Brazil Forecast to Overtake U.S. as Leading Soybean Producer, USDA-FAS Report
A recent report from the USDA’s Foreign Agricultural Service (FAS) stated that, “Brazil is forecast to overtake the United States as the leading soybean producer in the world during the 2019/20 season.”
More specifically, the report indicated that, “Post forecasts a record crop for the 2019/20 year, at 123.5 million metric tons (mmt). Brazil’s previous record crop was 122 mmt, recorded in 2017/18 season. The 2019/20 production forecast is based on a return to trendline yields after the current season was adversely affected by inclement weather. Post forecasts yield at 3.36 metric tons per hectare. Notably, according to the forecast from the World Agricultural Supply and Demand Estimate (WASDE) issued by the U.S. Department of Agriculture (USDA), U.S. soybean harvest will be less than 100 mmt in 2019/20, a drop of almost 20 percent on the previous season.
“Thus, as long as local weather across the key producing states does not deteriorate significantly, Brazil is expected to overtake the United States as the leading soybean producer in the world this coming season.”
The FAS update noted that, “Nationwide, according to Brazilian agricultural consultant AgRural, as of the first week of December, producers in Brazil had planted 93 percent of their total projected area, compared to 96 percent a year ago and in a line with the five-year average. In fact, although the pace of soybean planting has been significantly below what was recorded in the 2018/19 season, 2019/20 sowing progress is on par with the historical average. As a result, the delayed pace of planting should not significantly impact the harvest timeline, with the first soybeans harvested ready to ship in January.”
Turning to exports, FAS indicated that, “Post forecasts soybean exports for market year (MY) 2019/20 (February 2020 to January 2021) to reach 75 mmt. Post’s export forecast is based on recovery in available supplies, but also anticipates subdued demand from China for several reasons. First, China will continue to grapple with the adverse effects of ASF and the resulting drop in feed demand. Secondly, Post anticipates Brazil will lose some portion of its China export share to the United States in the wake of a trade deal between Washington and Beijing that was announced in mid-December 2019.
“The initial reaction of the Brazilian market to the U.S.-China trade accord has been muted, despite reports that the deal includes a pledge from China to buy $40 billion to $50 billion of U.S. agricultural products within two years, compared with $24 billion in purchases before the trade dispute erupted. At this point, Post contacts have not revised their soybean export estimates for 2019/20. Instead, most have adopted a wait-and-see approach, in anticipation of next season’s harvest coming online in January 2020. Local analysts also point to the fact the forecast shift in global supply may benefit Brazilian exports. For example, the soybean crop in the United States is forecast 20 percent less than last season due to inclement weather negatively affecting both planted area and yields. Meanwhile, higher export taxes in Argentina may also make Brazilian soybean exports more attractive.”
The report added that, “Notably, this calendar year saw a repeat of the 2018 scenario, despite the fact that vessels destined for China loaded soybeans both from the United States and Argentina. Post believes that October-November 2019 soybean sales from Brazil were driven to a large degree by extremely favorable local soybean price dynamics. Post estimates that December exports will benefit from this same dynamic and will likely reach well over two million metric tons as producers had contracted whatever volumes they had left in the previous months.”
Source: Keith Good, Farm Policy News