Grain market review: Oilseeds

by Teresa Acklin
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   World soybean carryover at the end of 1993-94 could reach its lowest level in a decade, according to early projections.

   Preliminary estimates put 1993-94 world soybean carryover at 16.99 million tonnes, down about 16% from estimated 1992-93 carryover and the smallest since 1983-84. In that year, drought ravaged the U.S. soybean crop, and world soybean ending stocks stood at 13.53 million tonnes. In 1988-89, another year of drought-reduced U.S. crops, world soybean carryover was 17.92 million tonnes.

   U.S. crop problems are contributing to the carryover declines again in 1993-94. Hit hard by unseasonably cool weather, persistent rains and flooding, the U.S. soybean belt should harvest about 51.77 million tonnes in 1993-94, down 13% from 1992-93's record crop of 59.78 million.

   The U.S. production decreases come amid expectations for increases elsewhere — increases that would put non-U.S. soybean production at a record 60 million tonnes.

   Soybean harvests in Brazil and Argentina for 1993-94 were expected to increase by 1% and 7%, respectively, mostly based on an expected jump in planted area. Southern Hemisphere soybean sowings could increase beyond early projections, depending on price levels as plantings begin.

   Brazil's producers are expected to continue the recent trend of using increasingly more production inputs. The inputs should help Brazil maintain yields, although 1993-94 yields are not expected to be as high as in the previous year.

   But larger Southern Hemisphere harvests were not expected to offset U.S. losses. Overall, 1993-94 world soybean production was projected at 111.8 million tonnes, down about 4% from 1992-93's record.

   Meanwhile, soybean use is projected to firm slightly, leading to the drawdown in stocks.

   But the likelihood that stocks will decline to the projected level is uncertain. Soybean demand is notoriously price-sensitive, and high price ratios relative to feed grains and other oilseeds typically ration soybean use.

   For example, world soybean carryover for the drought-reduced 1988-89 crop was estimated in July 1988 at about 13 million tonnes. But by the end of the season, actual carryover was some 4.5 million tonnes higher than the July estimate. Even though actual crop size was smaller than early projections, actual use was lower than expected amid relative soybean price strength.

   This year, a smaller crop is not the only factor contributing to price rationing; reforms in the European Community's Common Agricultural Policy also have affected price relationships and demand for soybeans and products.

   The C.A.P. reforms have reduced feed grains prices, making grains more attractively priced for animal feed relative to soybean products. This situation was projected to curb E.C. demand for soybeans and products in 1993-94, with soybean imports expected to drop by 6% from 1992-93 and soymeal consumption expected to decline by 4%.

   The drop in E.C. imports, along with declining demand in the former Soviet Union and Eastern Europe, should result in 1993-94 world soybean trade of 29.6 million tonnes, down slightly from 30.54 million in 1992-93.

   Asia's soybean imports in 1993-94 were expected to ease by less than 1%, although some substitution of rapeseed for soybeans could occur.

   World production of other oilseeds in 1993-94 was expected to increase by about 4% from 1992-93, with only the peanut crop estimated to be marginally smaller. These increases would not offset the expected drop in the soybean crop, and 1993-94 total oilseeds production, at 226 million tonnes, was projected to be down slightly from the previous year's production of 227 million.

   Meanwhile, total oilseeds use in 1993-94 was expected to remain steady or to increase slightly, according to projections. Smaller production and steady use were projected to push down total oilseeds carryover to 20.39 million tonnes, also the lowest level since 1983-84.