South American soybean production adjustment will affect the global phase of supply

Since entering 2023, the overall domestic and international soybean futures market has been strong, with U.S. soybean futures prices running above 1,500 cents per bushel, bringing continued support to the domestic soybean market. in the first quarter of 2023, key factors affecting U.S. soybean futures prices remain focused on South American soybean production adjustments and changes in exports of North and South American soybeans.

Argentina’s production is expected to continue to be adjusted downward

A series of impacts from Argentina’s soybean production cuts continue to ferment, and the USDA report in January lowered U.S. soybean yields and total production by more than expected, lowering U.S. soybean ending stocks by 10 million bushels, from an estimated 220 million bushels in December 2022 to 210 million bushels, down from 274 million bushels the previous year.

While U.S. soybean production has been confirmed, the adjustment in South American soybean production continues. The USDA estimates Argentina’s soybean production for 2022/2023 at 45.5 million tons, down 4 million tons from the December 2022 estimate of 49.5 million tons. But even though the USDA has begun making downward estimates for Argentina’s soybean production, it is still well below the estimated figures from domestic institutions in Argentina.

Currently, the Buenos Aires Grain Exchange expects Argentina’s 2022/2023 soybean production to be 41 million tons; Argentina’s Rosario Grain Exchange is lowering Argentina’s 2022/2023 soybean production to 37 million tons, down 12 million tons from an earlier estimate of 49 million tons.

Meteorological agency monitoring data show that the impact of La Nina will gradually decay, so that Argentina’s domestic agencies continue to adjust soybean production space is more limited, but from the U.S. Department of Agriculture estimates, there is still not much room for downward adjustment, because the future of the U.S. Department of Agriculture soybean production in Argentina is expected to continue downward adjustment.

Brazil soybean production increase pressure is partially resolved

Under the influence of the expected reduction in soybean production in Argentina, Argentina may expand the scale of soybean imports from Brazil, and the Brazilian Grain Exporters Association recently confirmed that Brazilian soybeans are sold to Argentina. Argentine soybean processors are having difficulty buying local soybeans at a time when soybean crushing margins are high due to the large number of soybeans sold in Argentina in the fourth quarter of 2022, leading to the depletion of domestic stocks. Cargill and Vitra have confirmed the shipment of 71,000 tons of Brazilian soybeans to Argentina. At the same time, global soybean meal purchases will shift from Argentina to Brazil, and uncertainty over Argentine supply will prompt major demand countries to import soybean meal from Brazil.

The USDA report projects that global soybean meal exports will reach 69.73 million tons in 2022/2023. Among them, Argentina’s soybean meal exports of 26.5 million tons, accounting for 38% of total global soybean meal exports, down from 39.4% in December 2022; Brazil’s soybean meal exports of 20.7 million tons, accounting for 29.7% of total global soybean meal exports, up from 27.9% in December 2022.

Although Brazil’s soybean production increased and may reach a record high of 153 million to 154 million tons, the repair of global soybean stocks has slowed due to the downward revision of U.S. soybean production beyond expectations and the reduction of soybean production in Argentina. The growth of soybean meal exports and soybean oil for biodiesel consumption in Brazil will also absorb some of the pressure of increased soybean production in Brazil.

South American production adjustments will affect trade flows

U.S. soybean exports are being boosted again by a reduction in soybean production in Argentina. The U.S. Department of Agriculture’s weekly export sales report shows that as of January 5, 2023, the cumulative sales of U.S. soybeans in 2022/2023 amounted to 44.4 million tons, an increase of 1.96 million tons, or 4.6%, year-on-year. Among them, sales to China 26.79 million tons, an increase of 3.01 million tons, or 12.6%; export shipments to China 20.55 million tons, compared with 2003 million tons in the same period of the previous year; the number of unsold shipments was 6.24 million tons, up from 4.06 million tons in the same period of the previous year. The U.S. shipped 1.13 million tons of soybeans to China during the week, compared with 900,000 tons the previous week. Sales of 96,000 tons of 2023/2024 soybeans to China were unchanged week-over-week.

From the recent CNF price changes in North and South America, the CNF offer for February shipments of U.S. Gulf soybeans was $657/ton and the CNF offer for Brazilian beans was $644/ton; the CNF offer for March U.S. Gulf soybeans was $651/ton and the CNF offer for Brazilian beans was $618/ton. As Brazilian soybeans hit the market, the price advantage of Brazilian beans came to the fore and concerns were raised about the crowding-out effect on U.S. soybean exports. In particular, with the record production of Brazilian soybeans into cash, Brazil’s domestic storage capacity shortage will be rapidly magnified, the grain storage capacity of Brazil’s production areas is less than 20% of production, far behind the EU’s 50% and the U.S. 56%, which also means that Brazil’s record production of soybeans brings more difficult storage problems, whether it will increase the phase of concentrated pressure to sell grain, which in turn will lead to Brazil soybeans It remains to be seen if the escalating discount will continue to soften and the export rowboat will surge. 2023 will see Brazil’s storage and logistics and transportation bottlenecks become more prominent than in previous years.

The company’s main business is the development of a new product, which is a new product for the company. South American soybean production adjustments will affect the global soybean phase supply pattern, will also affect the flow of soybean trade between the North and South American markets.

Source: Grain and Oil Market News

Post time: Feb-08-2023