Global oilseed market: Argentine soybean production cut, US buys Brazilian soybean

Global oilseed prices diverged in the week ended 14 April 2023. Argentine soybean production forecasts continue to be cut, and the United States buys Brazilian soybeans because of strong demand amid tight domestic supplies, while Brazilian soybeans are large and cheap. Soyabean prices are likely to remain volatile as the focus shifts to northern hemisphere spring weather and planting progress.

The May 2023 soybean futures contract on the Chicago Board of Trade on Friday closed at $15.0050 a barrel, up 0.5 percent from a week ago. The average spot price of yellow soybeans for April shipment 1 was $15.905 per Pu, up 0.1 percent from a week ago. CBOT's July soybean meal reported $456.80 per short ton, up 1.6%; July soybean oil settled at 53.77 cents a pound, down 1.75%. Euronext August rapeseed delivery closed at 440.75 euros a tonne, down 4.4 percent from a week ago. Ice July rapeseed closed at C $736.30 a ton, down 1.6%; Argentina's FOB spot price for Shanghe soybeans was $569 a tonne, including 33 per cent export tax, down 0.9 per cent from a week ago. On Friday, the ICE Dollar Index closed at 101.245, down 0.5 percent from a week ago.

Usda Supply and Demand Report at a glance

As expected, the USDA's April supply and demand report could be described as unimpressive, with little adjustment to the 2020/23 U.S. soybean, soybean meal and soybean oil supply and demand data. In terms of global soyabean supply and demand, the 2020/23 world soyabean production estimate was reduced by 5.5 million tonnes to 369.6 million tonnes, as production declines in Argentina and Uruguay outweighed production increases in Brazil, with Argentine soyabean production cut by 6 million tonnes to 27 million tonnes; Uruguay's soybean production was revised down by 900,000 tonnes to 1.2 million tonnes. Brazil's soybean production was revised up by 1m tonnes to a record 154m tonnes. Argentine soybean crush was cut by 3.3 million tons to 32 million tons, and soybean meal and oil exports were also revised downward, with Argentine soybean meal exports revised down to 22.4 million tons from 24.9 million tons forecast last month and down from 26.59 million tons a year ago; Argentina's soyoil exports were cut to 4.1 million tonnes from 4.75 million tonnes forecast last month and down from 4.87 million tonnes a year earlier. Brazilian soybean production was upgraded, exports were unchanged and crushing was raised, and Brazilian soybean meal exports were also revised up by 300,000 tonnes to 21.4 million tonnes, although still 1 million tonnes below Argentine soybean meal export expectations. Brazil's soyoil exports were revised up to 2.4 million tonnes from 2.35 million tonnes forecast last month, unchanged from a year earlier. This month the USDA also revised down China's crushing of soybeans, reflecting the impact of thin margins on domestic crushing. The focus will shift more to Northern Hemisphere spring sowing weather and planting progress in the coming months, with the May USDA supply and demand report providing the first update on new crop estimates. The inventory-to-use ratio is at its fourth-lowest level since 1970, given tight US soyabean supplies, as good weather in the US Midwest is needed to help replenish tight stocks.

Tight soybean stocks in the United States have prompted North Carolina poultry producers to import Brazilian soybeans

U.S. companies are importing a shipment of Brazilian soybeans for the first time since 2021, because U.S. soybean stocks are tight and Brazil is harvesting a large and cheap crop. The 30, 000-ton soybean cargo is expected to depart from the Brazilian port of Santalam in the last week of April, bound for North Carolina and destined for U.S. poultry producer Bordo Farms Inc. With Brazilian soyabeans trading at their biggest discount to US soyabeans in nearly a decade, it is much cheaper to buy, even after shipping costs are taken into account.

In the US, demand for soyabeans remains strong and inventories are very tight, thanks to lucrative crushes. The National Oilseed Processors Association (NOPA) will release its crushing report next Monday, and analysts expect NOPA members to crush 5.5 million short tons of soybeans in March, up 10.9% from a month earlier and 0.5% from a year earlier, a five-month high.

In terms of U.S. soybean exports, sales totaled 430,000 tons in the week ended April 6, up from about 110,000 tons a week earlier. Soybean export sales for the year to date totaled 50.28 million tons, down 11.2 percent from the same period last year. From the point of view of export prices, it is still the most competitive Brazilian soybeans. On April 13, Brazilian soybeans at Paranagua port were quoted at $498 a ton, down $23 from a week earlier; U.S. soybeans were quoted at $592, down $4 from a week ago; Argentine Shanghe soybeans were quoted at $573 a ton, down $1 a ton from a week ago.

Brazilian soyabean base spreads fell to record lows

On April 10, the CFR basis of Brazilian soybeans in China was 5 cents/pl higher than that of Chicago May soybeans, which hit the lowest level in the history of recent shipping of Brazilian soybeans, down 90% from a week ago and 95% from a month ago. On the same day, the CFR price of Brazilian soybeans in China was $551.98 / ton, down 3.9% from a week ago, mainly reflecting weak demand in China and a bumper crop of Brazilian soybeans. Brazil's soyabean harvest has reached around 80%, but farmers have sold less than half, meaning they are under urgent selling pressure.

Historically, Brazil's soybean exports peak from February to June. Brazilian farmers will have to accelerate sales in the next two to three months to free up stocks for next season's crop, as ports shift their export focus to corn, with 100 million tonnes of second season corn expected to be harvested in the middle of this year.

Argentina's soybean production has been cut further and the central bank has allowed soybean exporters to postpone exports

Argentina's government announced a preferential exchange rate of 300 pesos to the dollar until the end of May in an effort to stimulate soybean trading and replenish foreign exchange reserves. Argentine farmers sold 441,747 tonnes of soyabeans between April 10 and 13, according to the Rosario Grain Exchange. For comparison, farmers sold 3.1 million tons of soybeans in the first four days of the first soydollar-program in September. In the first four days of the second soydollar-dollar program in November, 1.1 million tons of soybeans were sold. El Emile Trey, chief economist at the Rosario Exchange, attributed the disappointing sales to reduced soybean production. The exchange expects Argentine soyabean production to fall to 23 million tonnes, the lowest level in 25 years. The Buenos Aires Grain Exchange warned of a surge in soyabean abandonment and further cuts to current production forecasts of 25 million tonnes.

To encourage farmers to sell soyabeans, Argentina's central bank introduced a policy on April 11th that allows exporters to pre-finance but not deliver for 60 days, in order to minimise their risk. Normally, exporters buy soybeans in pesos and sell dollars to get pesos to pay for them. The process takes up to five days, meaning that when exporters deposit pre-financed dollars, they have less than a week to convert them into pesos and pay producers. With Argentina's central bank extending that period to 60 days, exporters have more time to wait for the farmers to deliver and pay them in pesos.

China's soyabean imports will pick up pace in the coming months

China imported 6.85 million tons of soybeans in March, down 2.7% from 7.04 million tons in February and up 7.9% from 6.35 million tons a year earlier, customs data showed. Imports in the first quarter of 23 million tons, up 13.5% year on year, hit a record high for the same period. In the first half of 2020/23 (from October to March), China has imported 45 million tons of soybeans, up 5% year on year. By contrast, the US Department of Agriculture is forecasting a full-year export target of 96m tonnes, up 4.8% from a year earlier. To achieve the export target, China needs to import another 51 million tons of soybeans in the second half of the year (April to September), 4.6 percent higher than the 48.77 million tons imported in the April to September of 2022. Seasonal trends suggest the pace of soybean imports will pick up in the coming months. Analysts estimate soybean imports will rise to more than 9 million tons a month in April and May.

China's Ministry of Agriculture released a three-year action plan on Friday to reduce the proportion of soybean meal in feed formula to less than 13 percent by 2025, from 14.5 percent in 2022. That compares with an earlier target of 13.5 percent. That means China could reduce its annual consumption of soymeal by at least 3m tonnes, equivalent to 4m tonnes of soyabeans, and imports could fall to 82m tonnes by 2025.

Global rapeseed production is set to reach record levels in 2020/23

In its April supply and demand report, the USDA raised its 2020/23 global rapeseed production estimate by 900,000 tonnes to a record 87.2 million tonnes, as production growth in Bangladesh and Russia outweighed declines in Pakistan. The latest production figures are 17% higher than the previous year. Global rapeseed ending stocks are forecast at 6.2 million tonnes, down 500,000 tonnes from last month but well above the all-time low of 4.1 million tonnes set a year ago.