The last week has been marked by a slew of new data releases for the Brazilian soybean supply and demand scenario, and there are three strong points of convergence among analysts and market consultants: 1) all current crop estimates are too optimistic and – in consideration of the climatic adversities already registered, which are being registered and which could still be registered – the country should harvest a maximum of 150 million tons; 2) Oilseed exports are well placed to renew their record this season, exceeding 90 million tonnes in what is expected to consolidate as the largest harvest in the history of global soybean cultivation; 3) Domestic demand for soybeans in Brazil is expected to have a promising 2023 with problems faced by Argentina and a crop failure in the nation that is the world’s largest exporter of oil and bran.
In its specific bulletin for oilseeds, released on January 12, the USDA (United States Department of Agriculture) stressed that the supply of soybeans from South America “will be a record high despite the crop failure in Argentina “.
“Despite a smaller crop in Argentina, South American supply in 2022/23 is still expected at a record high, mainly due to Brazil’s record production. Unlike Argentina, Brazilian soybeans were high (estimated of the department) by one million tons this month, to 153 million. In addition, soybean ending inventories increased by three million tons (in the US crop year, June through July) due to the upward revision of the 2021/22 crop year and lower crushing estimate. and soybean exports increased this month. This increase largely offsets Argentina’s reductions this month.”
Conab (Companhia Nacional de Abastecimento) and Abiove (Brazilian Association of Soybean Processing Industries) reduced their crop estimates, as well as lowered their projections for the country’s exports. However, both still carry high numbers of 93.9 million and 92 million tons respectively. The USDA estimates that Brazil exports 91 million tons of wheat, as it is also quite intense, although it has undergone a small correction from the previous one, of 92 million.
Similarly, Conab increased its number for crushing Brazilian soybeans from 50.67 to 52.75 million tons, while Abiove maintained its estimated processing at 52.5 million.
Therefore, the main question the market is asking now is the strength of domestic and export demand overall for soybeans in Brazil and of course how this should continue to affect price formation and income margins for Brazilian producers. .
“2023 should be a year of higher soybean supply in Brazil because, despite the problems in the South, we will have a record harvest, and because we have much higher supply, we will once again have record exports and crushing should grow again,” believes Luiz Fernando Gutierrez, analyst at Safras & Mercado. The consultancy estimates exports at 94 million and crushing at 50 million tons.
Gutierrez says that, of course, the numbers could change in the coming months, especially in processing, since part of these results are related to the decisions that will be made in relation to biodiesel policies, and in the field, to the completion of crops in the face of the scenario climate.
The expectation is that the soybean oil blend in the biofuel composition will increase from 10% to 14% and then 15% after the first quarter of this year, which is still undefined. On Jan. 3, the new Minister of Mines and Energy, Alexandre Silveira, said the blend would be defined after talks and research conducted with industry representatives. “It is important to bring predictability to the industry by ending the instability caused by frequent changes in the blending rate of fossil fuels,” he said.
Also according to the analyst Safras, when it reaches 13% from March or April, it should reach 50 million tons of processed soybeans. “If it’s the B10, we get a little less, if it’s the B15, we can go a little more,” he adds.
Alongside the biodiesel issue, the attention of Brazilian industries is focused on the future of the crop in Argentina. The decline is quite marked and the final numbers should be well below those recorded by private consultancies or public bodies at this time. On Thursday, the USDA lowered its projection from 49.5 to 45.5 million tons, while Bolsa de Cereales de Buenos Aires raised its estimate from 48 to 41 million tons. However, there are specialists who believe that the new harvest in Buenos Aires may not even reach 40 million tons.
Similarly, the USDA even lowered its estimates for Argentine soybean crushing from 39.75 million tons to 38 million tons.
“When Argentina’s crop goes down, it’s not just the volume itself that’s the problem. Argentina is the world’s largest supplier of oil and bran, and when the crop goes down, the volume of derivatives and someone will have to come in to supply that And that someone will be Brazil with the entry of its new crop,” explains agribusiness consultant, Ênio Fernandes, of Terra Agronegócios.
And in his view, in addition to low inventories in the US as well, this will be a major pillar of support for soybean prices in the Brazilian market. After all, this week was also marked by the news that Argentina has even purchased Brazilian soybeans in recent days.
According to the assessment of the senior risk manager of hEDGE Point Global Markets, Victor Martins, six ships of Brazilian oilseeds are formed, imported through the port of Murtinho, in Mato Grosso do Sul, via barges. The buyer is the Vicentin group. “Soy stocks are depleted, Argentina has extreme difficulty getting soy locally, taking it to the industry and offering bran and oil,” he says. “Demand comes from soybean shortage due to very high export volume in Q4 2022.”
As a result, as explained by Martins, the prices of derivatives have exploded in the Argentine market, giving opportunities to Brazilian products, also pushing soybean premiums in these parts in recent days.
Alongside these good prospects for domestic demand for Brazilian soybeans – supported by the window that is expected to leave Argentina, with good demand from the processing industries, as well as an improved horizon for the biodiesel blend – there are also projections of strong soybean exports to Brazil, which may exceed 90 million tons.
“Demand for Brazilian soybeans should be strong again, we should recover some part we lost in the US in 2022, because we had nothing left to offer to the overseas market due to the last crop failure. So, this year we are we’ll be back to gaining what we lost to the Americans, so we should see our exports grow further, China increase its purchases, possibly approaching 100 million tonnes, and Brazil be the top exporter to China,” explains l analyst at Safras & Market.
From the point of view of Marcos Araújo, market analyst at Agrinvest Commodities, when this reduction in Brazilian production is confirmed and good demand data is also guaranteed, soybean closing stocks in Brazil will end 2023 tight, at just over 5 .6 million tons, especially at the end of the second half. And this is another important pillar for listings on the Chicago Stock Exchange.
In his analysis, Araújo highlighted the development of soybean prices in early 2022, when the bushel rose 30% from January to March – from US$13.00 to US$17.00 – compared with a decline in South America also caused by The little girl. “I’m not saying that the price should go up by the same 30%, but with a lower supply, I consider a possible maximum of the bushel of soybeans,” he says.
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