Brazilian soybean output to rise to record 125 million mt in 2019-20: USDA

New Delhi — Brazilian soybean production is forecast to reach a record 125 million mt in 2019-20 crop year (October-September), up 2% from January estimates and 9% year on year, because of favorable weather in Mato Grosso, as well as improved rainfall in southern and northeastern soybean areas of the country, according to the USDA's World Agriculture Supply and Demand Estimate report, released Tuesday.

Soybean planted area in Brazil was forecast at 36.9 million hectares, up 100,000 ha from previous estimates because of higher rainfall across the region in recent months, according to the USDA post report circulated last week.

Sufficient rains across the region since October also boosted soy yield projections. According to the latest report from the national crop agency, Conab, Brazilian soybean yield in 2019-20 is expected to rise 4.4% year on year to 3.52 mt/ha.

Brazilian soybean exports are forecast at 77 million mt for 2019-20 marketing year (February 2020-January 2021), up 2% year on year, the USDA said, while the ending stock is forecast to rise 6% year on year.

According to market sources, Brazil's total soy exports in 2020 could be revised lower because of China's commitment to buy more US-origin beans to underline the January Phase 1 trade deal pre-condition set by the administration of US President Donald Trump.

Showing its commitment to the Phase 1 trade deal, China announced February 6 it will cut in half additional tariffs on $75 billion worth of US products, including soybeans. China will cut the 10% tariff on US-origin agricultural products, including soybeans, fresh seafood and poultry, to 5%, the State Council Tariff Commission said in a statement.

The tariff waiver is seen as a move to boost soybeans purchases from the US, sources said. But China's purchase capacity could be severely affected by the recent outbreak of coronavirus, which has stifled the supply chain and stalled China's economic growth forecast in 2020.

DOMESTIC USAGE RISING

Brazil's domestic soy crush is forecast at 43.75 million mt, up 3.5% year on year, USDA said.

Greater domestic crushing demand and a higher biofuel mandate may limit Brazilian export growth in the coming months, market sources said.

According to the Mato Grosso Institute of Agricultural Economics, domestic soybean oil demand is set to increase significantly as the government mandates biodiesel blending.

Soyoil is the primary input for biodiesel production in Brazil, accounting for nearly 75% of the total, according to the December report of Abiove, the Brazilian soy crushers association.

Currently, diesel sold in Brazil contains 11% biodiesel and is known as B11, Abiove's report said. This blend is scheduled to rise to 12% (B12) by March 2020 and touch 15% (B15) in 2023, the report added.

Apart from higher soybean oil consumption, Brazil's domestic purchase of soybean meal also has increased.

As global demand for meat products rise, primarily fueled by African swine fever-hit Asian markets, the trend of rising domestic soybean crushing demand is set to continue in Brazil, which needs the high-protein soybean-based animal feed to meet consumption demand from its cattle industry, sources said.