Despite the all-time high soyabean production in South America this year, next year’s supply from the continent might end up significantly lower in the coming season.
Brazil’s soyabean inventory could plummet by up to 80% by early 2019 while foreign and domestic sources are giving conflicting reports on the outlook for Argentina, Reuters wrote on 6 November.
The US Department of Agriculture (USDA) is predicting that the world soyabean stocks-to-use – a measurement of both supply and demand – will sink to 19.4% in the 2017/18 marketing year from this year’s 19.9%, while both number are still higher than recent historical averages.
The USDA and its Brazilian attaché both projected that Brazil’s soyabean carryout would decline drastically, but had differing projections on the actual numbers, Reuters said.
The carryout would be reduced by half, according to the USDA, falling from this year’s 5M tonnes to 2.5M tonnes in 2017/18, while the attaché projected a much larger drop to 1.055M tonnes due to better domestic crushing potential.
Higher biodiesel blending mandates, cheaper domestic soya meal and a recovery in the Brazilian economy contributed to the attache’s more positive demand projection on domestic demand, Reuters said.
Both the USDA and the attaché expected Brazilian soya stocks-to-use to be at 4.5% for the current marketing year ending in January, but the USDA projection fell 2.2% in the upcoming 2017/18 season, while the attaché’s drop was cited only at 0.9%.
The two agencies expected the coming year’s harvest to reach 107M tonnes, but this could change due to planting having just started and being slower when compared to last year, while central Brazil continued to be plagued by lack of rain.
For Argentina, the country’s agriculture ministry had drastically different projections, and if the ministry ended up being right, it could mean a considerably tighter supply in the coming year, according to the Reuters analyst.
The USDA predicted Argentina would have a soyabean supply of 16.7M tonnes when the Argentine 2016/17 marketing year ended on 31 March 2018, but the ministry’s projection was much lower at 5.6M tonnes.
According to Reuters, the projection difference stemmed from a move by Argentina in November 2015, when it cut its soyabean stocks nearly in half, with carryout estimates dropping from 17.2M tonnes to 9M tonnes over the following four months.
The USDA did not adjust its future estimates to such a large extent as Argentina did at the time, which could explain the massive difference.
In terms of stocks-to-use, the USDA’s projection was growth from 22% to 30%, while the agriculture ministry expected a tighter market, projecting growth only from 10% to 14%.
The USDA expected Argentine soya carryout to be the largest ever at 17.6M tonnes with stocks-to-use at 31% in 2017/18.