Global soybean markets for next few months shall react largely, in context to the fundamental developments in South America i.e. Brazil and Argentina. The Brazilian soybean harvest commenced late January, but till first week of March, not more than 25 percent of the planted soybean crop could be harvested. Wet weather situation is the major cause of slower harvest pace.
As the weather has not shown any noticeable improvement in the past week, there is higher possibility of further delay in the harvests. Farmers during later part of February and first week of March could not finish their harvests in the state of Mato Grosso, the leading producing state of Brazil, because they are unable to enter the water soaked fields of soybean. The weather has also affected the crop planted in the states of Goias, Tocantins, Para and Maranhao, with cloudy conditions, enhancing the risk of lower weight of the individual soybean plants.
Harvesting delays have raised the logistical problems related to Brazil’s soybean exports. Ships have lined up in Brazil’s ports to receive delayed soybean shipments from the field. In the North of Brazil, long trucking lines are creating traffic jams that are further delaying the transport of soybeans to the port. The USDA in its March report has left U.S. ending stocks unchanged, lowered the crop estimate for Argentina, and pegged a higher Brazil’s crop size.
The Department raised crop projection for Brazil, by 36.7 million bushels to 4.924 billion bushels, but slightly reduced the same for Argentinian soybean to 1.745 billion bushels. Considering the USDA’s increased estimate for Brazilian soybean output, the current level of global soybean stocks appears slightly better versus previous estimates.
However, as long as the Brazilian soybean shipments remain delayed, markets may continue to factor in the prevailing tight supply conditions. As a significant quantity has been shipped out from Brazil to China, Brazilian stocks in coming months may remain at the lowest level, seen ever in Brazil. Exports from Brazil totaled 2.9 million metric tons, down significantly from the 4.8 million metric tons exported in February of 2020.
Considering the final year crush and export level, the USDA has revised Brazil’s 2019/20 soybean production up 2.5 million metric tons to 128.5 million metric tons based on higher yields. Because of this increase, USDA has also upgraded its forecast for Brazil’s 2020/21 production to 134 million metric tons and yield to 3.47 metric tons per hectare.
The crop growth conditions in Argentina appeardifferent than Brazil, due to prolongeddry weather conditions in the producing regions. This has prompted the USDA to lower its forecast of 2020/21 Argentine soybean production to 47.5 million metric tons. Meanwhile there is rising concern over a potential export tax increase for oilseed products in recent weeks.
The Ministry of Agriculture announced on February 8 that an agreement had been reached with Argentinian soybean processors to curb the price rise of edible oils in exchange keeping the export tax on soybeans, meal, and oil unchanged. At present the Argentinian farmers are reluctant to sell their soybean crop in bulk, because of political pressure depressing domestic soybean prices.
This has led to an increase in USDA’s forecasted imports for Argentina, up 200,000 metric tons to 4.7 million metric tons. The hike in imports may contribute in growth of the Argentinian crush sector, on the back of rising export demand for soybean oil and soybean meal.
As such, exports estimate for soybean meal and soybean oil has been raised in the latest USDA report to 27.4 million metric tons and 6 million metric tons, respectively.
