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Brazil 2020-21 soybean output forecast at all-time high despite delayed start: Conab

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Brazil 2020-21 soybean output forecast at all-time high despite delayed start: Conab

Highlights

High prices boost to yield, acreage

H1 soy supply high on weak real, China demand

Tight supply, late planting to keep prices high

New Delhi — Brazilian soybean production for the 2020-21 crop year (September-August) is estimated to hit an all-time high on higher acreage and productivity, Brazil's national agricultural agency Companhia Nacional de Abastecimento (Conab) said Nov. 10, despite a late start to the planting process.

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According to Conab, Brazilian soybean production for the 2020-21 crop year will be 134.95 million mt, up 8.1% year on year and an all-time high.

The country's soy yield is forecast at 3.53 mt/ha, up 4.2% year on year, Conab said, while acreage is forecast to expand 3.5% to 38.25 million hectares.

The states of Mato Grosso, Parana, Rio Grande do Sul, Goias, Sao Paulo, Tocantins, Maranhao, Rondonia and Distrito Federal have been projected to set record acreage and yields in 2020-21. As a result, Brazil's overall soybean yield forecast has been revised higher.

High prices attract farmers

Brazilian soybean farmers received unprecedented profits for their 2019-20 soy crop due to a weak real and robust Chinese demand, Conab said. Farmers are therefore bullish on oilseed crop planting for 2020-21, with record acreage transferred from other crops.

The average domestic price of raw beans in October was Real 141.63 per 60 kg, up 14.3% month on month, Conab said.

In fact, according to the latest state reports, Brazilian soybean prices are trending in a range of Real 175-185 per 60 kg, as of Nov. 7.

In the coming months, bean prices are expected to remain high due to the weak real, high demand and limited supply, a Brazilian analyst said.

Backed by a weak real, which has lost over 40% of its value year on year as of Oct. 31, the country's farmers have already sold over 99% of their soybean crop for the current marketing year which started on Feb. 1, up 18 percentage points year on year, market sources said. They have also forward contracted almost 60% of next year's crop as of Oct. 31, a year-on-year increase of 20 percentage points.

In the first 10 months of the year Brazil exported 81.4 million mt of soybeans, up 24% year on year, with 73% of these shipments purchased by China -- the world's largest consumer.

According to Conab, Brazilian soybean exports in 2021 are forecast at 85 million mt, up 3.7% year on year due to continued strong demand from China.

The continuing recovery in China's swine and poultry production growth is expected to push up soybean demand in 2020-21, market sources said.

High soybean sales in the first 10 months of 2020 has reduced Brazilian soybean supply for the remained of the year, which has further fueled stockpiling of beans and pushed prices higher.

Additionally, dry August weather in the US has boosted international soybean prices.

US soybean output for 2020-21 is estimated at 116.15 million mt, down 4 million mt on the previous estimate due to extensive damage to the soybean yield as persistent dry weather across the Midwest rapidly worsened crop conditions, the US Department of Agriculture said in its October report.

Lower US soybean output, coupled with strong demand from China, has driven up international prices and the trend is expected to continue in the coming weeks.

Delayed planting

Brazilian soybean planting has progressed at its slowest pace in a decade due to extremely dry weather across the main regions of the country, agricultural consultancy AgRural said. However, rains in late October improved soil moisture, causing planting to pick up pace in the last two weeks.

Soybean planting requires abundant rainfall and high soil moisture content, while dry weather slows the process.

Brazilian soybean farmers have managed to plant 56% of the total estimated area up to Nov. 5, from 42% a week earlier and 58% in the same period last year, AgRural said Nov. 9.

Although the current year's pace of soybean planting seems to have caught up with both last year and the five-year average, dry weather in November could rekindle fears of a delayed harvest.

The beginning of November was marked by the return of predominantly dry weather, causing soy planting concerns in parts of Mato Grosso, Paraná, Rio Grande do Sul, São Paulo and Rondônia, AgRural said.

Although a delay to soybean planting is not expected to affect total output, the harvest could be pushed back by a few weeks, which would be advantageous to US soybean farmers, market sources said.

Brazil's soybean harvest generally begins in February every year, but a delayed planting could push the harvest back.

By the end of January, US soybean farmers had sold the majority of their stocks, so a lagging Brazilian harvest means tight supply and high demand for US beans in the first quarter of 2021, an ideal scenario for a price spike, analysts said.

Conab expects domestic demand for soybeans to remain high in 2020-21 due to the growth of the economy, the increase in meat production for export and the biodiesel mixture that will go from B12 to B13, Conab said.

Final soybean stocks are therefore expected to remain low for another year and, thus sustain high domestic prices in 2021 as well, it said.

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