Naperville – Recent U.S. government estimates suggest a little more relief in global soybean stocks than corn or wheat next year, but it’s based on some grain estimates that can be difficult to achieve, especially at once.
The US Department of Agriculture’s first outlook for the upcoming 2022-23 season, released last Thursday, suggests that next year’s supply of soybeans will safely increase this year compared to demand, but will remain tighter than other recent years.
Several limiting factors may already exist towards production, potentially adding stress to a situation without a huge safety net. The most active Chicago soybean futures settled at .6 16.62-3 / 4 per bushel on Wednesday, the highest to date.
The USDA found that 2022-23 soybean production in Brazil, the United States, Argentina and Paraguay was 13% higher than the five-year average and 8% higher than the previous high. These countries export 94% of the world’s soybeans.
Soybean production in each season from 2013-14 to 2016-17 increased to a greater degree than the previous average, and this was due to both area and yield growth. The growth of planted area this year is predicted to be significantly higher than last year, but yield gains are more marginal.
There are only four years in the last 15 where the big three – soybean yields in Argentina, Brazil and the United States – have surpassed the previous five-year average. Brazil and the United States, the top two exporters, have achieved this feat simultaneously in seven of the last 15 years.
The biggest standout is with top exporter Brazil, which the USDA expects to easily beat the record of 139.5 million in 2020-21, with 149 million tonnes harvested in early 2023 from this year’s horrific crop.
That forecast is in stark contrast to last month’s USDA Attach রিপ report that Brazil’s next soybean crop yielded 139 million tons, 8% lower than the initial USDA official. The attachment assumes normal weather but uses less fertilizer based on world market conditions.
Brazil imports 85% of its fertilizer demand and Russia is a top supplier, although shipping data last month showed that Russian fertilizer was coming to Brazil despite sanctions following Russia’s invasion of Ukraine.
If fertilizer availability does not prevent soybean area expansion and / or strong yields, high costs may be a factor. Mato Grosso, Brazil’s top soybean and corn state agency, IMEA, estimates that the variable cost of soybean production for farmers there has increased by 71% year-on-year. Some producers may have difficulty securing credit due to tight government resources.
But while high costs and input availability do not limit Brazil’s soybean production, the weather in its south could speak volumes. Forecasters are calling for the third year of La Nina in 2022-23, which occurs when the surface water of the equatorial Pacific Ocean is cooler than usual.
La Nina can produce a dry growing season in southern Brazil and especially in Argentina. During a La Nina there may be a successful harvest, but all bad crops coincide with a La Nina, so yield loss is a reasonable bet.
This could put the USDA’s 51 million tons of soybean crop pegs at risk for Argentina. The company puts 2022-23 plantings at a six-year high, probably due to rising costs and risks for competing crops.
At USDA, Argentina’s soy yields are up 10% from the previous two-year average, and those two years feature La Nina. The country collected 42 million tons of oilseeds in 2021-22, the worst since 2017-18, also a La Nina year.
Last week’s USDA estimates proved that U.S. stocks will not be too comfortable with a record crop ending in 2022-23. A stock-to-use will increase from 5.3% to 5.7% in 2021-22 and from 5.7% in the previous year, but it is better than the previous three oversupplied years when the ratio was above 15% on average.
To get started, U.S. farmers must plant a record 91 million acres in early March. North Dakota, which will sow about 8% of U.S. soy area this year, is planting at the slowest pace on record, with only 2% complete by Sunday.
The state’s corn and wheat plantings are also incredibly slow, so whether or not soybeans are lost in North Dakota and how many crop growers prioritize depends on the next few weeks of weather. Nationally, soybean planting delays are less extreme.
The USDA trend of 51.5 bushels per acre requires very good summer weather in most growing regions, although this is not unreasonable as high yields have been observed once before in 2016. Coincidentally, this was also where North Dakota bumper harvested last year. Karen Brown is a Reuters market analyst. The opinion expressed above is his own.
(Edited by Matthew Lewis)