By Onome Amuge
U.S. soybean ending stocks are getting tighter as the Department of Agriculture report showed an estimated 120 million bushels for the season, down from its earlier projected 140 million bushels.
The tighter ending stocks are leading to higher anticipated prices as producers begin preparations for the spring planting season while buyers are forced to shift their focus towards South America, particularly Brazil, where harvest is currently getting underway.
Production in Brazil, according to the latest USDA report, is at present, forecast at 133 million tonnes, a 7 million increase from last year.
As of early February, ship lineups in the South American largest country had exceeded 11 million tonnes, indicating a large demand. However, dealers say a portion of the lineup may be as a result of this year’s delayed harvest.
Reports in Mato Grosso, the third largest Brazilian state and soybean hub, show soybean maturity running behind last year, translating into a later harvest and slower movement of soybeans to port. The large lineups also point to a quick run-up in export volume over the next few months, dealers say.
According to the USDA report, with strong export and domestic demand coupled with the smaller supply growth forecast for 2021, an increased export pace would lead to a quicker draw-down in supplies by October and consequently, U.S. producers would face limited competition from Brazilian exports at harvest, similar to the situation observed in the last quarter of 2020.
Export prices for the three largest soybean exporters (USA, Brazil and Argentina) rose in January with that of the U.S and Argentina strengthened for the eighth consecutive month, the highest levels since June 2014 and March 2014, respectively.
Prices continued to rise in the first half of the month on strong export demand, tightening global stocks, and dry weather in South America. Monthly gains were partially offset by lower prices in the second half of January owing to rainfall in South America.
Argentina’s soybean production for the season, according to the USDA report, is estimated at 48 million metric tonnes while that of Brazil is estimated at 133 million tonnes.