Global soy supplies expected to rebuild

CHESTERFIELD, Mo. — USDA analysts forecast record soybean production worldwide of nearly 410.6 million tons, up nearly 11% from last year. If realized, this would be the largest year-over-year production increase in nearly two decades.

Jim Sutter, U.S. Soybean Export Council CEO, and Jason Grant, agriculture professor and Center for Agriculture Trade director at Virginia Tech, looked at the potential impact of the new marketing year numbers recently projected in the U.S. Department of Agriculture’s supply and demand estimates report.

More than half the soybean production increase is estimated to come from higher yields in Argentina, after a historic drought.

Meanwhile, USDA reports Brazil, Uruguay and Paraguay account from more than a quarter of production gains from increased plantings and higher yields across all three countries.

U.S. farmers are forecast to plant acreage numbers similar to last year, but projections show higher yields.

USDA’s initial look at the new marketing year featured in the May supply and demand report projected an increase in ending stocks to 335 million bushels, compared to 210 million for the current marketing year.

“The overall message from the May WASDE numbers is we have moved from a situation of whether we had weather-related shocks in Argentina or Brazil or recently in North America for wheat, corn or for soybeans,” Grant said.

“We are now back to a situation where we are looking at ample supplies and potentially even a larger carryout stock, or more significant supplies of soybeans and corn.”

Total U.S. soybean production is projected at 4.51 billion bushels, up from 2022-2023′s 4.276 billion. Corn wrestled some of those planted acres away from soybeans with 92 million compared to 87.5 million for soybeans.

“Global oilseeds production is projected to grow faster than consumptions and stocks are projected to be record high. Global corn production is going to support record consumption,” Grant noted.

“I’m bullish on the China market. I know it’s important for U.S. soy. Since 2015-2016, China’s imports have really taken off and I think that’s a testament to a fast-growing economy, a large population and it’s convergence to protein-enhanced diets that it’s going to have to import to satisfy some of those consumption needs.

“We will continue to see unprecedented competition from the southern cone countries — Brazil, Argentina, Paraguay, Uruguay.”

Q&A

Sutter and Grant followed up with a question-and-answer session to delve deeper into the global soybean complex.

Sutter: It wasn’t very long ago we were so worried about not having enough and where are we going to get supplies. It was just a year or two ago we were talking about those things to today where we’re going to grow more. Do you think we’re over the hump or are there still things that could be uncertainties that people have to be thinking about? Now that we’re seeing prices come down some, is it just like we’re going to carry on down?

Grant: This is a projection from USDA. This is the best guess of supply-and-demand balances across major exporters and when you add it up at the end of the day it looks like the tendency is we’re going to move to a situation where we were really tight on supplies, particularly in wheat, and we’re going to move to a situation where we have a little bit more buffer, a little bit more cushion.

I believe that to be true. There’s no denying what’s going on in Brazil’s corn market and there’s no denying potentially about 163 million metric tons, over 200 and something million metric tons if you include Argentina and Paraguay out of South America.

Maybe we don’t get there, but if we get somewhere close to trend yield, I think that is enough to relax some of the price pressure, some of the talk about food price crises when the invasion of Ukraine happened.

We were on a situation when I thought if we don’t get wheat out of the Black Sea, the U.S. will just back-fill. The U.S. can send wheat. And I, like many others, thought, boy, was I wrong.

No. 1, we are short on wheat here and Argentina wasn’t doing much better for the last couple of years. We were short on wheat because of a significant drought last year.

No. 2, the price of our wheat was really high, so it became an affordability question for the millions of food-insecure residents in the Middle East and North Africa.

Sutter: Regarding food affordability, do you think now with prices coming down from those highs, do you see demand increasing?

Grant: When you get an uncertain macroeconomy environment, and whether that’s regional banks where their deposits are not being shored up or are we headed toward a recession.

Once we start talking about whether the U.S. was headed to a recession or whether we’re already in one, the general macroeconomy uncertainty increased, and that in a nutshell explains why we have a lot of funds flowing to the U.S. dollar. It’s the safe-haven currency. It’s the safe-haven financial institution of the world.

Whenever you have that situation you get a dollar appreciation, and that unfortunately history shows us that hasn’t been as beneficial to agriculture. It’s bit of an obstacle.

It’s not great when it comes to our farmers, or ranchers and our exporters because Egypt, because Bangladesh, Southeast Asia, South Asia, more generally if they want U.S. product it may not be affordable at the time.

Sutter: Hopefully, this cyclical decline we’re seeing in prices and apparent growth in supply will help us get back to having a more affordable product. I’m a believer that there’s plenty of demand out there and traditionally we’ve seen protein demand on a global basis grow 8 to 10 million tons per year and in the last couple years we’ve been worrying about kind of rationing that demand growth. So, hopefully it will be great if we can get back to a period where we have enough to be able to see that demand growth.

Grant: I think if we get into a stable supply situation, you will see some of those prices become more competitive, more affordable and that can be sent to the world. That’s good from a competitiveness standpoint.

Sutter: Going back to the WASDE numbers from a soybean perspective, what would be the main thing you will be watching for in the next few reports?

Grant: Let’s watch the weather. El Niño can typically result in a 2% to 5% increase in global yields, but it could be detrimental in parts of Asia and India. We’ll have to watch that play out. And let’s keep an eye on some of the crush, some of the protein demand in Southeast Asia, in China.

I see that by the latest baseline projections from (Economic Research Service), (Organization for Economic Cooperation and Development), those aren’t going away. Those protein-enhanced diets from beef, from pork. The poultry situation is improving from the (highly pathogenic avian influenza) which is good for soybean meal.