USDA lowers soybean production forecast for US and Argentina, but this will be offset by a record crop in Brazil

Dry weather in Argentina worsens the outlook for soybean production in 2022/23, so USDA experts in the new balance reduced the forecast by 4 million tons to 45.5 million tons, while the local exchange of Buenos Aires (BAGE) lowered its estimate by 7 million tons to 41 million tons, and the Rosario Exchange (RGE) - by 12 million tons to 37 million tons, which is significantly lower than the average analyst estimate of 46.71 million tons.

At the same time, the world soybean balance remains under pressure from an 18% increase in the crop in Brazil to a record level and a decrease in soybean imports to China. Increased soybean supply from South America will reduce U.S. exports in the coming months, leading to lower global prices.

China is likely to take advantage of the record crop of Brazilian soybeans and will be slow to buy them, helping to lower prices. In the 1st quarter of the 2022/23 season, China imported 21.5 million tons of soybeans, which is 5% lower than the previous season and the 5-year average level due to increased imports of rapeseed and sunflower meal, as well as a reduction in soybean processing due to the state of the economy and the spread of covid .

In comparison with the December estimates, the January soybean balance for 2022/23 MR has undergone the following changes:

• The forecast of global initial stocks has been increased by 2.63 million tons to 98.22 (100) million tons due to reduced processing and consumption in FY 2021/22.
• The estimate of world production was reduced by 3.16 to 388.01 (358.1) million tons, in particular for Argentina by 4 to 45.5 (43.9) million tons against the background of drought, for the USA - by 1.89 to 116, 38 (121.53) million tons as a result of quoting areas before harvest and productivity. At the same time, the forecast for China was increased by 1.9 to 20.3 (16.4) million tons according to the reports of the National Bureau of Statistics, and for Brazil - by 1 to 153 (129.5) million tons due to the increase in sowing areas and favorable weather.
• The global export forecast was reduced by 1.85 to 167.53 (153.79) million tons, in particular for Argentina – by 2 to 5.7 (2.86) million tons and the USA – by 1.5 to 54.16 (58 .72) million tons due to increased competition from soybeans from Brazil, for which the estimate was increased by 1.5 to 91 (79.14) million tons, although the local agency CONAB estimates it at 93.91 million tons.
• The global import forecast was reduced by 1.89 to 164.32 (157.13) million tons, in particular for China – by 2 to 96 (91.57) million tons.
• The estimate of final reserves was increased by 0.81 to 103.52 (98.22) million tons, in particular for Brazil - to 33.4 (26.8) million tons, although analysts estimated them at 101.69 million tons.

According to the report, March soybean futures on the Chicago Stock Exchange rose by 1.7% to $558/t (+4% for the month).

In Ukraine, the demand for soybeans remains high thanks to active exports. Already in February, the market will be filled with cheap Brazilian soybeans, so prices will again decrease from $420-460/t to $380-420/t with delivery to the port.