Record new soybean crop expected to demand heated domestic and foreign demand by 2020

Posted by Marina
Brazilian soybean production should reach a new record in the 2019/20 crop. According to researchers from Cepea (Center for Advanced Studies in Applied Economics), from Esalq / USP, after starting the delayed sowing, the pace of oilseed cultivation accelerated in October, making activities even above average. recent years in most regions. Then the rains returned more intensively, favoring the development of the crops and generating high productivity expectations - except in the case of the first cultivated areas.

The record crop, in turn, will require from Brazil greater internal and especially external demands. In this context, the impacts and / or resolutions of the US-China trade war and its reflections on Brazilian demand will be discussed. For now, agents are not expecting big changes.

Cepea's survey shows that the current crop's trading pace is relatively higher than last season's, influenced by higher prices in the last quarter of 2019 and greater attractiveness of forward contracts for 2020. Agents believe that contracts with maturities January and February may have difficulties to meet due to late planting. It is worth considering that most companies finished 2019 with little or no inventory, which even required the early stop of processing. This fact may support prices, at least in the short term.

Of the 2019/20 soybean crop in Mato Grosso, the main national producer, more than 40% were traded in advance in 2019, according to agents consulted by Cepea. Surveys of Imea (Mato Grosso Institute of Agricultural Economics), in turn, show that 51.12% of production had been sold in 2019, up from 41.33% traded in the same period of 2018.

For 2020, the export parity in the Brazilian port of Paranaguá (PR) indicates prices of R $ 89.60 / 60 kg bag for February, from R $ 88.42 for March / 20, from R $ 88.92 / sc for April / 20 and from R $ 89.12 / sc for May / 20 - the December average future dollar in B3 was considered. Last season, the parity indicated price up to 10 Reais / sc lower than in December / 19.

On the other hand, the higher operating cost of input purchases - especially fertilizers - may limit producer margins. The Cepea Production Cost Team estimates that, between the 2018/19 and 2019/20 harvests, the prices of inputs purchased by producers in the regions of Londrina (PR) increased by 6%; Cascavel (PR), where agricultural products were already appreciating, the increase was 1% - here are considered acquisitions of inputs between March and September 2019 and in the same period of 2018. In the region of Sorriso (MT), the increase in input value was 6% and in Primavera do Leste (MT) 2%. In Rio Grande do Sul, the increase in values ​​was 3%.

OFFER - Given the US-China trade war over the past two years, US soybean acreage fell sharply in the 2019/20 season to 30.36 million hectares - the lowest since 2011/12 - and 14.35% lower than last season. Thus, production (harvested in 2019) totaled 96.84 million tons, the lowest in six seasons.

With this, the estimate is that the aggregate supply may be 5.74% lower than last season, at 337.7 million tons. Demand for crushing soybeans continues to rise and, on aggregate, is expected to rise 1.76% to 303.58 million tonnes, a record. In Argentina, crushing should grow 9.94% to 44.6 million tons; in the United States, 0.62%, to 57.29 million tons, and, in Brazil, 2.9%, to 43.75 million tons.

The increase in processing is driven by the demands for soybean meal and oil. Global offerings for these by-products are expected to total 238.59 million tonnes and 56.86 million tonnes respectively. Demand for soybean meal is estimated by the USDA at 235.81 million tonnes, up 2.11% from last season. For oil, demand is forecast at 56.86 million tons, 2.8% more than in 2018/19.

It is noteworthy that domestic demand for soy meal and soybean oil in Brazil and the United States should be record in the 2019/20 season. For soybean oil, US consumption should be 10.66 million tons and Brazilian consumption 7.35 million tons. In both countries, soybean oil demand for biodiesel production is expected to increase.

On the bright side, domestic demand for soybean meal is also estimated at record highs of 33.38 million tonnes in the United States and 18.27 million tonnes in Brazil. In this case, there is expectation of higher demand for animal feed production. This is because China has not been able to recover its production of pigs, and must continue to acquire animal protein from Brazil and the United States.

World soybean transactions are also on the rise. According to the USDA, 147.9 million tons of soybeans should be traded worldwide, 1.37% more than in the 2018/19 season. Among the countries that are expected to increase imports, China is the largest with 85 million tonnes (+ 3%), followed by the European Union with 15.2 million tonnes (+ 1.3%), Mexico (+1 56%), Japan (+ 1.5%), Taiwan (+ 4.4%), Indonesia (+ 8.26%), Thailand (+ 7.77%), Egypt (+ 10.45%), Vietnam ( 2.78%), South Korea (6.23%), Russia (+ 15%) and Turkey (+ 7.69%).

Brazil should continue to lead the global supply, with 76 million tons of soybeans, 1.4% more than in 2018/19. For the United States, shipments of 48.3 million tons (+ 1.56%) are forecast and, for Argentina, 8.2 million tons, according to USDA data.

In Argentina, the new president Alberto Fernández raised the tax rate on soy complex exports to 30%. This scenario makes foreign sales less attractive to Argentines. Remember that the country is the third largest exporter of soybean and leader in sales of bran and oil in the world.