Record South American Soybean Supplies Forecast Despite Falling Argentina Crop

15.01.2023 08:03 "Agro Perspectiva" (Kyiv) — This month, 2022/23 Argentina soybean production is lowered 4.0 million tons to 45.5 million on drought conditions straining yields. Smaller supplies put downward pressure on crush and exports, both lowered this month. Argentina exports and crush have been lethargic this year as farmers were reluctant to sell soybeans to hedge against high inflation. However, a more- favorable ‘soy dollar’ exchange rate enacted in September temporarily boosted sales and exports for a couple months. This trend is likely to continue with the new crop as supplies are forecast to tighten, further incentivizing farmers to hold onto stocks to maximize soybean sales revenue.

Despite a shrinking crop in Argentina, South American supplies in 2022/23 are still forecast at a record predominantly due to record Brazil production. Unlike Argentina, Brazil soybean production is up 1.0 million tons this month to 153.0 million. Additionally, soybean carryin is raised 3.0 million tons due to an upward revision to the 2021/22 crop and a lower crush estimate. As a result, both Brazil crush and soybean exports are up this month. This increase mostly offsets Argentina reductions this month.

The record South American crop will have major implications on U.S. soybean trade, which is nearing the final weeks of the usual peak-selling window before the start of the South American harvest. For one, this will put downward pressure on U.S. exports as buyers are more likely to source beans from abundant Brazil new-crop supplies. Coupled with the smaller U.S. crop and strong competition from Brazil through the end of 2022, U.S. soybean exports are lowered 1.5 million tons this month. The harvest of the South American crop will likely have a dampening effect on high global soybean prices unless dry weather further hampers Argentina production.

However, U.S. crush remains elevated on strong crush margins boosted by high product prices.

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