Feature: US soybean 2023-24 production woes likely to boost Brazilian exports in 2024

The US soybeans production forecast in marketing year 2023-24 (September-August) has been sliced significantly since pre-season estimates amid sizable acreage cut and prolonged unfavorable weather, likely supporting Brazil's oilseed exports early next year, analysts and market observers have told S&P Global Commodity Insights.

Just before the oilseed sowing for MY 2023-24 began mid-May, the US soybean production was forecast at record 122.74 million mt with a yield of 52 bushels/acre, up 5% on the year and acreage estimates of 87.5 million acres, steady on the year, the US Department of Agriculture's May 12 World Agricultural Supply and Demand Estimates report showed.

With oilseed prices on a steady climb due to robust global demand and supply issues in the Black Sea, it appeared as if the US soybean farmers were eventually going to catch a break after a dull 2022.

But the euphoria was short-lived as just a month later the USDA's projections changed drastically in its acreage report released June 30. The US soybean planted area for MY 2023-24 was estimated at 83.5 million acres, which was 4.6% lower than May's forecast and 5% lower year on year. Compared with last year, soybean planted acreage was seen down in key states of Illinois, Iowa, Ohio, Indiana, Kansas, Missouri, North Dakota and Nebraska, as farmers were seen opting for more corn acreage, which caught the market by surprise.

To make matter worse for the soybean farmers, May and June saw extreme heat and dry weather in the key areas of Midwest. At a time when the oilseed crop needed moisture for its development, heat and dryness dealt a big blow to the yield estimates, which nosedived 3.7% from May estimates to 49.1 bushels/acre by September, the USDA data showed.

The US soybean output forecast for MY 2023-24 is now seen at 112.84 million mt, down 8% from record projections in May and 3% lower on the year, the USDA data showed. But many market analysts see further cuts in output estimates as dry and hot August battered the Midwest's oilseed crop.

"The US exports will have to be cut because of the higher domestic price and lower production," said Sherman Newlin, an analyst with Risk Management Commodities.

Advantage Brazil

The biggest beneficiary of US soybean farmers' woes in MY 2023-24 is likely to be Brazil – world's top soybean producer and exporter.

"The US' loss is Brazil's gain," said Peter Meyer, S&P Global' crops and feedstocks economist. According to S&P Global estimates, the US soybean exports in MY 2023-24 will be limited to 49.5 million mt, which is well below the USDA's early season estimates of 53.75 million mt, he said.

The US soybean output has remained stagnant over the last 10 years averaging 113 million mt owing to limited acreage expansion and mostly unfavorable weather conditions, Brazil has swiftly surpassed its North American competitor in that very period.

While in MY 2014-15, Brazil's soybean production was seen at 97.1 million mt on an area of 79 million acres, it is forecast to jump 68% from then, to 163 million mt in MY 2023-24 on 112.7 million acreage, the USDA data showed.

Brazil's soybean exports are expected to go from strength-to-strength in 2024 on the back of record production, crop issues in the US, favorable exchange rate and continued robust global demand, the Foreign Agricultural Service said.

So, it didn't surprise many when the latest estimates from National Supply Company projected Brazil's MY 2022-23 (January 2023-December 2023) at an all-time high 97 million mt. And for MY 2023-24, local consultancies see the country comfortably breaching 100 million mt in soybean exports. In fact, one of them, Datagro, projects the yellow oilseed exports to touch 103 million mt.

The emergence of Brazil as a reliable supplier of high-quality soybeans in large volumes is likely to impact the US export sales of the oilseed, market analysts said.

Brazil continues to gain ground in the international market due to the quality of its soybeans and increased demand for food in China," the Brazilian Association of Vegetable Oil Industries said Sept. 12.

China preferring Brazilian crop

The world's top soybean importer and the largest buyer of US soybeans -- China -- is expected to import 100 million mt of oilseed in MY 2023-24, down 2% on the year. But China is likely to source nearly three-quarters of the oilseed from Brazil, which offers cheaper and better quality oilseeds for most of the year.

According to Foreign Trade Department data, Brazil has exported a record 81 million mt of soybeans between January and August, up 21.6% on the year. China has bought 70% of the cheaper Brazilian oilseed in this period, the data showed.

"Despite a sharp cut in MY 2023-24 output projections, I think there may be a glut of supply for US beans, even if China continues to boost imports," said Jacob Shapiro, founder & chief strategist at Perch Perspectives, a consulting firm. Stiff competition from South America is limiting US soybean sector's trade potential, he said.

To make matters worse, there are indications that as US soybean harvesting begins in September, China will likely slacken its soybean purchases in the last quarter of 2023 and wait for cheaper Brazilian supplies early next year.

"Most local crushers will wait for next year's Brazil harvest, which is forecast to touch 163 million mt, making it very price competitive against the US-origin oilseed," said an official with a China-based agricultural trading company.

After dry weather issues, acreage cuts and receding Mississippi River, the last thing US soybean farmers need this year is for China to taper down its oilseed imports from North America in the middle of harvest season. But, perhaps it's a hint of things to come with the US playing second fiddle to Brazil in global soybeans trade in coming years, analysts said.