The US soybean production forecast in marketing year 2022-23 (September-August) is heading towards a record haul of around 124 million mt despite variations in yield estimates by different entities, analysts told S&P Global Commodity Insights.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
There is a very high possibility of an oversupply in global soybeans market till 2023 as top producers Brazil and the US are likely to have record crops, while demand from China is expected to remain weak, analysts say, likely signaling pressure on prices.
Platts assessed SOYBEX FOB New Orleans for October shipments at $592.40/mt on Sept. 9, down $8/mt from previous month. SOYBEX FOB Santos was assessed $14/mt lower on the month at $610.80/mt.
According to average commodity consultancies' estimates, world's top soy producer Brazil is forecast to produce over 150 million mt in MY 2022-23 (January-December 2023), which will be unprecedented.
And if the US soybeans follow a similar trail and produce large volumes in MY 2022-23, then markets will be flooded with soybeans and prices are expected to see some corrections.
"It's a record crop [for the US soybeans MY 2022-23]," said Pete Meyer, head of grain, oilseed, and advanced feedstock analytics at S&P Global Commodity Insights.
"If Brazil can get some moisture before planting begins, we believe that the US and Brazil will produce back-to-back record soybean crops in the same marketing year and that does not bode well for prices, especially with a strong dollar," he said.
US soybeans yield higher-than-expected
As heat and dryness battered a sizable portion of the western Midwest during late June and July, not many were expecting the soybean yield to remain resilient even at 51 bushels per acre.
However, favorable weather in the upper Midwest regions, coupled with timely rains in some key states in the western parts of Midwest, meant a strong comeback for the American soybean farmers.
"Late-season rains were a net-positive to the overall beans crop, with biggest producing states of Iowa and Illinois seeing beneficial precipitation these past few weeks," said Susan David, partner and analyst at the commodity consultancy the Grain Bull.
"Hence, we are at a 51.5 bu/acres yield for the US soybeans in MY 2022-23 compared with 51.4 bu/acre last year," she said.
Back in early August, the US Department of Agriculture surprised many when it released its World Agricultural Supply and Demand Estimates and pegged the US soy yield at 51.9 bushels per acre and pointed towards a harvest of 4.531 billion bushel (123.3 million mt), up 96 million bushels on the year.
But Pete was expecting this.
"Platts Analytics has no argument with the USDA's August report's production numbers of 51.9 bu/acre yield and 4.5 billion bu output," he said. "We [Platts Analytics] are using 51.5-52 bu/acre as our yield."
Arlan Suderman, chief commodities economist for financial services provider StoneX Group Inc. is also expecting a sizable crop in MY 2022-23.
"Our latest customer survey pegged the US soybean crop at 4.515 billion bushels, on a yield of 51.8 bushels per acre," Suderman said.
However, at the same time, there are analysts who do not see the MY 2022-23 yield surpassing last year.
Agricultural brokerage group Futures International's senior commodity analyst Terry Reilly is one of them.
"The US likely lost some soybean acres across the delta over the past two weeks (ended Sept. 3) due to extremely heavy rains," Terry said.
Parts of Louisiana, Mississippi, Arkansas, Tennessee, Kentucky, Missouri, and Illinois form the delta region.
Hence, the Futures International's MY 2022-23 yield estimates are at 51.3 bu/acres, with harvested area down to 86.57 million acres from previous estimate of 87.2 million acres, he said.
Demand worries persist
The USDA's Sept. 6 report on soybeans export inspections for MY 2022-23 to date showed a tremendous start for the American farmers.
According to the data, soybean inspections are estimated at 49,582 mt till Sept. 1, compared to 30,354 mt last year, with China as top destination.
But most analysts see it as an initial sales surge with slowdown in the pipeline amid COVID-19 lockdowns across China – the world's largest soy buyer and top market of American soybeans.
Lockdowns have affected millions of people and logistics have been crippled, likely slackening the demand for soybeans in the coming weeks, a Shanghai-based commodity analyst said. With crush margins in negative since last year, lockdowns have dealt a major blow to the local crushers.
Platts assessed China Soybean Gross Crush margin (Oct) at minus $44.02/mt on Sept. 9.
The USDA Foreign Agriculture Service's Beijing-based analysts see a slide in Asian nation's soybean imports in MY 2022-23 amid slowing economy and COVID-19-related restrictions.
China's soybean imports for MY 2022-23 are revised downward to 96.5 million mt from the USDA's previous estimates of 98 million mt on weak demand for vegetable oil in the food service sector and soybean meal (SBM) in the swine and poultry sectors, the USDA FAS said Sept. 8.
Recent economic data suggests that the already prolonged period of sluggish consumption in China may continue through the end of the year, it said.