Commodities 2023: US MY 2022-23 soybean exports expected to slide on year, crush likely to surge

The US soybean exports in the marketing year 2022-23 (September-August) are expected to slide on the year, while domestic crush is seen surging, according to commodity analysts, likely keeping the prices stagnant next year.

The country is expected to ship 55.6 million mt of the yellow oilseed in MY 2022-23, down 3 million mt on the year, according to the US Department of Agriculture's World Agricultural Supply and Demand Estimates report released Dec. 9. However, at the same time, total domestic crush is forecast at 61 million mt, up 1 million mt on the year, the WASDE data showed.

This is in line with an outlook from S&P Global Commodity Insights analytics, with US soybeans exports and crush at 55.7 million mt and 62.6 million mt, respectively, in MY 2022-23.

Amid the expected downtrend for the US soybeans trade, a very bearish season for American soy exports is also predicted by other commodity analysts.

"Compared with the USDA, we are a bit less optimistic at 54.6 million mt for the US beans exports in MY 2022-23," said Arlan Suderman, chief commodities economist at the financial services organization StoneX Financial.

Exchange brokerage group Futures International expects an even bleaker outlook for US soybean shipments.

"We remain bearish for the US soybean exports at 54.2 million mt in 2022-23 despite higher export commitment volumes year on year," said Terry Reilly, senior commodity analyst – grain and oilseeds at Futures International.

Record Brazillian harvest to pressure US trade

The world's largest soybeans supplier Brazil is forecast to have a record harvest in MY 2022-23, which is likely to pressure the US soybean shipments, according to analysts.

Although below expectations, the US itself has had a decent output at 118.3 million mt in MY 2022-23, close to its 5-year average of 118.4 million mt.

However, it is no way near Brazil's 150 million mt output forecast. In fact, some analysts expect Brazil's MY 2022-23 harvest to cross 160 million mt, which will give the South Americans a head start of over 40 million mt over their top competitor.

"With record output projection for Brazil, we will not see as many soybeans flowing from the US in July and August next year as we typically see," Suderman said.

Not surprisingly, the US basis prices have stagnated since mid-2022 when the pre-season forecast for the Brazilian harvest began pointing toward a record haul.

Brazil and the US together account for 70% of global soybean production and both nations compete for demand in China, which is the world's biggest consumer of beans, accounting for 60% of global imports.

Apart from the numerical advantage of an enormous harvest, the Brazilians also have a sentimental edge over the US.

China-based crushers typically prefer Brazilian beans over the US-origin, a Shanghai-based agricultural consultancy said. Although the protein content in the oilseed is almost similar for both origins, there is virtually no political animosity between Brazil and China, which is a big factor in favor of the South American nation, it said.

The world's largest economies the US and China have been in disagreements over trade policies and geo-political disputes, such as Taiwan and South China Sea, which have stressed the relations between the two countries in recent years.

China typically imports 60% of its soybeans from Brazil and 33% from the US.

China's demand resurgence

Analysts and crushers expect a strong recovery in crush margins in China, especially from the second quarter of 2023 amid higher demand for soybean meal-based animal feed.

As a result, China is expected to import a record 100 million mt of soybeans in calendar year 2023, up 11% on the year, according to a survey of China-based traders and crushers conducted by S&P Global.

Although a surge in the Asian nation's oilseed demand is expected to support global oilseed trade in MY 2022-23, analysts expect most of that trade revenue pie going to Brazil, and not to the US.

In MY 2022-23, China is projected to buy 61.7 million mt of Brazilian beans, up 9% on the year, Reilly said, adding that only 28.4 million mt from the US will go to the Asian nation, down 5% year on year.

However, StoneX expects a slightly better prospect for American soy exports to the Asian nation.

"We expect to see China take close to 30 million mt from the US, up slightly from the previous year," Suderman said.

However, this will represent only half of what Brazil will sell to China in MY 2022-23.

Deciding factors

Eventually, Argentina's weather and China's COVID-19 situation are going to decide the direction of soybeans trade in 2023, according to analysts.

Argentina, the world's third-largest soybean supplier, has been battling drought since October, with local farming groups and agencies not expecting MY 2022-23 harvest to cross even 40 million mt, a far cry from early season estimates of 50 million mt.

If the Argentinian crop fails and leaves a supply void, analysts expect Brazil and the US to fill that gap. However, it will all depend on the early 2023 weather in Argentina as sufficient rains can quickly improve the harvest prospects, analysts said.

China's COVID-19 issue is another factor that can impact MY 2022-23.

Beijing's zero-COVID policy has strained the country's soybeans demand in 2022 which is down 8% on the year at 80.6 million mt between January and November. Despite recent quarantine relaxations, there are a lot of uncertainties surrounding what course the government will take next year.

Some analysts expect China's COVID infections to peak in 2023, with the Xi administration strictly re-imposing restrictions, thereby curbing the trade flow.

Although it is too early to conclude whether a rise in coronavirus infections would affect China's domestic soybean crushing and future consumption in Q1 2023, it would be more prudent to remain conservative in demand estimation, one of the largest crushers in China said.