Oil Crops: Outlook for other oil crops – cottonseed, peanuts, sunflowers, corn oil

Outlook for other oil crops – cottonseed, peanuts, sunflowers, corn oil – U.S. Dept. of Agriculture, Economic Research Service report

Cottonseed

Crop Revised Downward, Still Expected to Outpace Use

Parallel to other U.S. oilseeds, cotton acreage surged in 1991/92, driven by a lower Acreage Reduction Program (ARP) requirement and strong lint prices. However, adverse weather conditions during harvest, most notably in Texas, have led to further revisions in the production estimate. The January Crop Production report now places harvested cotton acreage at 12.84 million acres, down 487,000 from earlier estimates. However, even with this adjustment, harvested acreage remains nearly 10 percent ahead of a year earlier. Combined with slightly better yields (up 3 percent) total cottonseed production is forecast to reach 6.76 million tons. With larger beginning stocks, total cottonseed supplies of 7.4 million tons are expected to surpass a forecast increase in use, leading to a further buildup in stocks. Crush, typically the largest market, is projected to increase nearly 16 percent to 3.9 million tons, driven by strength in the domestic oil market and oil programming under the Cotton Oil Assistance Program (COAP). Other uses, primarily direct feeding, are also expected to surpass last year, reaching 2.39 million tons, down slightly from earlier estimates. Combined with projected seed export growth, total demand is forecast at 6.36 million tons, down marginally from December estimates, but still 12 percent ahead of last year. Despite the downward revision in crop size, stocks, while expected to remain larger than the past few years, are projected to reach 1.05 billion tons by year’s end.

Oil and Meal Markets

Projected stronger oil offtake is the driving force behind larger crush numbers. Lower seed prices and abundant supplies allow cottonseed oil to be marketed competitively against such oils as soybean and canola. As figure 7 illustrates, cottonseed oil prices have been running at a discount to soybean oil in the domestic market early in the marketing year. Currently, domestic use is forecast at 941 million pounds, up from the October estimate, and 10 percent above 1990/91. Increased COAP programming should also support total offtake, with exports forecast to reach 325 million pounds, unchanged from the October estimate. Meal production and offtake are expected to parallel the larger crush forecast. Total meal production is now forecast at 1.775 million tons, up nearly 5 percent from a year earlier. Use is expected to slightly outpace production, leading to a drawdown in stocks. Total use is forecast at 1.8 million tons with ending stocks projected to decline to 75,000 tons, down nearly 20,000 tons from this past year.

Prices Expected to Follow Oilseed Sector Down

Prices in the cottonseed complex are expected to react to the larger crop and the general abundance of oilseed in the U.S. market this year. Oil prices fell sharply this year and are expected to average between 17 and 21 cents per pound. Near-record seed supplies and lower oil prices have also had a negative impact on seed prices. Through December, prices received by farmers have averaged below $75 per ton, with season-average prices forecast to range between $65 and $85 per ton. Meal prices are the one bright spot. Record domestic soybean meal use, larger livestock numbers, and strong exports have supported the market to date, but declining profitability might soften prices later in the year.

Ahead in 1992

The final ARP announcement for cotton was set at 10 percent, up from 5 percent for the 1990/91 crop. This larger set-aside requirement is likely to lead to fewer acres and smaller cottonseed outturn in 1992/93.

Peanuts

Record Production Continues To Look for a Home

Upward revisions in acreage, offset by a downward revision in average yields, combined to leave the size of the 1991/92 peanut crop largely unchanged from earlier reports. The Crop Production: 1991 Summary reported peanut acreage harvested at 2.008 million acres, up 2 percent from the October estimate and 11 percent more than last year’s acreage. Yields, however, were revised downward, reflecting the effects of planting delays, wet harvest conditions, and isolated incidences of pest infestations–primarily in the Southeast. Average U.S. crop yields are now estimated at 2,463 pounds per acre, down slightly from the October estimate, but still 23.7 percent above last year’s poor performance. With yields and acreage changes offsetting one another, the 1991/92 production is now estimated at 4.944 billion pounds, largely unchanged from October, but up nearly 40 percent from 1990/91.

Use Continues To Lag; Crush, Exports, and Stocks Projected to Pick Up Slack

With harvest and farm marketings largely completed, the sector is looking for homes for the record peanut crop. Through November, however, use has been slow. Total use in primary products for the first 4 months of 1991/92 lagged 5 percent behind last year and 11 percent behind 1989/90. Use in peanut candy and salted nut products have been the slowest sectors to recover due in part to a lack luster economy and poor retail sales during the holiday season. Peanut candy was off nearly 20 percent and use in salted nut products was off 9 percent. With increased sales under the Temporary Emergency Food Assistance Program (TEFAP), use in peanut butter has recovered from last year’s poor showing, but is not up to the 1988/90 level. When combined with increased use in “other” products, these two categories were 3 percent above a year earlier. Given the poor showing to date, prospects for a rapid recovery from last year’s contraction have dimmed. Use rates are expected to pick up, however, in the second half of 1991/92 as inventories fall and the general economy improves. Buyers are also facing a smaller quota next year with significantly fewer undermarktings. Given these assumptions domestic food use is now forecast at 2.25 billion pounds, down 50 million from earlier estimates but still up 11 percent from a year ago. Increased production, below trend growth in domestic food uses, and larger Commodity Credit Corporation inventories point to significantly larger crush in 1991/92. Crush is now forecast to reach 1.1 billion pounds, up from 689 million in 1990/91 and 11 percent above earlier estimates. Larger crush should add peanut oil to a vegetable oil sector already blessed with an abundance of soybean, cottonsead, canola, and sunflower oils. Oil production is forecast at 343 million pounds, up more than 60 percent from a year ago. Following oil, production of peanut meal is forecast up 53 percent to 230,000 tons. Seed exports are expected to rebound in response to greater supplies and lower prices. Contracting for export is well ahead of last year, although some of these privately held supplies could end up as crush. Currently, exports are forecast to reach 825 million pounds, up 27 percent, but still below the nearly 1 billion pounds exported in 1989/90. Despite the expected recovery in use in all major categories, stocks are forecast to increase significantly. The current forecast puts total use at 4.429 billion pounds, with ending stocks at 1.2 billion pounds, up from 683 million this past year.

Prices

Expectations for a buildup in stocks and a change in the composition of use are expected to pressure prices during the 1991/92 marketing year. With crush forecast to account for more than 25 percent of use this year, season-average prices are expected to range from 27 to 30 cents per pound, down from 34.1 cents in 1990/91. Oil prices are expected to fall most dramatically and range between 20 and 24 cents per pound. With larger oil supplies and limited demand from specialty markets, the price forecast reflects a collapse of the premium for peanut oil over other oils such as cottonseed, sunflower and the benchmark soybean oil. Meal prices are the one bright spot in the market, expected to increase slightly, reflecting the overall tightness in world protein meal supplies and larger livestock number. Currently, meal prices are forecast to range from $165 to $185 per ton, compared to $193 in 1990/91.

Sunflowers

Production Expands Across the Country

With the start of the new year, sunflower producers and processors are facing larger supplies for the 1991/92 marketing year than previously expected. Despite a slight decline in the number of acres harvested in the primary growing regions, healthier yields and the addition of States not previously accounted for boosted the supply estimate. The Crop Production: 1991 Summary estimated harvested area for sunflowers at 2.67 million acres, up 140,000 acres from the October survey. The new numbers include harvests in developing areas of the sunflower sector. Yields of both oil-type and confection sunflowers continued to improve in 1991/92 with average yields surpassing 1,350 pounds per acre, up nearly 3 percent from a year ago and the largest since 1987. Minnesota, North Dakota, and Texas registered significant gains, with Minnesota setting a new record for oil types at 1,850 pounds per acre, due in part to favorable moisture throughout the growing season. With larger yields and area, total U.S. production is estimated at 3.6 billion pounds, up nearly 60 percent from a year earlier, although official estimates failed to include production outside of Kansas, Minnesota, North Dakota, South Dakota, and Texas. Including unofficial estimates of 1990/91 production outside the five-State area would put this year’s crop 48 percent ahead of a year earlier (tables 4 and 5). Composition of the 1991/92 crop shifted back toward oil-type sunflowers. Driven by larger stocks of confections and stronger oil-type contract prices, oil types accounted for nearly 85 percent of all production. This compares to 71 percent in 1990/91.

Stronger Oil Demand Expected To Boost Crush

The estimated 3.6-billion-pound sunflower crop is now projected to face stronger demands from crushers, confection processors, birdfood manufacturers, and exporters. Stronger oil demand and increased oil export programming is expected to boost crust to 875,000 metric tons, up more than 50 percent from a year ago. Seed exports are also forecast to expand, driven by continued success in the shelled edibles market. With larger oil stock exports, total 1991/92 seed exports, measured on an in-shell basis, are forecast at 205,000 metric tons, up from an estimated 169,000 tons in 1990/91.(2/) Non-oil use (domestic edibles and birdfood) markets are also expected to continue to grow in 1991/92, reaching 369,000 metric tons, up 9 percent. Despite the bullish outlook for demand, supplies are expected to outstrip use, leading to a significant buildup in stocks. Stocks are forecast to reach 270,000 metric tons, compared to 85,000 entering the marketing year. Stocks composition is likely to parallel production, with oil-type accounting for roughly 90 percent of available supplies entering the 1992/93 marketing year.

Oil and Meal Markets

As noted earlier, the sunflower oil market is forecast to encounter stronger demand at home and abroad. Domestic demand continues to climb and is expected to reach 125,000 metric tons this year, up more than 50 percent from a year ago. Reformulation by major bottlers and increased certainty of supply are fueling this trend, increasing the importance of the domestic market. If these forecasts are realized, the domestic market will account for roughly 36 percent of disappearance, compared to 33 percent a year ago. Although exports to date have been slow, increased programming and cash sales to Europe are expected to encourage growth. Currently exports are expected to reach 225 million metric tons, up from 163,000 last year. Cash sales to the EC-12 account for roughly 25 percent of this export market, although agrressive seed marketing by Argentine producers could cut into sales later this spring. Meal is typically thought of as the residual product of sunflowerseed processing, with oil demand (and prices) driving crush. Aggressive pricing keeps stocks low, with most production moved in the year produced. This trend is expected to continue in 1991/92. Production is forecast to reach 440,000 metric tons and to be consumed domestically, with little buildup in stocks.

Prices Falter as Stock Expectations Rise

With larger supplies across the U.S. oilseed sector this year, the fundamentals point toward lower prices in 1991/92. Like most years, sunflower oil prices and expectations for future movement factor heavily into the prices processors have been willing to pay for seed. With larger supplies of soybean, cottonseed, and canola oils, sunflower oil prices have trended downward since their March peak, declining 11 percent by December. Interestingly, however, sunflower oil has maintained its premium to soybean oil despite significantly larger seed supplies (figure 3). Whether this trend persists into the spring will depend on a number of factors, including the willingness of the bulk oils market to support the premium and oil sales abroad. Currently, sunflower oil cash prices are forecast to range between 19 and 23 cents per pound compared to 24 cents in 1990/91. Downward pressure on oil cash prices and expectations of further adjustments in vegetable oil prices have significantly affected prices received by farmers for oil-type sunflowers. After a late-season surge in 1990/91, prices received by farmers declined roughly 30 percent in September as new crop became available. With larger oil-type stocks forecast, prices are unlikely to repeat the late-season surge typical of the past few years. However, cash prices have begun to move slowly upward, paralleling new-crop forward- contract prices. Cash prices for confections have fared slightly better and, with stocks tightening, are likely to support average seed prices.(3/) Barring significant movements in seed demand, prices are expected to average between 8 and 10 cents per pound, down from 11 cents in 1990/91.

Ahead in 1992

After a year under farm legislation that created new opportunities as well as headaches, sunflower producers and processors should see few major changes in 1992. However, a number of the factors that fueled the shift to sunflowers have reversed themselves. Tightening stocks for many food and feed grains, combined with expected larger seed stocks, could make sunflowers less attractive than a year ago when wheat and barley prices were weaker. In contrast, prospects for new market outlets in the High Plains region of Colorado, Nebraska, and Kansas could buy back some of the acreage expected to be lost to wheat further north.

Other Minor Oilseeds

The Crop Production: 1991 Summary reflected an expanded oilseed estimating program that includes national estimates for canola, rapeseed, safflowerseed and mustardseed, as well as more extensive coverage for sunflowerseed and flaxseed. The 1987 Census of Agriculture was the last comprehensive national survey for these crops. As table 6 indicates, acreage for canola increased most significantly, driven in part by the advent of attractive forward contracts in a number of areas. In contrast, safflower and mustard acreage and production have declined since 1987, despite the additional support from the minor oilseed programs.

Corn Oil

Corn Oil Use Continues Upward Trend

A slightly larger forecast food, seed, and industrial use (FSI) for corn will lead to greater corn oil production. FSI use is expected to rise to 1,350 million bushels in 1991/92 from 1,325 million last year. Slower economic growth last year curtailed the corn refining industry. Use of sweeteners, a main product of the corn refining industry, is strongly affected by the business cycle. Growth in corn sweetener use has been negligible in recent years. Most of the expected increase in corn refining this season is from a modest rise in ethanol production. Corn oil production is forecast at 1,725 million pounds, up about 70 million pounds from last season. Corn oil exports are projected to show a fourth consecutive year of rises, reaching 525 million pounds. The Saudi Arabians and Koreans continue to be the major cash buyers of corn oil–government programs do not figure prominently in corn oil exports. Domestic use is expected to reach 1,210 million pounds, a third year of increasing use. The big boost in demand comes from increased use as a cooking oil in fast food restaurants. Corn oil still commands a premium price in the marketplace and that premium appears to have widened in recent months.

Tropical Oils

U.S. consumption of tropical oils is expected to show a 5-percent gain in 1991/92 over last season. The rise in consumption is for palm and palm kernel oils, while coconut oil use is expected to decline. Although world supplies are tightening, low prices compared to domestic oils will push up the year-over-year imports to these oils by 2 percent. Imports of palm oil are forecast to climb to 310 million pounds from 284 million last year. Likewise, imports of palm kernel oil will climb to 365 million pounds, up from 320 million last year. Coconut oil imports are forecast down to 880 million pounds from 925 million last season. Consumption of coconut oil is estimated at 880 million pounds and down from 906 million last year.

COPYRIGHT 1992 U.S. Department of Agriculture

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