NEWS for North Dakotans
Agriculture Communication, North Dakota State
University
7 Morrill Hall, Fargo, ND 58105-5665
May 7, 1998
George Flaskerud, Extension Crops Economist
NDSU Extension Service
Price history suggests that any remaining old crop sunseed should be sold during May and June. July soybean oil futures prices recently traded as high as $29.25 per hundredweight, which is about as high as the oil futures price got during 1994 and early 1995. Prior to that, soybean oil futures peaked at about $33.75 in 1988 and at about $41 in 1984.
The price of sunseed (40 percent oil) at Enderlin, N.D., has ranged from a low of $9.80 per hundredweight during mid-December to a high of $13.35 on May 1. Previous highs include $15.10 during March 1994 and $14.20 during July 1988.
The new crop price level suggests that a scale-up marketing plan for new crop should be considered. The new crop Enderlin sunseed bid was $11.25 on May 1. Forward pricing one-third of expected 1998 production by June 1, and more later if a weather rally occurs, may be a suitable plan for many producers. The loan rate provides a national floor price of $9.30 per hundredweight ($8.67-$9.47 in North Dakota) in case of lower prices later in the year.
Part of the price strength has come about because of limited U.S. supplies of sunseed. Because of that limited supply, however, the crush pace may slow down over the next several months, according to the National Sunflower Association, and this may lead to reduced competition and lower prices. Argentina is having a disappointing sunseed harvest which has contributed to price strength but its harvest may also lead to eventual price weakness because a substantial crop is still there to be crushed and exported.
Tight global vegetable oil supplies are the main reason for stronger sunseed prices. According to USDA's April Oil Crops Outlook, world production will slow this year while world consumption will continue growing. Palm oil production is projected to grow just 0.7 percent compared to 8 percent last year because of the drought in Southeast Asia, which is equivalent to losing one-tenth of the U.S. soybean acreage.
Several factors are working in the oilseed markets to alleviate tight supplies. The South American soybean harvest currently under way is projected by USDA to be 20 percent larger than last year's record. U.S. planting intentions are up about 2 percent for soybeans and 11 percent for oil sunflowers. The recent price relationship between sunflowers and wheat would suggest the possibility of even larger sunflower plantings. The adverse planting conditions being experienced in the corn/soybean belt could lead to more soybean acres.
It is difficult to estimate how long and far oil prices will rise during this current rally. The factors discussed suggest they will rise till May/June, which is consistent with the historical price pattern for sunflowers. Some analysts expect the futures oil price to rally into the $32 to $34 range. Others expect a gradual decline during this last half of the marketing year resulting in an average soyoil price during this last half that is just under $27 per hundredweight.
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Source: George Flaskerud (701) 231-7377
Editor: Barry Brissman (701) 231-7866