Global oilseed market: Brazilian soybean production upgraded, Argentina introduced preferential exchange rate

Global oilseed prices fell in the week ending April 7, 2023, with Chicago soybean futures again falling below the $15 mark, failing to extend last week's gains. Brazil's soyabean production looks solid at more than 150m tonnes; Argentina introduced a third round of preferential exchange rates for soybeans to encourage farmers to speed up sales; The weather in the U.S. soybean belt next week may be more favorable for spring planting; And a seasonal decline in US soybean export sales.

The May 2023 soybean contract on the Chicago Board of Trade on Thursday closed at $14.9250 a bushel, down 0.9 percent from a week ago. The average price of spot soybeans for the April shipping date was $15.885, down 0.7 percent from a week ago. CBOT soybean meal for May at $454.30 a short ton, down 2.5%; May soybean oil settled at 54.53 cents a pound, down 1.7 percent. Euronext May rapeseed delivery was at 461.50 euros a tonne, down 3 percent from a week ago. Ice July rapeseed closed at C $748 / ton, down 0.2%; On Wednesday, Argentina's FOB spot price for Shanghe soybeans was $574 a ton, including a 33% export tax, down 3%. Argentina is closed on Thursday and Friday.

The ICE dollar index closed Friday at 101.585, down 0.7% from a week earlier.

Brazil produces more than 150 million tons of soybeans

As Brazil's soybean harvest reaches 80 percent, more and more harvest reports point to a promising yield. Only Rio Grande do Sul's yield has been significantly affected by the dry weather, while the rest of the country's soybean yield per unit area and acreage have increased significantly, more than offsetting the losses in Rio Grande do Sul. Three agencies raised Brazil's soyabean production this week, with Safras & Mercado this week raising its 2020/23 soyabean production forecast to a record 155.08 million tonnes, up from an earlier estimate of 152.43 million tonnes. DATAGRO raised Brazilian soybean production by nearly 3 million tonnes to a record 153.7 million tonnes, up from its February forecast of 150.81 million tonnes and up 18.0 per cent from 130.58 million tonnes a year earlier. StoneX this week raised its forecast for Brazilian soyabean production to a record 157.7 million tonnes, 3 million tonnes higher than it had expected at the start of March, because of higher unit yield forecasts and also because of acreage adjustments. With Brazil producing more than 150 million tons of soybeans, it is difficult for soybean prices to stand still at $15.

Argentina has a preferential exchange rate of 300 pesos, but it is unclear how much farmers can sell

The Argentine government on Wednesday announced the third round of its soya dollar program, offering a preferential exchange rate of 300 pesos to the dollar from April 8 to May 31 to encourage farmers to speed up sales. At the preferential exchange rate, Argentine farmers could earn 42% more in pesos by selling soybeans than at the current official rate of 210 pesos. Since September, the government has launched two rounds of the soya dollar program to encourage farmers to speed up sales at a preferential rate above the official exchange rate. Unlike the first two rounds of soybean dollar programs in September and December, the third round will include wine, rice, cotton, barley, sorghum, citrus and timber, among other products.

The first Soya Dollar project was a big success in September 2022, when Argentine farmers sold 13 million to 14 million tons of soybeans, much of which was bought by Chinese buyers. The second Soydollar-program round in December sold 5.1 million tons of soybeans. Argentina has about 17 percent, or 7 million tons, of the 44 million tons of soybeans it harvested last year. The government hopes the third round of the dollar program will bring in $15 billion in foreign exchange revenue, but it is unclear whether farmers will sell as much as the government hopes, given the different circumstances under which the third round of the program is being conducted.

First, soybean production in 2022/23 is estimated to be at a 23-year low of 25 million tonnes or less, while domestic inflation is running at 100%. Argentine farmers may not be sure what the final yield is, plus the quality of soybeans this year is very poor, the proportion of green soybeans as high as 50%, and 30% to 40% of small beans and beans, it is estimated that it is difficult to sell poor quality soybeans; With inflation so high this year, farmers may prefer to stock up on soybeans as a hedge against inflation. Finally, the market is already anticipating a fourth round of dollar projects in Argentina, which means farmers may choose to sell in batches and sell a portion at the next time, given that Argentina's exchange rate has been depreciating. Argentina's agriculture ministry data showed that Nongong had advanced contracts to sell 5.5 million tons of 202/23 soybeans, down from 12 million tons at the same time last year. Sales of new beans have been slow as farmers wait for price increases and the "soybean dollar" program.

Argentina may no longer be the top soybean meal exporter because of reduced soybean production

The Buenos Aires Grain Exchange this week left its 2020/23 Argentine soyabean production forecast unchanged for the second week in a row at 25 million tonnes, well below the 48 million tonnes first forecast in early September. Brazilian consultancy Safras & Mercado this week cut its 202/23 Argentine soyabean production forecast by 6.6 million tonnes to 24.8 million tonnes, which would be 42 per cent lower than last year's 43 million tonnes.

The Rosario Grain Exchange expects Argentina to lose its position as the world's top soybean meal exporter this year after production fell to its lowest level in more than two decades, down more than 40 percent from a year earlier. The sharp drop in supply has left Argentine soyabean crushes running at historically low capacity. The exchange thinks Brazil will overtake Argentina as the world's leading exporter of manufactured soyabeans. Argentina's soymeal exports in 2020/23 will be close to 20m tonnes, accounting for 29% of global trade, less than Brazil's.

The weather is emerging

With U.S. soybean planting intentions about the same this year as last, and global soybean demand remaining strong, that means the U.S. growing season will need good weather to help replenish global soybean stocks. This is the year when La Nina turns into El Nino, which brings more weather uncertainty, indicating that one of the main themes for markets in the coming months will be weather pricing. A forecast Thursday called for warm, dry weather in the Midwest next week, which could help soybean seeding. U.S. farmers plan to plant 87.505 million acres of soybeans in 2023, up slightly from 87.45 million acres in 2022, according to the USDA Planting Intentions report.

U.S. soybean export sales are seasonally slow

As Brazilian soybean exports entered their seasonal peak, U.S. soybean export sales resumed their seasonal decline. U.S. 2020/23 soybean net sales for the week ended March 30 were 155,000 MT, 55% below the previous week and 42% below the four-week average. Net sales for 2023/24 were negative 48,000 tonnes, compared with 3,900 tonnes a week ago. Total US soybean export sales so far in 2020/23 were 49.92 million tonnes, down 11 per cent year on year, compared with 10 per cent last week and 8.4 per cent two weeks ago. Total U.S. soybean sales to China (shipped and unshipped) so far in 2020/23 are 30.99 million tons, up 7.8 percent from a year earlier, 8.9 percent from the previous week and 10.7 percent from two weeks ago. From the point of view of export prices, it is still the most competitive Brazilian soybeans. On April 5, Brazilian soybeans at the port of Paranagua were quoted at $521 a ton, up $5 from a week earlier; U.S. soybeans were quoted at $596, up $13 from a week ago; Argentine Shanghe soybeans were quoted at $574 / ton, down $602 / ton from a week ago and $28 from a week ago.

Oilseed production prospects in the European Union

In its April report, French consultancy Strategic Grains cut its 2023 EU rapeseed production forecast by 100,000 tonnes to 19.5 million tonnes from 19.6 million in March, but still higher than the 19.4 million tonnes forecast for 2022, due to dry weather in southeastern Europe. But an increase is still possible if the region's weather improves. The company also raised its 2023 European Union sunflower seed production by 100,000 tonnes to 11.3 million tonnes, up 20 per cent from last month's forecast of 11.2 million tonnes. But the report says sunflower seed planting in Spain has been affected by a continued lack of rain, and weather conditions in Italy have also been very dry.

The weather on the Canadian prairies is dry

Canadian farmers are about to plant canola crops, but parts of the prairies are suffering from the second worst drought in 45 years. Since Sept. 1, the major producing regions of Alberta, Saskatchewan and Manitoba have received less than 60 percent of their historical averages, according to Agriculture Canada. Bill Plebylski, vice president of the Saskatchewan Farmers Association, says precipitation is needed for successful planting. If soil moisture is poor, crops are vulnerable to adverse conditions.

In addition, analysts expect Canadian rapeseed exports could fall by nearly half in the next few years as the domestic processing industry expects to consume more of the seed to make renewable fuels. Canola press capacity in Canada will be increased by 50% to meet the growing demand for canola in the renewable fuel market. Analysts at Rafflefield in Winnipeg, Manitoba, say rapeseed exports could be cut by as much as 4 million tonnes over the next two to three years as more crushing capacity comes on stream. Canada produces about 20 million tonnes of canola annually, currently split 50-50 between press and export.