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Soybean Weekly Report

By: StoneX Intelligence Brazil, StoneX Intelligence Brazil

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Soybeans drop for another week, following supply and demand

 
Ana Luiza Lodi
Market Intelligence Specialist
analuiza.lodi@stonex.com
Nearby contracts fell more than 5% in the week
Bearish drivers
  • Global production for 2023/24 estimated much above consumption, according to USDA; 
  • Still weak economic indicators;
  • 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 are more positive;
  • Increase in mandatory biodiesel blending in Brazil, starting in April 2023.

Last week, soybeans continued the downward movement in Chicago, with the July contract ending Friday ( 19) at 1307.25 cents per bushel, down 6%.

After the USDA report brought a very bearish outlook for the soybean market, when considering the estimates for the 2023/24 crop, with world production well above consumption, the soybean quotes even rose on Monday (15), registering some adjustment, but did not sustain gains in subsequent sessions, with the decline prevailing.

The combination that justifies this pressure on prices remains the same: a perspective of supply without major problems and doubts on the demand side.

On the production side, the figures from South America are quite consolidated, with the Brazilian record offsetting the Argentine losses. In the case of Argentina, it is noteworthy that the Buenos Aires exchange once again cut its 2022/23 production estimate to just 21 million tonnes. At the same time, the lack of weather threats to the US crop at the beginning of this cycle reinforces the scenario of smooth supply.

Weekly intraday - July/23 (CME)
image 71529
 
image 71530
Source: CME. Design: StoneX.

Planting for the 2023/24 US crop reached 49% on Sunday (14) on the national average, maintaining the fast pace that has been noted since the beginning of field work. In the same week last year, the national average percentage was at 27%, while the five-year average was at 36%. The high possibility of an El Niño event fuels this more optimistic scenario for the country's crop. Even the delayed work in North Dakota does not counterbalance the general optimistic tone at the beginning of this cycle.

In any case, the weather should still influence the market a lot in the coming months, bearing in mind that the key phase of grain filling occurs between July and August.

On the demand side, economic indicators around the world, and especially in China, remain on the radar. In recent weeks, the Chinese crushing margin has remained at more favorable levels and, considering the pace seen so far, the country's imports for the 2022/23 crop (Oct-22 to Sept-23) could be around 99 million tonnes.

In Brazil, StoneX updated its follow-up of sales, with 57% of the 2022/23 crop sold, a percentage below that recorded in the three previous cycles for this period of the year, even though the pace has increased after the harvest.

In the US, the National Oilseed Processors Association (NOPA) announced soybean crushing in April, which was 4.71 million tonnes, slightly below average market expectations, at 4.74 million. On the other hand, this volume exceeded the 4.6 million tonnes crushed in April 2022.

US export sales for the week ended May 11 were only 16,950 tonnes for the 2022/23 crop, with the cumulative total reaching 50.78 million tonnes, considerably below the same period last year, at 59.2 million. The highlight was the net sales for the 2023/24 crop, at 663,800 tonnes, more than double the ceiling of the estimates, between 0 and 300,000 tonnes.

It is noteworthy that, with the recent drops in soybean prices, the US grain of the 2023/24 crop became competitive again against the Brazilian product placed in China for the months of October and November.

The final months of the year are already a period in which the supply of Brazilian soybeans is restricted, with the usual seasonality being the strengthening of US exports. Meanwhile, in the closest deliveries, Brazil continues to register competitive advantages for soybeans exported to China.

Weekly US export sales (000 tonnes)
image 71531
Source: USDA. Design: StoneX.
This week, the weather forecasts indicate drier conditions in much of the Midwest, with the exception of the regions near the Plains. Even so, this pattern does not yet bring major concerns for the country's crop.
Spot prices (USD/60kg-bag)
image 71532
 
image 35317
 
 

 

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