Brazilian soybean production is expected to reach a new record in the 2019/20 harvest. According to researchers from Cepea (Center for Advanced Studies in Applied Economics), from Esalq/USP, after starting sowing late, the pace of oilseed cultivation accelerated in October, causing activities to even be above the average for recent years in most regions. Then, the rains returned with greater intensity, favoring the development of crops and generating expectations of high productivity – except in the case of the areas cultivated first.
The record harvest, in turn, will require greater internal and, especially, external demands from Brazil. In this context, the impacts and/or resolutions of the trade war between the United States and China and their impact on Brazilian demand will be discussed. For now, agents do not expect major changes.
A Cepea survey shows that the pace of negotiations for the current harvest is relatively higher than that recorded last season, influenced by higher prices in the last quarter of 2019 and the greater attractiveness of forward contracts for 2020. Agents believe that contracts with maturities in January and February it may be difficult to comply due to the delay in sowing. It is worth considering that most companies ended 2019 with little or no stock, which even required processing to stop early. This fact could support prices, at least in the short term.
Of the total 2019/20 soybean harvest in Mato Grosso, the main national producer, more than 40% were negotiated in advance in 2019, according to indications from agents consulted by Cepea. Surveys by Imea (Mato-Grossense Institute of Agricultural Economics), in turn, show that 51.12% of production had been sold during 2019, above the 41.33% negotiated in the same period of 2018.
For 2020, export parity at the Brazilian port of Paranaguá (PR) indicates prices of R$ 89.60/bag of 60 kg for February, R$ 88.42 for March/20, R$ 88.92/sc for April/ 20 and R$ 89.12/sc for May/20 – the average future dollar for December at B3 was considered. Last season, the parity indicated a price up to 10 Reais/sc lower than that seen in December/19.
On the other hand, the higher operational costs of acquiring inputs – especially fertilizers – can 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 Londrina (PR) regions rose by 6%; in Cascavel (PR), where agricultural products were already increasing in value, the increase was 1% – here input acquisitions are considered between March and September 2019 and in the same period of 2018. In the region of Sorriso (MT), the increase the value of inputs was 6% and, in Primavera do Leste (MT), 2%. In Rio Grande do Sul, the increase in values was 3%.
SUPPLY – Given the trade war between the United States and China over the last two years, the area cultivated with soybeans in the United States saw a sharp reduction in the 2019/20 season, reaching 30.36 million hectares – the smallest since 2011/12 – and 14,35% lower than the last harvest. Thus, production (harvested in 2019) totaled 96.84 million tons, the lowest in six seasons.
As a result, the estimate is that aggregate supply could be 5.74% lower than last season, at 337.7 million tons. Demand for soybeans for crushing continues to grow and, in aggregate, is expected to increase by 1,76%, to 303.58 million tons, a record. In Argentina, crushing is expected to grow by 9.94%, to 44.6 million tons; in the United States, 0.62%, at 57.29 million tons, and, in Brazil, 2.9%, at 43.75 million tons.
The increase in processing is driven by demands for soybean meal and oil. Global supplies of these by-products are expected to total 238.59 million tons and 56.86 million tons, respectively. Demand for soybean meal is estimated by the USDA at 235.81 million tons, 2.11% more than last season. For oil, demand is forecast at 56.86 million tons, 2.8% more than in 2018/19.
It is worth noting that domestic demand for soybean meal and oil in Brazil and the United States is expected to be at records in the 2019/20 season. Of soybean oil, North American consumption should be 10.66 million tons and Brazilian consumption should be 7.35 million tons. In both countries, there is an expectation of an increase in demand for soybean oil for biodiesel production.
The good side is that domestic demand for soybean meal is also estimated at record levels, of 33.38 million tons in the United States and 18.27 million tons in Brazil. In this case, there is an expectation of greater demand for the production of animal feed. This is because China has not been able to recover its pork production and must continue purchasing animal protein from Brazil and the United States.
Global soybean transactions also continue to 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 main one, with 85 million tons (+3%), followed by the European Union, with 15.2 million tons (+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 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 expected and, for Argentina, 8.2 million tons, according to data from the USDA.
In Argentina, new president Alberto Fernández raised the tax rate on exports from the soybean complex to 30%. This scenario makes foreign sales less attractive to Argentines. It is worth remembering that the country is the third largest exporter of soybeans and the leader in sales of bran and oil in the world.
Source: DATA
