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Soybean Weekly Report

By: StoneX Intelligence Brazil, StoneX Intelligence Brazil

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Soybean plunges in the week following USDA figures for the 2023/24 crop 
 
Ana Luiza Lodi
analuiza.lodi@stonex.com
 
Although it is still early, the USDA reinforced the scenario of lack of threats on the supply side 
 
Bearish drivers
  • Global production for 2022/23 estimated much above consumption, according to USDA; 

  • Combating inflation may lead to a recession; 

  • Absolute production record in Brazil and lack of storage; 

  • Fast pace of US planting;

  • Chances of El Niño increase.

 
Bullish drivers
  • Relaxation of anti-Covid measures in China; 

  • Considerable crop losses in Argentina due to the climate; 

  • Chinese crush margins positive for days;
  • Increase in mandatory biodiesel blending in Brazil, starting in April 2023.

Soybean prices in Chicago ended the previous week in a negative field, with the contract for July falling below USD 14 and ending Friday (12) at 1390 cents per bushel. On the demand side, the market continuously monitors Chinese behavior, since the country is the world's largest consumer of the oilseed and accounts for around 60% of foreign sales. 

Official data from the Chinese customs indicated imports of 7.26 million tonnes of soybeans in April, below last year and expectations, around 9 million, a situation that weighed on prices. However, it is important to highlight that the accumulated since January is stronger and, considering the 2022/23 crop year (Oct/22 to Sep/23), the pace is consistent with around 99 million tonnes imported in the cycle. In addition, this data for April may not reflect reality, due to a slower pace of inspections and ships awaiting release, and it is possible that they reached higher volumes, but which did make it into the official statistics for the month. 

As for soybean crushing margins in the country, in recent days they have remained on the positive side, but they are always a concern, in addition to outbreaks of African Swine Fever (ASF), the margins of meat producers, the effort in reducing the participation of meal in feed and in the progress of the economy in general. 

Weekly intraday - July/23 (CME)    

image 70967
Source: CME. Design: StoneX.
image 70968
Source: CME. Design: StoneX.

In the US, export sales in the week ended May 04 reached 62,170 tonnes, a volume below the estimate floor, which ranged from 150,000 to 550,000. As a result, the accumulated volume for the 2022/23 crop is 50.77 million tonnes, below that recorded in the same period last year, at 58.46 million. As such, even with the USDA's estimate of exports for the current cycle lower than the previous one, there are doubts as to whether this number of 54.84 million tonnes will be reached. 

US weekly export sales (000 tonnes)

image 70969
Source: USDA. Design: StoneX.

In any case, it was mainly the supply side that limited possible soybean gains and led prices to record a significant drop after the monthly supply and demand report on Friday. 

In Brazil, Conab released its crop survey, showing an increase in Brazilian production for 2022/23 to 154.8 million tonnes, with positive adjustments in area and productivity. This number is still below that of StoneX, at 157.7 million tonnes, but, in any case, it sets an absolute record, “offsetting” the losses in Argentina. 

The Rosario exchange reduced Argentina's 2022/23 soybean production to 21.5 million tonnes, while the Buenos Aires exchange is at 22.5 million. Regardless of the number, the much lower volume offered by the country tends to affect domestic processing, even with the increase in grain imports. Last week, there were rumors of sales cancellations of Argentine meal, with buyers switching to the US product, but this bullish factor failed to offer greater support to soybeans, after the weak US export sales data. 

The USDA's monthly report further reinforced this “lack of threats” scenario on the supply side, while demand concerns remain. 

There was great expectation for the report, since it was the first one with numbers for the 2023/24 cycle. However, as already expected, the USDA maintained the intended planting area and productivity of the Agricultural Forum for the 2023/24 US crop, with production estimated at 122.7 million tonnes. On the demand side, the USDA brought a major growth to domestic consumption, which is set to reach 66.29 million tonnes, while exports were weaker in the new cycle. In any case, the US balance sheet would be more comfortable, with ending stocks rising to 9.1 million tonnes. 

Furthermore, the Department did not report any changes in exports for the 2022/23 US crop, even with weaker sales data. 

For the South American crop, the highlight was the increase in Brazilian 2022/23 production to 155 million tonnes, while Argentina was maintained at 27 million, even with the market betting on a cut. It should be noted, however, the reduction of 1.2 million tonnes in Paraguayan production, to 8.8 million. 

While global stocks had minor changes in the 2022/23 cycle, these first figures for the 2023/24 crop indicate world production well above demand, leading to an increase of more than 20 million tonnes in estimated world stocks, reaching 122.5 million and reinforcing the current scenario of a supply without major problems. 

 

SPOT PRICES (USD/60kg-bag)
image 70970
 
image 35317
 
 
 
 
  • Grains & Oilseeds

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