The Van Trump Report

Massive Jump Forecast for Brazil’s 2022-23 Soybean Exports… Time Will Tell

Brazil soybean production is expected to rebound significantly in 2022-23 after severe drought killed initial expectations for record output in 2021-22. The US Department of Agriculture’s Foreign Ag Service (FAS) post in Brasilia predicts the country’s new crop production will jump to 144 million metric tons (MMT), up from the current season’s expected production of 126.6 MMT. While that is less optimistic than the USDA’s official forecasts for new crop production of 149 MMT, it would nonetheless mark a new record. FAS Brasilia expects the massive harvest will allow Brazilian soybean exports to hit 92 MMT, higher than USDA’s official estimate of 89 MMT and near the all-time high of 91.14 MMT exported in 2019-20.

FAS Brasilia expects a larger planted area for the 2022-23 crop than official USDA, at 105.02 million acres versus 103.78 million, respectively. If reached, FAS Post notes it would mark an annual increase of +3.95 million acres, substantially above the five-year seasonal growth rate of +2.96 million. There are multiple factors behind the rapid expansion, including a favorable exchange rate and high commodity prices, as well as infrastructure and logistics improvements. Notably, FAS Brasilia says that fertilizer supplies were not as constrained as initially expected, hence farmers were able to move ahead with expansion plans.

Most of the acreage increase is seen occurring in the North and Northeast, with average growth expected in the more developed Center West. Interestingly, FAS Post says most of the productive area is already utilized in big production states like Parana and Rio Grande do Sul in the South. In contrast, the North and Northeast regions of Brazil are expected to continue experiencing crop growth on the back of newly built and expanded roads and ports. Expansion will come through both newly developed cropland as well as converting degraded pastureland.

Brazil’s soybean crush in 2022-23 is seen rising +2% to a new record volume of 49.15 MMT. The crush expansion is above the five-year average growth rate and fueled in part by strong oil and meal export demand that will be supported by the relative weakness of Brazil’s real currency. FAS Brasilia notes that strong international demand is supported by the Russia-Ukraine war, which has dramatically reduced the availability of sunflower oil. There have also been lower exports of rival palm oil due to protectionism measures by various governments.

FAS Brasilia provided some interesting updates on Brazil’s current 2021-22 soybean crop as well, starting with a less robust export forecast than official estimates. Post forecasts exports of 77 MMT versus USDA’s most recent estimate of 80 MMT. FAS Post says part of the reason behind its lower export forecast is the increase in Brazil’s soybean crush rate. The industry association Abiove has has indicated good margins for both soybean meal and oil production and rising international prices that favor exports of soybean byproducts over whole beans.

Brazil’s slower soybean exports are also related to weak demand from China, which FAS Brasilia says has been postponing soybean purchases to the second half of 2022 in hopes a big US harvest will pull down prices. FAS Post projects that China’s soybean demand could rebound with increasing demand for animal feed, noting a nearly +60% increase in pork prices since early May.

Brazil has been able to maintain such a high crush rate this year in part due to a huge increase in imports, which Post estimates to reach 850,000 MT. That compares to USDA’s official estimate of 550,000 MT and the historical norm of around 150,000-350,000 MT. The country’s imports have actually been substantially higher than those norms since 2019-20, when imports jumped more than +500% to just over 1 MMT. With crush and byproduct exports expected to remain high, FAS Post believes soybean imports will remain above the historical average as well. FAS forecasts 2022-23 imports at 700 MT, versus USDA’s official estimate of 750 MT.

Brazil exported +30% more soybean meal in the first five months of 2022 than last year, thanks in part to Argentina’s reduced deliveries. At the same time, soy oil exports climbed +58%, with China and India the primary markets. The full update is HERE.

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