MercoPress. South Atlantic News Agency

Brazil manages record soybean exports, at lower prices, but much will now depend on the US crop

China, a key importer, purchased 62.3 million tons of soybeans, marking a 15% increase from the same period in 2022.

Despite the slow pace of soybean trade in the past five years, the first seven months of 2023 have seen Brazil achieve a record volume of exports, reaching over 70 million tons, as reported by the country’s National Supply Company (Conab) last week.

China, a key importer, purchased 62.3 million tons of soybeans, marking a 15% increase from the same period in 2022. “Brazilian farmers have sold around 80.93% of that imported volume to date, totaling 50.42 million tons of soybeans, according to data from the Foreign Trade Secretariat (Secex),” noted Leonardo Amazonas, a market analyst at Conab.

Conab projects total Brazilian soybean exports in 2023 to reach 95.64 million tons, reflecting a 21.5% growth compared to the previous year.

Soybean exports in July reached 9.7 million tons, buoyed by international price hikes and positive premiums at port terminals. July saw Chicago futures prices rise 5.48% over June and remain 2.79% lower than July 2022. This oilseed price appreciation, driven by US climate uncertainties, echoed in domestic prices, reported Conab experts.

Conab analyst Leonardo Amazonas highlighted that the United States Department of Agriculture (USDA) recently lowered its soybean crop productivity estimate. The estimated production of 114.5 million tons marks the lowest since the 2020/21 season. On one hand, record global production limits more pronounced price hikes, while on the other, evaluations that US stocks are low support Chicago quotations.

“The American crop is still uncertain and will only be harvested in September. Further production cuts are possible, as the crop is in the grain-filling phase, and severe drought may impact productivity,” noted the Conab report.

On August 24th, Chicago soybean prices responded to rising demand for US oilseed beans. The USDA’s report indicated a net sales balance (when confirmations exceed cancellations) of 1.2 million tons for the 2023/24 season, ending on August 17th.

While slightly lower than the previous week (1.4 million), the volume was close to market expectations. The November contract in Chicago, the most traded, rose by 11.2 cents (0.83%) and closed at US$13.71 per bushel, nearing the day’s high of US$13.73. Contracts for January 2024 increased by 12.4 cents and closed at US$13.83, similarly near their peak (US$13.84).

Climate effects on fields remain a point of attention for market operators. On August 21st, the USDA maintained its estimate of 59% of soybean crops rated as good to excellent. They made only a one-percentage-point upward adjustment to “good” (from 48% to 49%) and a one-point downward adjustment to “excellent” (from 11% to 10%).

Regular areas decreased from 29% to 28%, poor areas remained at 9%, and very poor areas rose from 3% to 4% of the total. The survey covers 18 producing states.

As of August 24th, the U.S. Drought Monitor map indicated severe and extreme drought in certain parts of Minnesota, Iowa, and Missouri. Furthermore, the USDA noted that there had been few rain accumulations in areas north of Wisconsin and Michigan.

“Average weekly temperatures were below normal in much of the region, except for areas in southern Missouri, southern Illinois, and central Wisconsin, where temperatures were a few degrees above normal,” reported the USDA.

This week, the Pro Farmer Crop Tour explored producer regions in the US grain belt and indicated higher yields in some areas. The numbers released brought some volatility to the Chicago market.

Expectations of improved field results may, to some extent, help limit price increases on the American exchange. Alternatively, it could even exert downward price pressure, depending on traders’ perceptions of US soybean futures contracts in relation to the US crop and its impact on supply and demand.