel.
• Oil Production and Consumption: The U.S. soybean oil production forecast was increased by 295 million pounds to 26.05 billion pounds, and consumption was revised up to 14.29 billion pounds.

International Soybean Outlook

• Brazil: Brazil's soybean production forecast was lowered by 5 million metric tons to 134 million metric tons. Harvest progress has been ahead of the 5-year average.
• Argentina: Argentina's soybean production is forecast at 45 million metric tons, a decrease of 1.5 million metric tons due to heat and drought. The crush forecast was reduced by 1.2 million metric tons to 40 million.
• Paraguay: Paraguay's soybean production is expected to drop by 2.2 million metric tons to 6.3 million, with exports forecast at 4.15 million metric tons.
• China: Slow economic growth has impacted meat demand, leading to a reduction in soybean crush and imports. The 2021/22 soybean crush forecast for China was lowered by 3 million metric tons to 94 million, and imports were also reduced to 97 million metric tons.

Key Information

• Weather Impact: Drought and extreme heat in South America have significantly reduced soybean production and exports.
• Price Trends: Global soybean prices have increased due to reduced supply, while U.S. soybean prices also rose, supported by strong crush margins.
• Crush Activity: U.S. soybean crush activity has been robust, with record volumes in December, leading to increased oil production and consumption.
• China's Demand: China's soybean demand is expected to remain relatively stable despite economic slowdown, with a slight reduction in crush and imports.
• Indonesia's Policy: Indonesia introduced a new export policy to stabilize domestic oil prices, requiring 20% of planned exports to be sold domestically, which has affected global trade flows.

Conclusion

The global soybean market is experiencing tighter supply conditions due to adverse weather in South America, leading to increased prices and reduced exports. The U.S. market is benefiting from these conditions, with strong crush activity and higher prices, although export volumes remain unchanged. In China, economic factors and ASF have led to a slight reduction in soybean demand. Indonesia's new export policy aims to stabilize domestic oil prices and has had an impact on international trade dynamics. Overall, the outlook for soybean and its derivatives remains volatile and influenced by both supply-side disruptions and demand-side factors.