Early harvest in Brazil, USDA, and supply size draw attention, weighing on prices of soybean


Porto Alegre, January 22, 2024 – Last week the international soybean market absorbed the surprising bearish data released by the United States Department of Agriculture (USDA) on Friday (12) afternoon. The report indicated higher-than-expected production and stocks in the United States, a lower-than-expected cut in Brazilian crop, and a higher-than-expected increase in Argentine production.

The size of the Brazilian crop, after the climate effects, still dominates the market’s attention. The USDA and Conab’s numbers – 157 and 155 mln tons, respectively – are above the average of private consultancies. SAFRAS indicates production at 151.3 mln tons. Last week, Aprosoja indicated around 135 mln tons and a consultancy linked to the association indicated around 140 mln tons. These numbers, however, seem exaggerated (downward).

However, the production cut, led by the decline in the crop in the largest producing state, Mato Grosso, did not impact futures contracts in Chicago. The reason is that the crop coming from South America is still large. Besides Brazil’s 150 mln tons – below expectations (above 160 mln) but still a sizeable crop – larger crops are expected from Paraguay, Uruguay, and, mainly, Argentina.

The neighboring country and third-largest producer in the world is a case apart. Last year, production was decimated by dry weather. Around 20 mln tons were reaped. With good crop development, there are forecasts that up to 30 mln tons could be added from the neighboring country. This fact weighs on the market, both in Chicago and regional premiums in South America, resulting in more pressured prices in Brazil.

Furthermore, the harvest is beginning to gain momentum in the country, also bringing seasonal pressure on the crop arrival. The environment remains negative for prices, and only a major worsening of the climate in Argentina and/or an increase in losses in Brazil can change this situation in the short term.

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