- Bearish drivers
- 24/25 world production widens gap with consumption, according to USDA;
- StoneX estimates record productivity for the US;
- Concerns about the pace of world demand;
- StoneX estimates record production for Brazil's 24/25 crop;
- Favorable crop conditions in the US;
- Pro Farmer estimates record for the US, surpassing USDA figures.
- Bullish drivers
- Incentive measures adopted by the Chinese government;
- Funds with a large short position;
- Strong pace of crushing in Argentina;
- Conversion of plants to renewable diesel in California;
- US evaluates limiting imports of used cooking oil (UCO);
- Indonesia considers raising the mandatory biodiesel blend to 50%.
Soybean prices rose again last week in Chicago, with the November contract ending Friday (30) at 1000 cents per bushel, up 2.8% over the period.
Even with the rise in prices, the scenario of a possible record crop in the US continues to condition estimates of high stocks in the country and an increase in the difference between world production and consumption. The USDA already estimates record yields and production, but private estimates such as Pro Farmer's Crop Tour are even more optimistic, forecasting a harvest of 129 million tonnes.
Crop conditions in the week ending August 25 continued to indicate a positive scenario, with the good/excellent percentage at 67%, down 1 p.p. from the previous release, but still considerably above the average for the period, at 59%. Weather forecasts for the first half of September indicate a drier pattern, a situation that could cause some stress on later plants. Even so, the outlook for the crop is unchanged for this reason.
On the demand side, export sales for the 23/24 crop in the week ended August 22 registered cancellations for the second week in a row, at 143,600 tonnes. Even so, the country is on track to reach the USDA's export estimate of 46.3 million tonnes. On the other hand, sales of the 24/25 crop reached 2.6 million tonnes, above the ceiling of estimates, which ranged from 1.5 to 2.5 million, but the accumulated to date, of 10.2 million tonnes, is 2.8 million tonnes weaker than in the same period last year, with China accounting for 2.7 million of this total. It is worth remembering that the USDA expects soybean shipments for the 24/25 cycle to grow by 8.8% compared to the previous cycle, reaching 50.4 million tonnes.
Even with bearish factors prevailing for soybeans, the market for soybean oil offered some support last week. Vegetable oils had a positive week, with factors pointing to strong demand.
Indonesia, the world's largest palm oil producer, announced that its mandatory biodiesel blend will rise from 35% to 40% from the beginning of 2025, with the Indonesian president indicating that this percentage could rise to 50% once tests are finalized and approved later next year.
Rumors that the US could limit imports of used cooking oil (UCO) supported soybean oil, which remained in the positive field on the last day of the week and month. This possible limitation comes amid suspicions of adulteration in UCO exported by China, the main supplier of the product to the US. A reduction in the availability of UCO on the US market would encourage consumption of other feedstocks, especially soybean oil. It should also be noted that the National Oilseed Processors Association (NOPA) has sent a request to reject the 20% limit on the use of vegetable oils when generating biofuel credits in California. The vote on the issue will be held later this year, with entry into force from 2028.
In South America, as September gets underway, attention is focused on the weather in Brazil, as the soybean fallow ends before the 15th in some regions of Mato Grosso, for example. However, forecasts indicate only sparse and localized rainfall over the next two weeks, which should not be enough to guarantee the necessary moisture for sowing to begin. As a result, the possibility of slightly bringing the cycle forward is unlikely to be exploited.
For the time being, StoneX do Brasil maintains its production estimate for the 24/25 crop at a record 165 million tonnes, with a small increase in area, less than 1% compared to the last cycle, but with the prospect of productivity within the trend, which will only be possible if the weather helps.
This week, StoneX's US division will also be releasing its crop survey on the 3rd, amid estimates of record productivity and production.
