USDA balance sheet remains stable despite Argentina soybean crop forecast downgrade

Drought in Argentina is weighing on the outlook for the soybean crop, and analysts are cutting forecasts, even with recent rains. In the USDA's February balance sheet, Argentina was the main change, but the global balance sheet remained more stable than last year, thanks to an increase in Brazil's harvest and a drop in global demand.

Compared to the January estimates, the new balance for soybeans for 2022/23 MR underwent the following changes:

• The initial stock forecast has been raised by 0.6 mln t to 98.83 mln t (99.75 mln t FY2021/22) due to reduced processing and consumption in FY2021/22.
• The estimate of world production was reduced by 5 to 383.01 (358) million tons, in particular for Argentina against the background of drought - by 4.5 to 41 (43.9 in 2021/22 and 46.2 in 2020/21 MR) million. t, which will be a 14-year minimum. This is in line with the forecast of the local Buenos Aires exchange (BAGE), but well above the forecast of the Rosario exchange (RGE), which was reduced from 37 to 34.5 million tons. Analysts estimated the harvest in Argentina at 42.3 million tons, so the market was surprised by the USDA data. For Brazil and Paraguay, forecasts were left at the January level, which is in line with market and local agency estimates. For Ukraine, the harvest forecast was reduced by 0.4 to 3.2 million tons due to a reduction in the area before harvesting, although the MSG of Ukraine estimates it at 3.6 million tons.
• The forecast of world exports was left at the level of 167.53 (153.79) million tons, although for Argentina the estimate was reduced by 1.5 to 4.2 (2.86) million tons, and for Brazil it was increased by 1 to 92 (79 .12) million tons, and for Paraguay - by 0.5 to 6.3 (2.27) million tons against the background of increasing supplies to Argentina for processing into meal.
• The forecast of world imports was reduced by 0.25 to 164.07 (157.08) million tons, in particular for the EU - by 0.5 to 13.9 (14.55) million tons, but for Argentina the estimate was increased by 1. 25 to 6.25 (3.84) million tons.
• The estimate of final reserves was reduced by 1.5 to 1.2 (98.22) million tons, in particular for Brazil – by 1.2 to 32.2 (26.8) million tons, Argentina – by 1 to 22.4 (23.9) million tons, but for China it was increased by 1 to 32.33 (31.4) million tons due to a reduction in consumption by 1 to 115.3 million tons, although last year's consumption was 107.6 million tons, and this thing may decrease even more against the background of lower prices for pigs, which will lead to a drop in soybean imports.

According to the report, March soybean futures in Chicago rose 0.3% to $558.4/t, which corresponds to last month's level. This suggests that speculative pressure on prices has eased amid rising supply of soybeans from Brazil, whose forward sales are 30-40% below last year's pace, as producers hoped for further price increases.