Shrinking South America Soybean Production Constricts Trade and Boosts Prices

10.02.2022 17:17 "Agro Perspectiva" (Kyiv) — According to the report of the USDA Oilseeds: World Markets and Trade (February 2022), dry weather in South America over the past 2 months has significantly depressed forecast soybean yields and slashed production. In the first USDA forecast released in May 2021, the combined total 2021/22 soybean crop in Brazil, Argentina, and Paraguay was a record but is now forecast to be the smallest crop since 2018/19. Since the December 2021 WASDE, soybean production in these three countries has been lowered by more than 18 million tons: down 7 percent in Brazil, down 9 percent in Argentina, and down 37 percent in Paraguay.

If realized, this massive decrease in the South American soybean crop is likely to significantly constrict global trade. In total, South America soybean exports are cut nearly 6 million tons this month and crush is down over 2 million tons. In Brazil, smaller production is expected to impact the export market more than domestic crush. In Paraguay, both exports and crush are forecast down around 1 million tons.

Argentina supplies are squeezed from both lower production and smaller imports from Paraguay, resulting in both lower exports and crush. Likewise, 2021/22 global soybean imports are no longer expected to be a record and global soybean meal consumption growth is forecast below 2 percent for the first time this forecasting cycle. With tighter supplies supporting higher prices, consumers are likely to import fewer soybeans and offset smaller supplies by drawing down stocks, decreasing soybean meal consumption, or substituting with other protein meals.

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