USDA lowers soybean harvest forecast in Brazil by only 1 million tons, although market expected more significant changes

In a February report, USDA experts slightly lowered their forecasts for world production, consumption and exports of soybeans, although the market had expected a more significant decrease in estimates. As a result of the opening inventory adjustment, the ending inventory estimate also exceeded analysts' forecasts. Overall, the soybean balance sheet remains fairly tight compared to last season, although Brazil's soybean crop outlook is a cause for concern.

Compared to the January estimates, the new soybean balance for the 2023/24 FY has undergone the following changes:

• The initial stock estimate was raised by 1.7 to 103.57 (98.03) million tons due to an increase in stocks in Brazil by 2 million tons after adjusting soybean production in 2022/23 MY by 2 million tons to a record 162 million tons.
• The global production forecast was reduced by 0.77 to 398.21 (378.06) million tons, in particular for Brazil - by 1 to 156 (162) million tons due to dry and hot weather in the states of Paraná and Mato Grosso, although the market expected a decrease forecast to 153.2 million tons, and the local agency Conab lowered the estimate by 5.9 to 149.4 million tons. For Argentina, the estimate was left unchanged for now.
• The estimate of world exports was reduced by 0.37 to 170.57 (171.96) million tons, in particular for the USA – by 0.95 to 46.8 (54.21) million tons against the background of strong competition with Brazil and a drop in export rates in January For Brazil, despite the reduced harvest, the export forecast was increased by 0.5 to 100 (95.51) million tons thanks to significant stocks and active deliveries at the beginning of the year.
• The estimate of world imports was reduced by 0.5 to 167.52 (164.38) million tons, primarily for the countries of Southeast Asia, while the estimate for China was left at the level of 102 (100.85) million tons.
• The forecast of world ending stocks was raised by 1.43 to 116.03 (103.57; 99.7 and 100.3) million tons (although analysts expected them to decrease to 112.5 million tons), in particular for the United States and Brazil.

According to the report, March soybean futures on the Chicago Stock Exchange rose 0.4% to $438.5/t (-3.4% compared with the data after the January report) supported by a speculative increase in soybean oil prices on 2.5%.

USDA experts also increased the forecast of world rapeseed production in 2023/24 by 0.3 to 87.4 (88.82) million tons, particularly for India, although the export estimate remained at 17.1 million tons.

The forecast of world sunflower production in 2023/24 was reduced by 0.47 to 55.08 (52.29) million tons, in particular for China - to 1.7 (1.9) million tons. At the same time, the harvest estimates for Ukraine were left unchanged - at the level of 14.5 million tons, the Russian Federation - 17.1 million tons, Argentina - 4.1 million tons, and the EU - 10.2 million tons. Also, the forecast for sunflower exports from Argentina was reduced by 50 to 150 thousand tons and the Russian Federation - by 100 to 450,000 tons, for Ukraine the estimate was left at 500,000 tons, for Turkey the import forecast was reduced by 100,000 tons.

Improved weather in South America and active soybean harvesting in Brazil are weighing on the soybean market and neighboring sunflower and canola markets, exacerbating the fall in oil demand from China, where the economic crisis is escalating.